MTU may not be the most visible company in the aerospace universe, but it is present almost everywhere. It has been flying solo on the stock market for twenty years, after successive stints under the ownership of BMW, MAN, Daimler-Benz and the KKR fund. A specialist in aero-engine propulsion, the company produces components for most Rolls-Royce, Pratt & Whitney and Avio engines. The group is exposed to both civil aviation (Boeing, Airbus, Cessna...) and military programs (Eurofighter...).
The sector's business model relies less on new equipment (OEM), but rather lucrative maintenance, repair, and overhaul (MRO) contracts. In practical terms, new engines are sold with very slim margins, although for manufacturers profitability is built step by step. Maintenance and repair services currently represent over 65% of revenue for a company like MTU.
Over the decades, the group has developed strategic expertise that enables it to work with nearly all the world's engine manufacturers for the production of critical parts, such as low-pressure turbines or high-pressure compressors.
The Burden of GTF Engines
The story could have been even better were it not for the GTF (or PW1000G) episode. This next-generation engine, which began commercial deliveries in 2016, suffered several setbacks that grounded the aircraft of certain customers for a period of time.
Resolving the issue cost time and money, while significantly straining relations with Airbus (which launched a compensation claim against P&W's parent company, RTX, at the beginning of the year).
In GTF engines, MTU produces, amongst other things, the low-pressure turbine—its area of expertise—as well as the first four stages of the high-pressure compressor. The company is still paying the price today. In 2025, these compensation payments amounted to €360m, and an additional cost of €250m is expected for 2026. These cash outflows have weighed on the group's balance sheet for years, although are expected to end in 2027.
Operationally, however, the GTF—now purged of its problems—is reliable and fuel-efficient, in line with its commercial promises.
Unwavering Resilience
Despite these headwinds, FY 2025 proved the company's ability to generate cash, a trend confirmed in Q1 2026. Revenue grew by 7% y-o-y, driven by military activity and spare parts sales, while the order book reached €31.6bn (compared to €8.71bn in revenue in 2025). More importantly, profitability is benefiting from a strategic shift: the share of low-margin OEM is declining in favor of MRO, such that the operating margin rose to 14% at the start of the year. Finally, free cash flow stood at €177m, up 18% (twice as much as forecast).
The year 2026 looks like a transition phase: the gradual end of compensation payments should lighten the balance sheet and pave the way for new momentum in 2027. The drop in the share price likely offers an attractive entry point by compressing valuation ratios.
