The Business That Keeps Planes Flying: Inside the Future of Aviation MRO

0:00Ed Clark:This is Why We Like It, a quick dive into the industries capturing our attention in the lower middle market in the United States. We're asking the questions that unlock why and where we see value in the lower middle market. I'm Sam, and each episode I'll share why a sector stands out. We're going to bring in the voices who know it best, and we'll point to where we think the future's moving. Welcome to Why We Like It. The U.S. is the largest aviation market in the world. U.S. Airlines offered over 300 million departure seats in Q1 of 2025 alone. Some months as many as 70 million passengers, some days as many as 3 million passengers.

0:44Ed Clark:and in aviation we zoom in to a segment of the market of critical importance we find MRO that stands for maintenance repair and overhaul and that refers to all the activities and services that keeps aircraft safe compliant and airworthy for passengers just like you recently access holdings announced a partnership with G2 G2 are a specialized independent sponsor focused on the aviation space. Our friends at G2 have a unique set of qualifications and depth of experience across the full aviation and defense industries. Today, I'm delighted to be first up speaking to Greg Smith. Greg is the co-founder of G2.

1:31Ed Clark:He's also the chairman of American Airlines, as well as being on the board and an investor in many other aviation businesses. Welcome, Greg. And thanks for having me. Great to be here. Let's dive straight into the aviation strategy and thesis. G2 Equity Partners has a clear focus on aviation and aftermarket support. What's the core thesis behind your aviation strategy?

1:57Leanne Caret:Yeah, look, it's a great question, Sam, because it's such a large growing market in general. And when we launched G2, between myself, my partner and our advisors, we spent a significant amount of time really dissecting the market that we all grew up in. All of us average about 30 years of experience in anywhere from defense, space, or security and in commercial. And I found it, you know, not only interesting and helpful, but reassuring that many of us came to MRO. And the reason we did that collectively, independently and then collectively, is, you know, when we look at the market, you know, it's$120 billion market by 2035.

2:44Leanne Caret:continuing to grow commercial airplanes alone going from, you know, 29 ,000 roughly fleet out there today to over 38 ,000, you know, by 2035. So on the commercial side, we see a significantly growing market. As you described on your intro, traffic is going up. Capacity is going up globally. More people are traveling and we're traveling to places that, you know, in some cases that were either untraveled or expanding our breadth in those areas. So fleets are growing significantly. While that's taking place, when we shift over to defense, we're seeing defense budgets growing. We do have an aged fleet of very capable aerospace products that need maintenance in order to stay relevant through modernization and capability, but very strong established platforms.

3:40Leanne Caret:Combined with, we're seeing a lot of new entries, in particular in unmanned areas. So when you kind of bring that all together, it's a really exciting place to be. And it's a real opportunity to provide value to our end customers here in a new, I'll say, new world of digitization and modernization, where ultimately, you know, if we can be part of helping people keep airplanes up on a more utilized basis, particularly our warfighters, and be able to provide them with very predictable, high-quality levels of service and partner with them so they can fulfill their missions in an even more successful manner than they are today, it's a great place to be.

4:25Ed Clark:You're so right. The structural tailwinds there with the global fleet expansion, aging aircrafts, these are hugely technical as well. They're getting more and more technical as the industry and the planes evolve. and that specialization and complexity creates margin opportunity and value add windows the one area you didn't mention which is a part of the access thesis is fragmentation and consolidation potential very much for us that's part of the you know the perfect lower middle market playbook lots of small regional operators independent shops component specialists legacy hangers and so on and they're all competing against regulation certification requirements skill shortages and uh in some instances quite quite significant capital intensity so it's kept the operators small but it does mean that there's a big opportunity for the professional scalable platforms and with that in mind as as you form g2 you've brought together a group of people who've worked with some of the best of the best in the industry.

5:37Ed Clark:It's an extraordinary group of colleagues you have. And ultimately, bringing together those operators who solve real technical and operational problems is a massive value add for any organization that you and we invest in. How do you see G2's value creation capability being applied to an MRO business?

5:58Leanne Caret:Yeah, maybe I'll just go back quickly. I'm on the fragmentation again. That was a common theme amongst all of us independently, as you've addressed, is there lies, you know, again, a significant opportunity in a real growing market, you know, where we can make a difference. You know, when we launched G2, this was all about how can we differentiate and not be in the crowd and how do we separate? And many people in this industry had approached me in the past around, you know, launching something like a G2, people even in our industry, because of the access, you know, we have and the experience we have and the love of the business that you, I'm sure, have picked up from everybody that's on the team that really wants to make, continue to make a significant impact in the business that they know and love, that they've been in their whole life, that they really see opportunities to add value in.

6:54Leanne Caret:Beyond that, it was not only bringing the capabilities together, whether it's people that had experience in classified commercial services, airline, any forms of military, satellites, et cetera. It was people that were really excited about helping founders really see the full potential of their business. And look, these people not only have tremendous experience and phenomenal track record, they still have a lot of access. And we've learned, you know, in our short period of time here that that's a real challenge for some of these companies to continue to grow. They just don't know how to get in or they don't have access to at least be able to provide their presentation on why, you know, they would be a great provider of services.

7:45Leanne Caret:And I think we can, again, I think we could help significantly because we're all still very active in the business. We all again have, you know, an expanded network of people and we think we can open a lot of doors combined with clearly, you know, helping those businesses fulfill their potential internally, which maybe that's through, you know, modernization of capabilities or backroom capability, which again, I'll talk a little more about our partnership with access because I think when you combine the two of us, I've not seen anything that would match us. And it's a great partnership, again, that I think is an opportunity to differentiate.

8:26Leanne Caret:But I think the nice thing is, I think we've got somebody to play a position in whatever the need is. If the founder had a great playbook on how to grow through M &A, we got plenty of people that have expertise in aerospace and defense around M &A and have done it, done it successfully, and can, you know, again, access resources. If it means modernization of a factory, we got plenty of people that can come in and help show what best practices are, and not only show them, these are people that do it. They don't just, they're going to, you know, sit in the ivory tower and tell you how to, they've done it, they know how to do it, and those are the type of people that we're going to bring to bear.

9:07Leanne Caret:The one thing that's clear across access and our entire team is we're all living the same values, which is the most important aspect of this. Everybody on this team, combined team, wants to have an impact and really wants to show the full potential of something that clearly people have put their heart and soul in and dedicated a tremendous amount of their life. We understand that. We love the business and we value what they've done. And it's really about, you know, really taking them to their full potential. And I think the combination, the two of us, I think we're extremely well suited to do that.

9:46Ed Clark:You're quite right. Between our two teams combined, we've got over 60 business builders with both deep research, talent, value creation chops, deal chops, but also technical industry knowledge that you have to have in this space. And it's not just with value creation that this partnership will help us. We also have a unique view across the entire aviation supply chain. So where do you think some of the most overlooked or misunderstood opportunities are for us to create long-term value?

10:23Leanne Caret:Yeah, I think, again, I think it's very deep in the supply chain. I mean, you mentioned, you know, the fragmentation. Labor has clearly been a challenge within the supply chain, especially, you know, post-COVID. And then, you know, just, again, access to capital has been more challenging in this environment than I'd say some of the prior cycles. And those are areas that, again, I think, you know, are some viewed as headwinds. But I think, again, we bring some capability to the table that can really help solve a lot of those problems, and particularly also around what access is done around scaling businesses and institutionalizing processes and proven digital tools.

11:10Leanne Caret:Again, I think those are game changers in our business that are really, I think, untacked in some cases. So I'm pretty excited about, you know, there's challenges, but I think we bring a great solution playbook to a lot of those challenges. These are all very solvable, but I think they're going to continue to be challenges because as you noted, this is a continued growing market. There's going to be more pressure on CapEx and need to invest. There's going to be more pressure on cycle time and agility and speed. And there's going to be more pressure on applying skills and labor in a marketplace that is definitely more sparse today than I'd say it was 10 years ago.

11:53Leanne Caret:So I think, again, we got the right, I think, not only approach, but team to be able to solve those in a very differentiating way than I think most would be able to bring.

12:04Ed Clark:Let's talk about that timeframe for a moment, Greg, because as investors, we don't just look at what an industry might do over the four to seven years that a private equity firm would hold an asset. We want to think about at least double that because we've got to think about the environment that we're selling the business to the new buyer in. If we fast forward 10 years now, what does a truly modern, data-driven, tech-enabled MRO platform look like? And who wins in a decade?

12:35Leanne Caret:Yeah, well, I think you said it. One of the things that you highlighted was tech-enabled. I think that's going to be a differentiator not only on design, but clearly manufacturing and service and ultimately quality. And if you think about an environment that like an MRO, like everything in aerospace, what you do really matters. And anytime an asset is on the ground longer than it should be or what they would like it to be, anybody that can take that cycle time down. And one of the challenges right now is there is a lot of shortages out there. So there's a lot of very expensive assets and critical assets sitting on the ground waiting for, you know, for lack of having, you know, specifics on it, but$100 per.

13:27Leanne Caret:And in anybody that can differentiate that and provide some predictive analytics is going to win. Because ultimately, you're going to solve your customers' needs in a differentiating way. But it's really pretty simple. it's just all around you know keeping those assets active as the customer plan to have them whether it's on the military side or or in a very predictable high quality fashion that is going to help them fulfill their mission that's the difference here so anything that you could do in that entire value chain to help enable that mission those folks are going to win and digital is going to be clearly a big, big part of that.

14:10Ed Clark:One for the consumers of aviation. Often people get on a plane and they ask themselves, if Concorde was decommissioned, how have we not advanced air travel in the number of decades since it was decommissioned? And people don't think about all the things that happen below the surface, the safety, the cleanliness, all the different components of it. I think they just think about their individual experience on a flatbed for a set amount of time. How much is the industry going to change for the consumer over the next decade?

14:45Leanne Caret:Yeah, it's a great, great question. Again, I think for, you know, all the airlines, first of all, it starts with safety. So that's number one in everything everybody does, No question. As you said, it's a highly regulated business, and that has evolved over time. And then you kind of get to the operational side that getting 2 ,600 flights out on time every day, no small task by any means, those have been the priorities around the airline. and then, of course, creating a customer experience and how to differentiate there. I think, again, I think it's going to come back to where we started, where if you're in the MRO business and you can help cut the downtime on an airplane when it's in maintenance and that to be able to get back into service quicker, that ultimately is going to play out in customer service.

15:45Leanne Caret:There's going to be more assets available. There's going to be more flexibility to move airplanes around, et cetera. And ultimately, then, therefore, you're going to have fewer delays and fewer cancellations. I think the other area of the differentiation is going to be digital. And in the entire end-to-end customer experience, from the time that you're booking a flight to getting ready to your flight to boarding your flight and the experience you have once you get off the flight, I think you're going to see a continued evolution here, like you are in all businesses around AI and predictive analytics that, again, I think are going to enhance the overall experience, but also enhance the efficiency for the airline applying these digital tools behind the scenes that you don't see around maintenance in particular, but also in gate utilization.

16:35Leanne Caret:And then ultimately, you know, in the U.S., modernization of our air traffic management system is all of that coming together, I think, is overall going to create a much more, you know, favorable experience going forward in a market that's, as you said, continuing to grow. So it's going to be more challenging. But I think, you know, in today's age of digital tools and the growth around AI, it's just a fantastic time to be in the industry to provide that differentiation that you talked about.

17:07Ed Clark:I can definitely vouch for a differentiated experience tonight. I'm boarding a flight with an airline that'll be unnamed to London and they've just re-rooted me to Paris. So I got a little bit of the French experience today without expecting it, which is nice. Um, Greg, you've, you've had an unbelievable career. Uh, you've been at the helm of Boeing. Um, you, you lead the board at American airlines. You work with a number of other significant players in this space. Um, and you, you continue to invest behind the industry. If there are management teams watching this operators, founders in the aviation and MRO space.

17:49Ed Clark:What piece of advice would you give them for the future?

17:52Leanne Caret:Well, I think it's just that. It's just, you know, look, you know, it's challenging, you know, day to day that you have is continually look ahead and look where the market is going and think about your business as far as what do you need to be successful going forward? And, you know, do you have those tools and capabilities today? Do you need to partner with somebody in order to do that. But as we said, this market is moving fast. And there's a lot that needs to be done within the short, I'll say short-term period. But I think it's just staying ahead and really having clarity around what you need to be successful to reach your full potential.

18:34Leanne Caret:And look, I'm bringing people in like us and just having conversations around it, around getting our views around where we see the market going and potentially how we could help and how we could partner in order to do that. But if not, just being a sounding board around it. I think the folks that can lift their head up and look a little bit further out and say, what's my full potential here? And what should I be doing now to be able to fulfill that full potential? And can I do that with what I have today? And if I can't, then how do I want to supplement it you know i think i said you know right at the beginning um you know all of us at g2 you know we're in this business because we love it and all of us could be doing something different in in our i'll say our next chapter here and we've all chosen to continue to be in the business and invest in the business so we're big you know our hearts in this business it's been very good to all of us that are in the industry.

19:36Leanne Caret:And, you know, again, if you think if you interviewed everybody independently, there is a real commitment to give back and a desire to give back. And part of giving back is where we talked about this fragmentation and some of these challenges that people are having. Boy, if we could be part of helping them and ultimately then helping the overall industry continue to grow and be even more successful than it is today, that's, I I think a huge win-win. And that's been a big commitment from everybody at G2. And then again, an equal commitment as we've come together with Access. And Access has been very careful in picking their partners.

20:15Leanne Caret:We have an, I think we got a real great winning formula. Again, it's not just what we bring. I love how we're bringing it. We're bringing it with humility. We're bringing it with a desire to make a difference and to help people reach a potential. In some cases, they probably couldn't even imagine they can reach. And to be part of that, I think that's just, you know, that's a mission that is near and dear at, I think, our combined team's heart. And we're excited about taking the journey with folks.

20:46Ed Clark:Greg, thank you. You used the word humility. That is absolutely a word I would describe you with and the G2 team. And bringing that together with the passion and experience you have, we couldn't be more excited to build something game-changing in this space together. So thank you from us. And we look forward to speaking soon. And we're going to speak to Leanne and Ed next to equally experienced members of your team.

21:13Leanne Caret:Well, that'd be much more fulfilling than the discussion you had with me. So enjoy it.

21:19Ed Clark:Thanks, Greg. Thank you. In this next conversation, we're double-clicking on MRO. It's the part of aviation that decides what actually flies, what stays grounded, and what stays profitable. To ground this conversation in the real world, we're joined by two guests who've led at the highest levels of aviation and defense, and who understand MRO not just as a concept, but as a daily operational reality. Leanne is a former president and CEO of Boeing Defense, Space, and Security, and one of the most respected leaders in the industry. She spent decades building high-performing organizations inside complex and mission-critical environments, and today she advises a litany of companies and boards such as Raytheon and investors, including Blackstone.

22:12Ed Clark:Ed's path is also equally rare. He started his career as an aircraft mechanic and worked his way up to run multi-billion dollar aerospace operations. He's lived the pressure of workforce shortages, readiness cycles, and the unglamorous constraints that determine whether a system performs or breaks. Together, we're going to get practical about what's happening right now in aviation services, where private equity can really genuinely add value, and where it risks getting it wrong and what a modern tech-enabled data-driven MRO platform actually looks like when it's built for the next decade. Welcome to the conversation and this is going to be a conversation about capability operational capacity in one of the most demanding industries in the world.

23:05Ed Clark:Let's get into it. Welcome Leanne and Ed.

23:09Greg Smith:Hello.

23:09Ed Clark:Hello there. Thank you for tolerating my monologue on the way in. I've been really looking forward to this. We've just caught up with Greg, a close colleague of yours for many, many years. Right now, we're going to double click on some of the areas of expertise that you guys bring to our partnership between Access and G2. And Leanne, maybe I can start with you. Private equity has played an increasingly meaningful role in aviation services and infrastructure over the last decade or so. In your perspective, where does PE add the most value and where does it risk getting it wrong?

23:47Greg Smith:Well, Sam, first, thanks for that incredible introduction. That was so lovely. And Ed, it is wonderful to spend time with you again. We've celebrated many years together. I've really been blessed the last few years to kind of get a better perspective of how private equity can help. And it starts with capital. I mean, you know, folks in private equity are really focused on how do they take an existing business and operation and lifting it to be something greater. And so that understanding of not only the capital models, how do you get efficiencies into the business, but also make certain they understand and can help drive pricing models is some real values that private equity can bring.

24:35Greg Smith:On the risk side, from my perspective, one thing that's super important is that no one forgets the importance and the value of the workforce. And you said it, Sam, in your introduction. This is one of the most hardcore, hard-charging, critical aspects of the aviation sector. And getting it right starts with the folks who are on the front line doing that maintenance work and making certain that they're keeping the aircrafts up and running. And so making certain that that's not underappreciated, I think, is a real opportunity for PE.

25:11Ed Clark:Thanks, Leanne. And Ed, let's double click on MRO. Walk us through your MRO demystification and how the market looks to you today. and I think particularly as the MRO market continues to expand, where do you see the biggest structural gaps?