Aerospace Sector Working Capital Report 2026

The commercial aerospace industry is currently facing intense competition, prompting buyers to optimize every aspect of their supply chain, including payment terms. Over the past decade, buyer strategies have been influenced by OEM supply chain initiatives, a major aircraft OEM's production halt, and the COVID-19 crisis. Today, buyers are navigating labor and raw material shortages, inflation, high interest rates, and the challenge of ramping up production rates, all while striving to improve working capital and liquidity.

Total global revenue for the top 100 aerospace companies reached USD 922 billion in 2024, yet the financial efficiency of that growth has been hampered by a further surge in tied-up capital. The average Cash Conversion Cycle for the sector has now extended to 163 days as of late 2024, compared to 131 days in 2018, forcing companies to finance their operations for an additional four to five weeks compared to pre-pandemic norms.

Rising Working Capital Requirements

Inventory levels rose 25%, from USD 200 billion in 2018 to over USD 260 billion in 2024. Days Inventory Outstanding increased by over 10 days, driven mainly by tier-2 and tier-3 suppliers. Global trade receivables in the aerospace and defense sectors grew from USD 160 billion in 2018 to an estimated USD 235 billion by end of 2024, reflecting record order backlogs. The average Days Sales Outstanding for the sector has climbed to 86 days, as customers navigate their own budget constraints and delivery delays.

The Widening Gap Between Tiers

The disparity in collection times between different levels of the supply chain has reached a critical point. OEMs continue to command the strongest position, leveraging milestone payments to collect receivables in an average of 78 days. Tier-1 suppliers, facing the brunt of production lags, have seen their collection cycles stretch significantly, with many now averaging 110 to 130 days. Tier-2 and tier-3 suppliers, usually smaller entities, often wait over 140 days for payment, as they lack the leverage of larger primes and must finance work-in-progress for months before seeing a return.

On the payables side, trade payables have increased from USD 120 billion to approximately USD 165 billion. To preserve their own liquidity, companies across the board are extending Days Payables Outstanding, which now averages 92 days.

Tier-2 and tier-3 suppliers have notably extended their payment periods to 130+ days, an increase of over 30 days. Tier-1 suppliers have shortened their payment periods to approximately 70 days. OEMs have consistently maintained or increased payment terms, remaining within the range of 65 to 90 days.

The Evolution of Payment Terms

Two decades ago, suppliers typically received payment within 30 days of delivery. This extended to 60 days in the early 2010s, 90 days by the late 2010s, and now stands in some cases at almost 120 days. Major aircraft OEMs sometimes offer shorter terms to their smallest or financially distressed suppliers, but most sub-tiers sell to larger tier-1 or tier-2 suppliers who adhere to the extended standard terms.

The primary reason for escalating payment terms is to increase free cash flow, a factor central to overall financial strength and shareholder value. Airlines pay OEMs 40 to 50% upfront for aircraft and engines, yet OEMs defer payments to suppliers for up to four months. Concentration in the supply chain's upper tiers reinforces this dynamic: the air transport sector is dominated by just a few aircraft and three engine OEMs, and major aerospace tier-1 suppliers now have significant purchasing power of their own.

What the Full Report Covers

The full report analyzes trade receivables and payables dynamics across the aerospace and defense sector, the widening gap in collection times between OEMs and tier-1, tier-2, and tier-3 suppliers, the evolution of payment terms across two decades, higher interest payment pressures, and the working capital and payment terms optimization approaches leading companies are adopting, including standardization, invoice process redesign, alignment of procurement and finance, and management incentive alignment.

For aerospace and defense CFOs, treasurers, and procurement leaders operating in a record-backlog environment with structurally higher working capital requirements, payment term optimization has become the single largest liquidity lever available.