Cleared for take-off: how private capital is transforming aerospace

Could private capital investment in aerospace take off in 2026? That’s the question we posed earlier this year in Preqin First Close.

Here, we take a second look at recent developments in the sector, including private equity and venture capital (VC) trends, big deals, government investment, and international cooperation.

Commercial aerospace growth is being boosted by increasing fleet utilization, fleet growth, and passenger and cargo demand, according to Deloitte’s 2026 Aerospace and Defense Industry Outlook, published in November 2025.

Global passenger traffic in 2026 is forecast to grow by 4.9% year on year, led by APAC’s 7.3% expansion, according to research published by the International Air Transport Association in December 2025. AI and associated trade flows are an opportunity for air cargo, even if sustainable aviation fuel is a challenge, it says.

On the military front, increasing defense budgets could also provide new opportunities. As PwC notes in its US outlook on aerospace and defense: ‘Funds are deploying record capital into carve-outs and mid-tier defense suppliers, building scalable technology platforms that can be used for both military and civilian purposes.’

Clearer skies for aerospace and defense spending

Private capital investment in aerospace and defense globally has soared over the past decade. In 2016, private equity and VC managers deployed capital across 216 deals totaling $6.8bn. By 2025, deal count had more than tripled to 711, while aggregate value had risen to $30.5bn, according to Preqin data. The acceleration in activity since 2020 coincided with the recovery of commercial aviation post-COVID, as well as an increase in global defense spending.

Aerospace accounted for the majority of both deal count and value last year, with 621 transactions (87.3%) and $24.4bn (80%) in aggregate value. Meanwhile, defense-focused deals represented 90 deals and $6.1bn in value, the third best year on record.

Venture capital taking flight

VC spending has become the primary engine for deal volume. In 2025, VC accounted for 605 transactions (85%) with $14.7bn in aggregate value, nearly half (48%) of total private capital aggregate spending in the sector (Fig. 1). Aerospace attracted the bulk of VC interest, making up 61% of VC spending ($9.0bn), while defense drew $5.7bn (39%).

Fig. 1: Aerospace and defense VC deal volume and value, 2016–2025

_{Source: Preqin Pro. Data as of February 2026}

US-based Stoke Space Technologies led the way as the largest VC aerospace deal last year, according to Preqin Pro. It raised $410mn in a series D, backed by investors including Breakthrough Energy Ventures, Toyota Ventures, and NFX, to accelerate development of its reusable launch vehicle platform. Meanwhile, Castelion Corporation, a US-based hypersonics and defense propulsion start-up, secured $360mn in series B funding.

Jumbo year for private equity aerospace investment

Across aerospace and defense, private equity firms completed 106 buyout deals worth $15.8bn in 2025, up from $6.2bn in 2016 (Fig. 2). Aerospace accounted for the majority of this, at a record $15.5bn.

Fig. 2: Aerospace and defense private equity deal volume and value, 2016–2025

_{Source: Preqin Pro. Data as of February 2026}

This marks a 19% increase in aerospace buyout value from 2024. Defense buyout activity was more subdued in 2025 with $400mn in private equity spending, a sharp drop from $5.8bn in 2024. The three largest buyout deals in 2025 were the $7.4bn take-private of Air Lease Corporation, Warburg Pincus and Berkshire Partners’ $3bn acquisition of Triumph Group, and Redwire’s $925mn acquisition of Edge Autonomy.

Early 2026 Preqin data suggests continued momentum. In January and February, we recorded 133 aerospace and defense transactions, including 20 buyouts totaling $4.0bn and 113 VC deals worth $2.5bn. If this pace holds, 2026 could surpass last year’s record, particularly if defense budgets continue to increase and commercial aviation maintains its recovery trajectory.

Increased global cooperation is driving innovation 

The Global Combat Air Programme (GCAP) was established by Italy, the UK, and Japan in 2022, with the aim of producing a next-generation fighter jet by 2035. In February, Italy’s defense committee approved an €8.8bn funding plan for the project.

Based on this government cooperation, the UK’s BAE Systems, Italy’s Leonardo, and Japan Aircraft Industrial Enhancement Co Ltd agreed a joint venture at the end of 2024. The three partners created the company Edgewing, with each of them holding a 33.3% share.

GCAP is designed to provide a technological update of the Eurofighter Typhoon program, which itself is based on cooperation between Germany, Italy, Spain, and the UK.

Similarly, the European Future Combat Air System (FCAS) is a joint effort between Germany, France, and Spain to develop a system of systems with next-generation fighter jets operating alongside autonomous drones within a combat cloud. The project has recently been in the news as France and Germany and the key industrial partners, Dassault, Airbus, and Indra struggle to align on key elements of the program, making future progress and delivery times uncertain.

This month, France-based private equity firm PAI Partners signed a partnership agreement with Fondo Italiano d’Investimento to back Italian aerospace manufacturer Mecaer Aviation Group, which operates seven facilities in Italy and North America. Fondo Italiano previously invested in Mecaer in an earlier fund, with LGT Capital Partners and the company’s management team investing in the new fund. Mecaer reported a revenue of about €242mn ($282mn) last year, up from €224mn (£263mn) at the end of 2024.

Flying toward a sustainable future

Sustainability interests are driving government investment in civil aircraft innovation.

The UK’s Aerospace Technology Institute program combines government and industry investment to facilitate R&D funding within the aerospace industry. The country is set to receive over £5bn of investment between 2013 and 2030 to transform aircraft technology, with the aim of generating economic opportunities while also reducing emissions. As part of the initiative, the UK government announced more than £250mn in joint industrial investment in June 2025, targeting green aerospace tech projects.

Earlier this year, the UK government also announced £43mn in funding to support green aviation. It estimates producing low-carbon fuels will contribute up to £5bn to the country’s economy by 2050. This funding is expected to drive millions of pounds of private investments in the aviation sector.

The EU is also boosting innovation and research in sustainable aviation. Its Clean Aviation Joint Undertaking is a public-private partnership with an overall budget of €4.1bn, including €1.7bn in EU funding and around €2.4bn in private investment.

Elsewhere, Japan has set a goal of replacing 10% of jet fuel use with sustainable aviation fuel (SAF) by 2030.

The African Development Bank and Japanese engineering firm JGC Corporation signed an agreement last year to explore the development of SAF in Africa. Both partners plan to look at co-financing opportunities to support green aviation solutions there.

While SAF and green aviation initiatives are drawing public funding, private capital has so far mostly concentrated on the enabling technologies and infrastructure.

As commercial aviation continues to recover, defense budgets rise, and governments back innovation, aerospace is increasingly aligning with private capital’s investment playbook – favoring scalable platforms, dual-use technologies, and assets with long-term government demand visibility.

Will Bennett-Lynch is Reporter, Preqin News, and Kerstin Weil is Research Editor, Preqin First Close.

Second Look is edited by Libby Fennessy, Production Editor of Preqin First Close.

Read the original story in Preqin First Close here.

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_{The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin accepts no liability for any decisions taken in relation to the above.}