Prior to the Spin-off, Honeywell maintained stock-based compensation plans under which it granted stock options and restricted stock units (“RSUs”) to certain management level employees, including certain employees of the Company. For all periods prior to the Spin-off, the Condensed Consolidated Statements of Operations reflect an allocation of these expenses on a specific identification basis for employees who exclusively supported the Company or, when specific identification is not practicable, a proportional cost allocation method primarily based on revenue, depending on the nature of the services. The amounts presented are not necessarily indicative of future awards and do not necessarily reflect the costs that the Company would have incurred as an independent company for the periods presented prior to the Spin-off.

In June 2026, the Board of Directors approved the 2026 Stock Incentive Plan of Honeywell Aerospace Inc. and its Affiliates (“Aerospace 2026 Plan”), pursuant to which up to 35 million shares may be issued.

In connection with the Spin-off, in accordance with the Employee Matters Agreement, stock options and RSUs granted under Honeywell's equity compensation plans to employees of the Company and Honeywell were adjusted to reflect the impact of the Spin-off on these awards. To preserve the aggregate intrinsic value of Honeywell awards held prior to the Spin-off, the awards held by Aerospace employees were converted into equivalent awards under the Aerospace 2026 Plan.

Certain executives and employees of Honeywell that held Honeywell stock options and RSUs received an adjusted award consisting of both an award denominated in Honeywell equity and an award denominated in Aerospace equity. These awards were adjusted in accordance with the basket method, resulting in participants retaining units of the existing Honeywell award while receiving additional units of an Aerospace award. Upon vesting, the Company is obligated to settle all of the outstanding awards denominated in Aerospace equity.

Share counts for stock-based compensation discussed herein represent outstanding shares to be remitted by the Company to (i) its employees in connection with the Aerospace 2026 Plan adopted by the Company and (ii) employees of Honeywell that received awards denominated in the Company’s equity. The Company recognizes stock-based compensation expense related to unvested awards held by its employees.

Stock-based compensation cost, which is recognized in Selling, general, and administrative expenses in the Condensed Consolidated Statements of Operations, is provided in the following table:


	Three Months Ended				Nine Months Ended
	September 26, 2026		September 27, 2025		September 26, 2026		September 27, 2025
Stock-based compensation expense (pre-tax)
Direct compensation expense	$	28	$	10	$	57	$	31
Allocated compensation expense	—		6		32		31
Total Stock-based compensation expense (pre-tax)	28		16		89		62
Income tax benefit recognized	7		4		20		15
Total Stock-based compensation expense (after-tax)	$	21	$	12	$	69	$	47

The exercise price, term, and other conditions applicable to each option granted under the Aerospace 2026 Plan are determined by the Compensation Committee of the Board of Directors. The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of the Company's stock on that date. The fair value is recognized as an expense over the employee’s requisite service period (generally the vesting period of the award). Options under the Aerospace 2026 Plan generally vest over either a three or four-year period and expire after 10 years. Forfeitures are estimated at the time of grant to recognize expense for those awards expected to vest and are based on historical forfeiture rates.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Company does not have sufficient historical information on which to base expected volatility. As such, our volatility assumption is based on the historical and implied volatility of similar public companies, which were identified considering factors such as industry, stage of life cycle, size, and financial leverage. Because the Company does not have sufficient historical option exercise experience upon which we can estimate the expected term we estimate the expected term using the average of the vesting period and the contractual period of the award. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.


	Three Months Ended
	September 26, 2026
Weighted average fair value per share of options granted during the quarter(1)	$	85.05
Assumptions
Expected annual dividend yield	0.98		%
Expected volatility	37.06		%
Risk-free rate of return	4.46		%
Expected option term (years)	7.00

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	Number of Options (in millions)	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding as of June 29, 2026(1)	4.1	$	180.23
Granted	0.1	201.12
Exercised	—	—
Forfeited	—	—
Expired	—	—
Outstanding as of September 26, 2026	4.2	$	180.86	6.03	$	16.94
Exercisable as of September 26, 2026	2.7	$	165.85	4.50	$	16.94
Expected to vest as of September 26, 2026	3.7	$	177.59	5.68	$	16.94

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1.On June 29, 2026, the Company began trading as an independent, publicly traded company under the stock symbol “HONA” on the Nasdaq. The options outstanding as of June 29, 2026 pertain to Honeywell equity-based awards issued by Honeywell in prior periods that were converted to Aerospace equity-based awards as part of the Spin-off. The conversion to Aerospace awards was considered a modification of the original award. Incremental fair value recognized was immaterial.

As of September 26, 2026, there was $41 million of total unrecognized compensation cost related to non-vested stock option awards which is expected to be recognized over a weighted average period of 2.6 years.

RSU awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain key employees and directors as compensation at fair market value at the date of grant. RSUs generally become fully vested over periods ranging from three to six years and are payable in Aerospace common stock upon vesting. Certain RSU awards are performance-based and awarded to eligible employees which entitle the grantee to receive shares of common stock if specified Company performance goals are achieved during the performance period and if the grantee remains employed through the vesting period.


	Number of Restricted Stock Units (in millions)	Weighted Average Grant Date Fair Value Per Share
Outstanding at June 29, 2026(1)	1.0	$	244.99
Granted	0.4	202.56
Vested	(0.1)	191.78
Forfeited	—	—
Outstanding at September 26, 2026	1.3	$	237.87

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1.On June 29, 2026, the Company began trading as an independent, publicly traded company under the stock symbol “HONA” on the Nasdaq. The RSUs outstanding as of June 29, 2026 pertain to Honeywell equity-based awards issued by Honeywell in prior periods that were converted to Aerospace equity-based awards as part of the Spin-off. The conversion to Aerospace awards was considered a modification of the original award. Incremental fair value recognized was immaterial.