July 26, 2013
AAR Corp. sees solid growth in its commercial airframe and component maintenance businesses near-term, continuing a steady upward trend that is helping the maintenance, airlift, and cargo systems supplier offset declining demand from its defense customers.
For the 12 months ended May 31—the end of the company’s 2013 fiscal year—61% of AAR’s $1.6 billion in sales were generated by commercial business, up from 55% in 2012. The shift was even more pronounced in recent months, as commercial sales contributed 63% of the $553.8 billion in fiscal 2013 fourth-quarter sales, against 61% for the same period last year.
The change is due to both a focus on growing the commercial business and the sequestration-related drop in defense spending, company executives say.
A big contributor is AAR’s Duluth, Minn., commercial maintenance facility, which turned its first aircraft around in December 2012.
“Our Duluth facility is up and running with two lines, and expected to go to a third line in September,” acting CFO Michael Sharp told analysts during an earnings call July 25.
Already the U.S.’s largest independent airframe maintenance provider by man-hours generated, according to Aviation Week’s Top 10 MRO rankings, the Duluth facility added still more capacity—but not too much.
“We don’t have a lot more space,” Chairman and CEO David Storch told analysts. “We have some space, we can accommodate some additional demand, but we couldn’t accommodate a dramatic requirement as we sit here today.”
AAR’s five facilities—in Indianapolis, Miami, Oklahoma City, Hot Springs, Ark., and Duluth—generated “close to” five million man-hours of work in fiscal 2013, says Storch, which is “steady growth,” year-over-year.
The near-term outlook is for more of the same.