“We see steady demand for our products on the commercial side, and our view is that the spares market remains fundamentally healthy and is expected to pick up over the next several months,” Storch says.
Growth areas could include the widebody market as well as international business, where the company is looking to “grow its footprint,” Storch says. AAR points to its recently ramped-up parts distribution operation in Amsterdam and a fledgling office in Abu Dhabi as logical generators of more work outside the U.S.
Among the few negatives for AAR is a dip in KC-10 flying by the U.S. Air Force. The company has a multi-year support program with Northrop Grumman to support Air Force KC-10 operations. AAR generates revenue based on total flight hours and over-and-above work on components. Annualized flight hours dipped 28% in the second half of fiscal 2013, compared to first-half levels that
the company deems “historically low.” The difference between actual and forecasted hours flown forced AAR to take a $19.5 million fourth-quarter charge.
AAR ended 2013 with a $55 million net profit on sales of $2.1 billion. Overall sales increased 3.5%, led by a 5.0% bump in aviation services sales, to $1.61 billion.
The company’s fiscal 2014 projection is for sales of about $2.2 billion, with “continued strength” in repair and supply chain businesses.
The year is off to a solid start, with several deals already announced. Among them is an extension of AAR’s component supply agreement with Mesa Air Group.
The deal, which runs through 2021, includes maintenance and repair services for the airline’s Bombardier CRJ700s and 900s. Under the agreement, AAR provides component support services, including guaranteed fill rates at the carrier’s six largest line stations.