AAR Plots Big-Time Recovery

AAR Corp (Stand A720) has a detailed plan to grow from $750 million in annual sales this year to $1.3 billion in five years, according to executive VP and chief operating officer Joe Gullion. "There is a recovery in progress, and we have an unprecedented opportunity for growth," he says.

Gullion was the first president of Boeing Aviation Services, and is credited with growing that sector at a rapid rate before moving to Illinois-based AAR last year.

AAR, says Gullion, offers a wider range of aviation services than any other third-party service provider, ranging from aircraft sales and leasing to manufacturing parts and cargo systems. Gullion intends to build on that expertise by "moving up the food chain."

In the airline business, AAR wants to move towards selling complete programs, particularly in the areas of inventory and logistics. The company has a contract with Delta, for example, to manage the flow of parts into and out of the carrier's engine shops, guaranteeing savings to the airline.

AAR will also focus on the regional jet market. "RJs will grow, and they can't duplicate the traditional infrastructure. You just can't afford it."

The company also expects to expand its business with the Pentagon, its biggest single customer. For the U.S. Navy, AAR provides complete support for the Boeing E-6 TACAMO communications fleet, "providing everything but the crew." AAR is moving into new areas such as the support of land-based turbine generators.

Gullion sees outsourcing as essential to the future of the airlines. AAR predicts that the shape of the industry will change dramatically in the next ten years, with a sharp expansion in the market share controlled by low-cost carriers-like Ryanair or JetBlue, relying heavily on outsourcing to reduce their fixed costs.

"The big boys will have to change their structure to compete, and they will move to outsource," Gullion says. "It's a tremendous opportunity for us."