The takeaway: AAR’s push into component support–1,200 aircraft and counting under some sort of agreement–continues to pay dividends, and take market share from the competition.
AAR Corp’s recent parts-supply and repair agreements, generated at least in part through steady investments in new facilities and general business-development initiatives, are likely grabbing market share from competitors rather than expanding the overall component-support pie, its top executive says.
The company has announced several large fleet-support deals in 2017, including a five-year agreement with IndiGo to overhaul A320 landing-gear shipsets and a component support deal for Allegiant Air’s growing A320 fleet. Both are new customers. It also added work with existing customers SkyWest, for Bombardier CRJ support, and BlueBird Cargo, for Boeing 737 Classic component support.
AAR President & CEO David Storch says the run of success has more to do with the company’s expansion, as opposed to a more fundamental strategic shift by operators.
“I think you what you’re seeing from our vantage point is more of a market share grab on our part,” he told analysts during the AAR’s fiscal year 2017 third-quarter earnings call. “You have seen some new wins and growth with new customers.”
AAR has more than 1,200 aircraft under a support deal, placing it among the industry’s top providers.
The company’s recent opening of a parts warehouse at Dubai World Central (DWC) Airport hasn’t hurt. The move helps balance AAR geographically—it has similar facilities in Asia, Europe, and North America—and could help in landing more regional customers beyond IndiGo and flydubai.
“There is a reason for opening up a plant in Dubai,” Storch said. “We made a significant investment in [business development] capability around this program activity, and you are seeing some of the fruits of that effort.”
Storch said that recent agreements with Air New Zealand and South African Airways Technical are bearing fruit.
“I think we’re starting to benefit from some of the investments we have made and some of the actions we’ve taken in prior periods,” he added. “I think you [will] see, hopefully, continued performance coming from our parts businesses.”
AAR’s Aviation Services segment boosted sales 9.6% to $382 million in its FY17 third quarter, which ended Feb. 28. The success in its expanding supply-chain business has help offset tepid demand in its MRO services business. The company’s newest heavy maintenance facility, in Rockford, Ill., is seeing regular drop-in and overflow work, but has yet to land its first high-volume customer.