U.S. MRO provider AAR posted a 20% jump in sales in its fiscal first quarter, with commercial aircraft maintenance and parts provision remaining at the core of its business.
In the three months to Aug. 31, the company recorded $662 million of sales to commercial and government customers at an adjusted operating margin of 9.1%, up from 7.3% a year earlier.
AAR’s biggest non-government customers are all from North America, with United Airlines at 8% of sales, Delta Air Lines at 6%, Air Canada at 5% and Southwest at 4%, and altogether commercial customers accounted for 71% of its consolidated revenue in the first quarter.
“Demand remains exceptionally strong for our services and we expect continued growth across both our commercial and government businesses,” says AAR’s chief executive, John Holmes.
“During the quarter, we continued to execute well across the company. We drove 26% organic growth in our new parts distribution activities, had strong operational performance in our hangars and saw a return to growth in our government business,” he adds.
Holmes also lauded the performance of AAR’s recent acquisition of Triumph’s product support division for an aggregate price of $725 million, which had driven better margins.
AAR also expects the purchase to scale its proprietary repair capabilities and complement its existing portfolio, while the former Triumph facility in Thailand expands its reach in Asia.
The company has also noted the potential benefits of integrating AAR’s existing parts supply business with Triumph's facilities and proprietary capabilities.
AAR’s parts business is the company's highest margin segment and consists of new parts distribution and the supply of used serviceable material.
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