On much more than a wing and a prayer, AAR provides a wide variety of aviation services and technology products primarily for the aerospace and defense industries. The company supplies commercial customers and the US government and its contractors with aircraft components such as transportation pallets, containers, shelters, mobility systems, and control systems used in support of the deployment of military and humanitarian activities. AAR also provides inventory management and parts distribution; aircraft maintenance, repair and overhaul; and expeditionary airlift services. The company traces its historical roots to 1955, when it was founded as Allen Aircraft Radio.
AAR operates through more than 60 locations in 17 countries. It has a presence in the Americas, EMEA (Germany, France, Sweden, Norway, the United Arab Emirates, and the UK), the Asia/Pacific, and Australia. Maintenance facilities reside in Indianapolis; Oklahoma City; Duluth, Minnesota; and Miami.
In 2013 AAR streamlined its organizations from four segments into two. Aviation Services (its main segment representing more than 75% of total sales) provides inventory management and parts distribution; aircraft maintenance, repair and overhaul; and expeditionary airlift services. It sells and leases new, overhauled, and repaired engine and airframe parts to commercial and defense customers. The segment also acts as a distributor for 80 aviation product manufacturers.
AAR's Technology Products segment makes and repairs transportation pallets, containers, shelters, mobility systems, and control systems used in support of the deployment of military and humanitarian activities. The segment also makes transportation pallets and containers used by commercial airlines.
Sales and Marketing
Customers include airlines, business aircraft operators, cargo carriers, aviation OEMs, and militaries; the US government accounts for about 40% of sales.
AAR's sales declined 5% in fiscal 2014 (ended May) versus the prior year, to $2 billion, on lower sales to commercial customers due to softness in maintenance, repair, and overhaul activity in its Aviation Services business. Sales of Technology Products fell 9% year over year on decreased demand for commercial cargo containers and precision machined parts. The decline in sales to government and defense customers was due to lower demand by the Department of Defense for expeditionary airlift services in Afghanistan, and for mobility products. The slide in fiscal 2014 revenue, reversed three consecutive years of growth for the company, during which revenue peaked at $2.1 billion.
Despite the decline in revenue, net income grew 33% to nearly $73 million in fiscal 2014 on the increased gross profit margin on sales to commercial customers. Cash flow from operations decreased by $23 million
As sales to government and defense customers decrease, but business with commercial customers rises, AAR has been making acquisitions that boost its operations in the civilian sector. After acquiring Telair, a maker of cargo loading systems for wide-body and narrow-body Airbus and Boeing aircraft, in 2011 and making it a subsidiary, AAR has completed several bolt-on purchases, including: Nordisk, a maker of heavy-duty pallets and lightweight cargo containers for commercial airlines; and Airinmar, which provides aircraft component repair management services.
AAR's Airlift division got a lift from the Department of the Navy in September 2014 when it was awarded a $49 million contract to provide personnel recovery airlift services in West Africa. AAR Airlift provides expeditionary airlift services in support of contingency operations worldwide, in such areas as Afghanistan, Africa, and the Western Pacific.
Mergers and Acquisitions
In August 2014, AAR's Mobility Systems unit acquired the assets of Cool Containers, a maker of temperature-controlled containers used to transport climate-sensitive pharmaceuticals and biological cargo. In December 2013, the company's Telair subsidiary purchased the cargo loading assets from Germany's PFW Aerospace GmbH, thereby enhancing its position as a leading global supplier of cargo loading and baggage handling systems