Recovery Is In Sight For AAR
Diversification into military as well as commercial aviation has helped some major MROs weather the virus crisis and remain in decent shape. Solid customer relations help a lot too.
For example, AAR now has no furloughed workers. “We have been fortunate that we have excellent airline partners, and we have no mechanics on furlough, and are actually hiring in some locations,” says Brian Sartain, SVP repair and engineering.
That does not mean the virus did not hurt the MRO. Total revenues were down almost 28% in the last quarter, compared with the same quarter of 2019.
Yet AAR still managed to eke out a slim profit of $8 million in the three-month period. And the future is looking decidedly better. “Airframe maintenance demand started to increase significantly in December of 2020 as airlines readied for a potential upturn in travel as the COVID vaccine is distributed,” Sartain says.
Carriers are preparing to get ready for the summer 2021 travel season, however Sartain is cautious about the recovery prospects this year. "We do not expect to reach pre-COVID levels for at least a year," he says.
AAR is diversified within its commercial work as well, and that affects prospects. On landing gear, a significant amount of gear swaps were carried out. So AAR’s current forecasts anticipate landing gear MRO demand to increase starting in March of 2021 and then follow a steady upward trend.
Another segment, component maintenance, is also looking brighter. So far commercial component MRO demand has lagged behind landing gear demand. “But we expect component MRO demand to increase in the second calendar year quarter of 2021,” Sartain says.
Investors are seeing the same brightening prospects as the AAR exec. AAR stock slid from $45 per share before the crisis to $9-15 per share at the crisis’s depth. By mid-January 2021 it had recovered to nearly $40 per share.
And when AAR has fully recovered, apart from some improvements in digital technologies, the MRO plans to sail a steady course forward.
“We do not see significant changes in the business model itself,” Sartain says. “We still believe there is significant value to our customers for an independent third-party maintenance provider like AAR that can provide many unique solutions.”
The MRO will continue to focus on improving technology and efficiency through the use of drones, augmented reality and paperless systems, Sartain says.