AAR Corp saw an uptick in assets needed to feed the long-constrained used parts supply chain last quarter, but the company’s top executive is not ready to project a surge in availability of much-coveted used serviceable material (USM).
“We are seeing opportunities in USM in terms of assets available for sale ... many more now than we did a quarter ago,” AAR President and CEO John Holmes said on the company’s fiscal 2025 second quarter (Q2) call Jan. 8. “It’s hard to call that a trend because we’re a quarter into it. But generally speaking, we are having more conversations ... and we would expect more growth through the balance of the fiscal year as long as we’re able to capture those assets.”
Holmes declined to discuss specific aircraft or engine model trends but underscored that 60% of AAR’s parts sales are engine-related, with a heavy narrowbody presence. It has a deal with FTAI to supply used CFM56 parts, for example.
Supply of airworthy used parts, used by all operators to help lower maintenance costs, has been tight for years due primarily to strong demand for travel combined with persistent problems with new-aircraft deliveries and durability. The combination has kept many older aircraft in service longer instead of being retired and parted out.
Manufacturers are working to meet delivery and performance targets for their newest models, but progress is slow—too slow to account for any uptick in retirements, Holmes suspects. Rather, he points to other market dynamics, notably the struggles of some ULCCs, as the likely source for the increase in older-aircraft transactions.
“I would not characterize this as a trend related to increased production out of the OEMs,” he said. “I think that you are seeing a slight loosening due to some of the things going on with the lower-cost carriers and the larger lessors ... I would characterize that as situational right now.”
One sign of a growing wave of USM availability is a drop in asset prices—something AAR is not seeing.
“The values are still very, very strong,” he said. “I would not say that they are accelerating at the rate that we have seen, but they’re still very, very strong. And of course, the prices that we pay for assets, we’re able to command equally strong pricing in the market to preserve our spreads.”
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