Founded in 1951, AAR Corp. is an independent provider of aviation and expeditionary services to the global commercial, government and defence aviation industries. ESD spoke with Eric Young, AAR’s Senior Vice President, OEM Solutions.
ESD: What is the core business of AAR?
Young: We are a global aviation services provider to commercial and government customers. Our aftermarket expertise and solutions help customers increase efficiency and reduce costs while maintaining high levels of quality, service and safety. We are the largest independent heavy maintenance check provider in North America and the third largest in the world as well. Our MRO business has seven facilities, 3,000 A&P (Airframe and/or Powerplant) mechanics, six million man hours, with a large focus on narrow-body fleets.
When I say independent, I mean not owned by an OEM, airline or operator. Additionally, we have two Component Repair Shops – one in Long Island, NY, and one in Amsterdam, the Netherlands. In combination with our flight-hour support business and our component repair management subsidiary, Airinmar, we are the largest independent provider of component repair management in the world, with 1,200 aircraft under management. And we are also the world’s largest independent aviation services provider with government and commercial capabilities.
ESD: What is AAR’s ratio of military vs. civilian business?
Young: In principle, every AAR business addresses commercial and military customers. When you look across AAR, the ratio is approximately 35% military and 65% commercial. This comes out to a revenue of US$700M generated by military projects every year. The largest customer in this area is the US Government, which includes the Army, Navy, Air Force and Department of State with different contracts and different services. The second largest military customer is the Japanese Ministry of Defence, and outside of that, we have a dedicated team that sells directly to 30 other foreign militaries.
ESD: What are the major US military programmes that AAR is currently involved in?
Young: I would like to highlight two of them. One is with the Air Force Sustainment Center, Hill Air Force Base. AAR provides total supply chain management including purchasing, remanufacturing, distribution and inventory control for all C-130, KC-135 and E-3 landing gear parts. Secondly, we maintain and operate the Department of State’s global fleet of fixed-wing and rotary-wing aircraft in the scope of its Worldwide Aviation Support Services (WASS) programme. These are very large programmes, and hundreds of employees are needed to support them. And so far, the execution has been very successful. But every contract is different. In some contracts, we train or even employ the pilots. In other contracts, we manage and perform the repairs of components. Sometimes, we own the components; sometimes, we own the warehouse and perform only part selection and packing. So, it is almost like a menu. We provide individual or bundled solutions. The agreements are very tailored to our customers’ needs.
ESD: You support the P-8A POSEIDON programme as well.
Young: That is an interesting story because it is linked to our experience in the commercial airframe maintenance business. The P-8A POSEIDON is a Boeing 737-800 derivative – and our airframe maintenance facility manages that contract for the US Navy. We are one of the few players for airframe maintenance. We like to say: Leverage commercial best practices to help the Government gain commercial efficiency. And especially for the commercial aircraft derivatives, we are in a great position because we already have the supply chain procurement knowledge to maintain the aircraft for the military.
ESD: AAR recently signed a contract with the Danish procurement authority DALO. What kind of services does your company provide for this customer?
Young: AAR’s task is to perform maintenance, repair and overhaul of Pratt & Whitney F100-220 engine components on the F-16 for the Royal Danish Air Force. Our Component Repair Amsterdam facility has been supporting European Participating Air Forces either as a prime or a subcontractor performing repair management, component maintenance, supply chain and depot services for more than three decades.
ESD: Your civilian customers want to be profitable while the military primarily wants to be effective while accomplishing military missions. These are different ways of thinking. To what extent can you leverage your experience in the civilian market to military customers?
Young: Well, obviously they are different markets with different terms, conditions and requirements. But it is the taxpayers’ money the US Government is spending, so the contract valuation is very transparent. So, yes, commercial customers are trying to make a profit but at the same time on the military side, they have to run a competitive process as well. It is not like “Oh, you have it – I’ll buy it!” They have to open it up for a bid. Therefore, in both markets we have to make sure that we are planning right, stocking right and servicing the mission accordingly to stay competitive.
ESD: Some air forces operate ageing fleets with high and exponentially rising maintenance costs. To what extent can your company help them to alleviate these problems?
Young: OEMs are always focused on the next big thing, on the next generation aircraft. And a lot of these parts needed to maintain legacy aircraft are out of production; they haven’t been built for sometimes ten years or even more. That is where AAR comes in. First, we get the part number list and review it. In parallel, we work with OEMs for certain parts and work with repair shops for others. We identify new partners to qualify alternative sources for parts that the OEMs don’t want to make anymore and source from the used surplus market as well. Additionally, we develop repair capabilities allowing the OEM to focus on their strengths. There are not that many players that can pull those different markets together to support a legacy aircraft. That expertise is one of our competitive advantages.
The interview was conducted by Peter Bossdorf.