AAR breaks ground on MRO facility expansion in Oklahoma City

Rhea-AI Summary

AAR Corp. (AIR) breaks ground on a new maintenance facility in Oklahoma City, expected to be operational by early 2026. The facility will provide 80,000+ square feet of space for all 737 variants, supporting a maintenance commitment from Alaska Airlines. Funding includes a grant from Oklahoma legislators and airport rent concessions.

Insights

Market Research Analyst

With AAR CORP.'s announcement of the expansion of its maintenance, repair and overhaul (MRO) facility, there is a clear signal of growth within the aviation services industry. This expansion, particularly to accommodate all 737 variants, suggests an alignment with current market demands for MRO services for narrow-body aircraft, which are commonly used in commercial fleets.

The strategic location at Will Rogers World Airport, coupled with the long-standing relationship with Alaska Airlines, positions AAR to capitalize on both the geographic and client-based opportunities. The increased capacity could potentially lead to enhanced revenue streams and a stronger competitive position in the MRO market segment.

The funding structure, partly through grants and partly through airport rent concessions, indicates a cost-effective approach to expansion, potentially improving the project's return on investment. However, investors should monitor the progress of construction and the integration of the new facility into AAR's operations for any potential risks or delays that could impact the expected operational date in early 2026.

Financial Analyst

The financial implications of AAR's facility expansion are multifaceted. On one hand, the capital expenditure for the new hangar and warehouse space is substantial but is mitigated by the grant from Oklahoma legislators and rent concessions. This shows a prudent financial strategy that may not over-leverage the company's balance sheet.

On the revenue side, the commitment from Alaska Airlines could provide a stable and predictable income source, strengthening AAR's order book. The addition of 80,000+ square feet of space may also attract new customers, diversifying AAR's customer base and reducing dependency on a few large clients.

Investors will be interested in the project's timeline and execution, as delays or cost overruns could affect AAR's financial performance. The operational start date in 2026 will be a critical milestone to watch, as it will mark the point when capital outlays begin to translate into operational revenues.

Aviation Industry Expert

The expansion of AAR's MRO facilities is indicative of the broader trends in the aviation industry. As airlines continue to update their fleets with newer models like the 737-10, the demand for MRO services that can support these aircraft is expected to rise. AAR's proactive approach in expanding to accommodate these models demonstrates foresight and adaptability.

Moreover, the involvement of state and local government officials in the project reflects the economic importance of such facilities to local economies. Job creation and infrastructure development are likely benefits that extend beyond AAR's direct business interests.

However, the competitive landscape of the MRO market is fierce, with several players vying for contracts. AAR's success will depend on maintaining high service standards and cost competitiveness, especially as the industry recovers from the impacts of the COVID-19 pandemic and faces new challenges such as sustainability and technological advancements in aircraft maintenance.

The new facility is expected to be operational in early 2026.

WOOD DALE, Ill., April 5, 2024 /PRNewswire/ -- AAR CORP. (NYSE: AIR), a leading provider of aviation services to commercial and government operators, MROs, and OEMs, broke ground on the expansion of its maintenance, repair, and overhaul facility in Oklahoma City earlier today.

More than 150 representatives from AAR, Alaska Airlines, state and local government, and partner organizations supporting the efforts gathered to celebrate groundbreaking on AAR's new three-bay facility that is being constructed adjacent to the Company's existing facility at Will Rogers World Airport.

The new facility has been designed to provide AAR an additional 80,000+ square feet of hangar and warehouse space and to accommodate all 737 variants, including the 737-10. AAR's growth in Oklahoma City supports a recently expanded maintenance commitment from Alaska Airlines, a valued customer of AAR for more than 20 years. The new airframe MRO facility is expected to be operational in January of 2026.

Considerable funding for the project was made possible through a grant secured by Oklahoma legislators, with the balance expected to be funded through rent concessions from the airport.

Speakers at the groundbreaking celebration included John M. Holmes, AAR's Chairman, President and CEO; Don Wright, Alaska Airlines' Vice President of Maintenance & Engineering; Grayson Ardies, State Director of Oklahoma Aeronautics Commission; Lt. Governor Matt Pinell; Senator Paul Rosino; Jeff Seymour of Greater Oklahoma City Chamber of Commerce – Economic Development; Terry Salmon, Chair of the Oklahoma City Airport Trust; and Jeff Mulder, Oklahoma City Director of Airports.

Holmes shared, "Today's groundbreaking has been made possible thanks to collaborative efforts across AAR and Alaska Airlines, partnerships with Oklahoma City Airport Trust, and state and local representatives who are passionate about expanding aviation in Oklahoma. We are especially excited about creating 200 additional full-time careers with AAR, which we expect to fill through local technical schools and workforce development partners who create opportunities through aviation-centric programming, such as Choose Aerospace."

"The Oklahoma City Airport Trust is excited to partner with AAR to expand its Maintenance, Repair and Overhaul operation at Will Rogers World Airport. This expansion of AAR's MRO operation provides more hangar capacity at OKC, along with more aviation jobs for our community," said Jeff Mulder, Oklahoma City's Director of Airports.

"This groundbreaking isn't just about constructing a hangar. It's about cultivating an excellent experience for all involved. JE Dunn is honored to bring our construction expertise and leadership and partner with The Oklahoma City Airport Trust (OCAT) to support the business growth happening in our city," said Jason Bishop, JE Dunn's Vice President – Oklahoma City, who is leading the construction effort.

For more information on AAR, visit aarcorp.com.

About AAR
AAR is a global aerospace and defense aftermarket solutions company with operations in over 20 countries. Headquartered in the Chicago area, AAR supports commercial and government customers through four operating segments: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services. Additional information can be found at aarcorp.com.

This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995, reflecting management's expectations about future conditions, including the expansion of the Company's MRO facility in Oklahoma City, the timing of and funding for such expansion, the creation of additional careers in connection with such expansion, and the anticipated activities and benefits under the maintenance commitment with Alaska Airlines. Forward-looking statements may also be identified because they contain words such as ''anticipate,'' ''believe,'' ''continue,'' ''could,'' ''estimate,'' ''expect,'' ''intend,'' ''likely,'' ''may,'' ''might,'' ''plan,'' ''potential,'' ''predict,'' ''project,'' ''seek,'' ''should,'' ''target,'' ''will,'' ''would,'' or similar expressions and the negatives of those terms. These forward-looking statements are based on beliefs of Company management, as well as assumptions and estimates based on information currently available to the Company and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. For a discussion of these and other risks and uncertainties, refer to "Risk Factors" in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Should one or more of these risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described. These events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company's control. The Company assumes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Contact:
Media Team
Corporate Marketing and Communications
+1-630-227-5100
Editor@aarcorp.com

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SOURCE AAR CORP.

FAQ

When is the new facility expected to be operational?

The new facility is expected to be operational in early 2026.

What is the ticker symbol for AAR Corp.?

The ticker symbol for AAR Corp. is AIR.

What is the purpose of the new facility in Oklahoma City?

The new facility is designed to provide AAR an additional 80,000+ square feet of hangar and warehouse space to accommodate all 737 variants, including the 737-10.

How is the funding for the project secured?

Considerable funding for the project was made possible through a grant secured by Oklahoma legislators, with the balance expected to be funded through rent concessions from the airport.

Who are some of the key speakers at the groundbreaking celebration?

Key speakers at the groundbreaking celebration included John M. Holmes, AAR's Chairman, President and CEO; Don Wright, Alaska Airlines' Vice President of Maintenance & Engineering; Grayson Ardies, State Director of Oklahoma Aeronautics Commission; Lt. Governor Matt Pinell; Senator Paul Rosino; Jeff Seymour of Greater Oklahoma City Chamber of Commerce – Economic Development; Terry Salmon, Chair of the Oklahoma City Airport Trust; and Jeff Mulder, Oklahoma City Director of Airports.