A reduction in supply chain business with Mesa Air Group and an overall decline in aircraft sales and leasing activities failed to substantially stymie AAR's growth in the 2009 fiscal first quarter, a period that saw the firm's net profit climb by $3.2 million to $18.4 million and sales rise 18% to $359.9 million.

"We had a strong first quarter marked by continued growth in revenue, operating income and earnings despite volatility in certain parts of our operating environment," says AAR chairman and CEO David Storch. "The results were driven by market share gains and margin expansion in our aviation supply chain, MRO [maintenance, repair and overhaul] and structures and systems segments."

While sales for the aviation supply chain business grew 8% to $153.5 million for the three months ended 31 August, Storch admits AAR "reduced the size of the relationship with Mesa" with an eye to culling some risk.

"We'll keep monitoring the situation. Mesa has been a good customer for us, and is honouring all aspects of their contractual relationship with us. We know they have some challenges, as all airlines do," says Storch.

During the fiscal first quarter AAR had no aircraft sales. As a result, the firm's aircraft sales and leasing segment declined $20.8 million and gross profit and earnings from aircraft joint ventures declined $5.5 million from the prior year.

The company's aircraft position remained unchanged at 37 aircraft, with 29 aircraft held in joint ventures and eight aircraft held in its wholly-owned portfolio. However, AAR has already signed agreements to sell two Boeing 737s coming off lease this year.

"The investors are going to be very happy with the return we have on these two sales," says Storch, noting that the firm will "end up with very healthy returns from the sale of these two assets".

Additionally, AAR is in active discussions to sell a third aircraft coming off lease in the fiscal second quarter. A further two aircraft, which are earmarked to come off lease in the second half, will likely be re-leased as "those two aircraft are newer", says Storch.

Also AAR yesterday announced that it has been selected by United Airlines to remarket and provide technical advisory services for the US major's fleet of wholly owned 737s. The carrier is retiring the aircraft.

"Obviously United went out to the market and looked for folks who could help them in this regard and they selected AAR. We are out there aggressively trying to move this hardware for them," says Storch.

Looking ahead, he says, AAR is "encouraged by the momentum, deal flow and opportunity in our aviation supply chain, MRO and structures and systems segments, which are supported by an increase in our backlog to approximately $500 million at 31 August from $465 million at 31 May and $310 million at 31 August 2007".

Source: Air Transport Intelligence news

Source: Air Transport Intelligence news