AAR (AIR) Enters Into Multi-Year Distribution Deal With Ontic
AAR Corp. AIR announced a new multi-year agreement with Ontic. Per the terms of the agreement, AAR will have the rights to supply a strategic selection of military products to the U.S. government, with exclusivity on specified parts.
As a reputable supplier of parts and services to the aircraft aftermarket, Ontic awaits to improve its offerings in order to better assist American warfighters. AAR looks forward to add the Chatsworth, CA facility to its Ontic alliance, further strengthening its strategic military portfolio.
At the moment, AAR supports commercial distribution for Ontic's Creedmoor, NC, plant as well as military distribution for Ontic's Cheltenham, the United Kingdom, facility.
Through this new agreement, Ontic aims to expand its cooperation with AAR. The latter’s support will help improve Ontic's operational efficiency and allow it to better serve its broad customer base. AAR allows Ontic to shorten turnaround times and improve the availability of products to its shared U.S. government customers.
AAR’s Focus on Commercial & Government Services
With a steady recovery in the commercial aircraft fleet over the past few months and the need for more technologically advanced aircraft, the demand for aircraft services has also increased manifold. This, in turn, has been benefiting AAR.
AIR continues to witness strong performance in its parts supply and program activities. During second-quarter fiscal 2023, the company’s consolidated sales to commercial customers increased 24% from the prior-year quarter’s level, primarily due to strong demand for its new and used parts offerings. The company’s consolidated sales to government customers increased 1%, primarily backed by growth across government programs in its Integrated Solutions segment.
As air travel continues to expand, the outlook for commercial fleet service remains bold. In December 2023, AAR signed a multi-year extension and expansion contract with ASL Aviation Holdings DAC to provide flight-hour component support services. Per the contract, AAR’s existing agreement with ASL Airlines Belgium will now include ASL Airlines France, ASL Airlines United Kingdom and ASL Airlines Ireland. The company previously supported 28 ASL aircraft, which is expected to increase to 65 under the new agreement.
In December 2023, AAR entered into an agreement to purchase Triumph Group’s Product Support business. This deal will significantly improve AAR’s commercial service capabilities. Such developments should help the company to gain from commercial and government services.
Peer Moves
Apart from AAR, other aerospace companies like RTX Corp. RTX, Triumph Group TGI and Boeing BA are also set to gain from their solid presence in the commercial aircraft services market.
RTX’s subsidiary Collins Aerospace is engaged in providing aftermarket solutions to commercial airlines. During third-quarter 2023, the company’s commercial aftermarket segment saw 25% growth.
RTX’s long-term (three-to five-years) earnings growth rate is 9.35%. The Zacks Consensus Estimate for 2024 earnings indicates a year-over-year increase of 7.4%.
Triumph Group is benefiting from improvement in overall air travel metrics. During second-quarter fiscal 2024, the company’s commercial aftermarket sales accounted for 27% of total sales.
The Zacks Consensus Estimate for TGI’s fiscal 2024 sales implies a 5.2% improvement from the previous year’s reported figure. The Zacks Consensus Estimate for fiscal 2025 earnings indicates a year-over-year increase of 60.9%
Boeing Global Services offers various benefits in the commercial aviation market. During the third quarter of 2023, it received orders worth $5 billion with a backlog of $18 billion and signed a digital maintenance solution agreement with Philippine Airlines for Airplane Health Management.
BA’s long-term earnings growth rate is 4%. The Zacks Consensus Estimate for 2024 earnings indicates a year-over-year improvement of 47.9%
Price Performance
In the past year, shares of AAR have risen 35.5% compared with the industry’s 29.1% growth.
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Zacks Rank
The company currently has a Zacks Rank #4 (Sell).
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