AAR (AIR) Expands Partnership With ASL Aviation Holdings
AAR Corp. AIR recently signed a multi-year extension and expansion contract with ASL Aviation Holdings DAC (ASL Airlines) 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.
AAR’s Prospects in Commercial Aircraft Services
With a steady recovery in the commercial aircraft fleet over the past few months and the need for more technologically advanced aircraft, demand for aircraft services has also increased manifold. This, in turn, has been benefiting AAR Corp. Evidently, during second-quarter fiscal 2023, AAR’s integrated solutions’ segment sales increased 23% from the previous year on account of higher commercial activity.
As air travel continues to expand, the outlook for commercial fleet service remains bold. To this end, per a report by Airbus, the commercial aircraft services market is projected to nearly double in value to $255 billion by 2042. This should boost fleet service providers like AAR.
Such solid market growth prospects should aid AAR, one of the notable aircraft commercial solutions providers in the world. The company offers flight-hour support services to prominent jet makers like Airbus, Boeing, Embraer and Bombardier’s commercial aircraft programs. Impressively, it has supported a total of 14 commercial airlines, with more than 27,000 commercial repair transactions.
Further, on Oct 21, 2023, AAR entered into an agreement to purchase Triumph Group’s Product Support business. This deal will significantly improve AAR’s commercial services capabilities.
Such developments, along with the company’s latest extension agreement with ASL Airlines, should increase AAR’s profitability in the coming days.
Peer Moves
Apart from AAR, aerospace players that have a solid presence in the commercial aircraft services industry and may gain from the flourishing market prospects are as follows:
RTX Corp. RTX: 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 is pegged at 9.4%. The Zacks Consensus Estimate for 2023 sales implies a 10.5% improvement from the 2022 reported figure.
Triumph Group TGI: The company is benefiting from improvement in overall air travel metrics. During second-quarter fiscal 2024, the company’s commercial aftermarket sales accounted for 27% of the total.
The Zacks Consensus Estimate for TGI’s fiscal 2024 sales implies a 5.2% improvement from the previous year’s reported figure. The consensus estimate for fiscal 2024 earnings has moved up 64.3% in the past 60 days.
Boeing BA: Boeing Global Services offers various benefits in the commercial aviation market. During third-quarter 2023, it experienced orders valued at $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 is pegged at 4%. The Zacks Consensus Estimate for 2023 sales implies a 15.4% improvement from the 2022 reported figure.
Price Performance
Over the past year, shares of AIR have rallied 39.5% compared with the industry’s 34.5% growth.
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Zacks Rank
AAR Corp. currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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