The two firms yesterday (June 16) signed a memorandum of understanding at the Paris Air Show and aim to launch a joint venture (JV) in September.
The partnership will see AAR playing a technical consultant role for SAA Technical helping the African MRO to improve and streamline its process.
“When we visited AAR’s facilities, we saw that they were using world-class services, focused on reducing costs, and we believe that if we implant that approach in our operations we can spread throughout the continent,” explained SAAT’s CEO Musa Zwane at the signing.
“If your costs are low you become competitive and are able to grow in other markets. With the help of AAR, we will be able to strengthen our processes, so we can operate cost effectively and expand.”
For AAR meanwhile, the partnership offers access to a new and burgeoning market. “We’re very excited,” said CEO David Storch.
“South Africa represents a real growing market and a great opportunity for us to expand our MRO and supply-chain capabilities.
The JV follows in line with Storch’s growth strategy, as he explained in an exclusive interview with MRO Network following the signing: “We are poised for growth and I’d like us to be deeper in what we do and broader. Broader from a standpoint of geography and deeper in terms of capability.”
The past 18 months have seen a lot of changes at AAR as the firm made the decision to refocus on its service business and divest itself of some of the capabilities it acquired post-9/11.
Storch explained: “No cycle hurt us as much as the 9/11 cycle. When 3,000 aircraft were parked our business really dried up, we lost 30 per cent of our revenues pretty much overnight.”
In reaction, the US’ largest MRO took action to diversify its offering – acquiring manufacturing capabilities and rebalancing its orderbook to include more international customers and more military applications.
“From 2000 to 2010 this approach served us well,” said Storch. “We got through the 2008 financial crisis with hardly a blemish.”
But with the US airlines revitalised and a more diverse MRO client base, Storch saw that the time was right for AAR to refocus on its service portfolio and over the past year and a half the group has sold off divisions that no longer fitted this strategy, such as Tel Air Cargo, and restructured into two areas: aviation services and expeditionary.
Now, with $500m of cash available, the focus is on growth and partnerships like that with SAAT will play a key role, according to Storch.
“Our business model is about being close to the; we get intimate with our customers and become integral to their operations,” he explained.
“My view is that we have a much better shot understanding local needs and creating value by having local partners.”
Alongside Africa, AAR is looking at its presence in the Middle East, Asia and, potentially, Europe.
“We have a relatively small joint venture in Malaysia that we’d like to expand. And we may do something more in the European market,” confirmed Storch.
It looks like the SAAT deal will certainly not be the last airline MRO joint venture we see AAR entering.