Continental Airlines Boeing 737-800 737: Boeing

AAR Sees More Opportunity To Sell Used Aircraft To Government

After landing a contract to deliver two 737s and their support equipment to the U.S. Marine Corps, AAR is looking to shop the used aircraft example around to other government customers.

AAR recently garnered attention by landing a new $118.6 million contract to deliver two 737 aircraft and associated support equipment to the U.S. Marine Corps–significant because the armed service was looking to buy new-build aircraft.

Now the aftermarket services provider is looking to shop that example around to other government customers, helping them to learn that they can get their aircraft needs met sooner for cheaper.

AAR announced the firm-fixed price contract Sept. 6. It is estimated to last two years, and entails the acquisition, modification, acceptance and delivery of two 737-700 increased gross weight-series commercial aircraft. The aircraft will meet USMC C-9B replacement medium-lift requirements and be designated as C-40A aircraft when delivered.

“If the government is looking to save money, going after solutions like what we just offer with the C-40 is a wonderful opportunity for them,” AAR CEO and President John Holmes said Sept. 25. “They were planning to buy new aircraft. AAR was able to present a solution that allowed them to buy used aircraft and actually get those delivered sooner than they would have if they had brought new aircraft for considerably less.

“And you can bet that we’re going to take that example and market it all over the place to the U.S. government as an opportunity for them to save money, and not just in whole-aircraft purchases,” Holmes continued. “We believe that there is more out there like this, but also as it relates to just used serviceable materials as a source of savings in all areas of procurement. That’s a big part of our strategy.”

Holmes spoke during a teleconference on AAR’s first-quarter fiscal 2020 results. Sales of $542 million were up 16% from $466 million in the same quarter the year before. Diluted earnings per share from continuing operations was $0.49 compared with $0.54, on net income of $4.4 million against $15.1 million.

The C-40 award contributed about $19 million of sales in the quarter, according to AAR CFO Sean Gillen. In other puts and takes, the company incurred $500,000 worth of severance and restructuring charges, net of tax benefits. AAR has been laboring to sell its Afghanistan war-related, contractor-owned, contractor-operated (COCO) aviation services business and once planned to have that done by May. The company currently expects it to wrap up by year’s end.

TAGS: Airframes
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