Aircraft maintenance provider AAR Corp reported net losses of $8.9 million in the three months ending February 28, 2025, swinging from its net profit of $14 million in the equivalent period a year prior.
However, the losses were driven by a pre-tax charge of $63.7 million associated with its recent divestiture of the company's landing gear overhaul business. The company had sold the business to GA Telesis in December last year for $51 million.
The company's sales had grown in the quarter from $567.3 million to $678.2 million. Cost of sales totalled $546.5 million, up from $457 million.
In addition, gross profit improved to $131.7 million, compared to $110.3 million a year prior. Operating income more than doubled from $33 million to $71.1 million. Adjusted EBITDA was up 39% to $81 million and EBITDA margin expanded from 10.3% to 12%.
“In addition to contributions from our product support acquisition, our internal initiatives to drive efficiency improvements continue to produce meaningful results,” said AAR chairman, president CEO John Holmes.
AAR had completed its $725 million acquisition of Triumph's product support business in March last year. Holmes added: “We are focussed on further increasing our margins as we fully integrate the product support acquisition and drive additional efficiencies throughout the company.”
The company noted that increase throughput at its airframe MRO facilities had contributed to the stronger sales.
“We've made substantial gains in margins in our airframe hangars,” said Holmes during its earnings call. "We've been able to improve margins in an inflationary environment for labour costs, in particular, and grow sales on the same footprint and that comes from increased throughput.
"We do see opportunities to continue both improvements, more throughput and sales growth as well as further margin expansion in the hangers on the existing footprint in the coming quarters."
Holmes added that the company is continuing to roll out its paperless initiative for its hangars, which will drive further margin improvement. In addition, the company is expanding capacity at its Miami and Oklahoma City hangars, which will further improve its margin.
As of February 28, 2025, the company's net debt was $947.6 million and net leverage was 3.06x.