AAR Corp. (AIR) Wins SAAT Contract Valued Up to $125M

October 6, 2016 10:54 AM EDT

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AAR (NYSE: AIR) has signed a five-year agreement to provide power-by-the-hour (PBH) component inventory management and repair services to South African Airways Technical (SAAT) Ltd. The contract is valued up to $125 million.

"This agreement marks a significant expansion of AAR's aviation and supply chain services in emerging markets," said David P. Storch, President, Chairman and CEO, AAR. "We are pleased to win the confidence of this leading airline customer in Africa."

AAR has teamed with local joint venture partner, JM Aviation South Africa (Pty) Ltd., to support South African Airways' (SAA) fleet with nose-to-tail component and repair management. JM Aviation will provide day-to-day, on-the-ground account management and technical support and will work closely with AAR's global parts supply warehouse team in Brussels. Work officially began on October 1.

The joint venture also will focus on growing SAAT's MRO services to third-party customers/airlines across the continent, and fulfills a key objective of the South African government to extend aviation services contracts to black-owned firms that, like JM Aviation, are certified BBBEE, or broad-based black economic enterprise businesses.

In addition, AAR will offer its industry-leading airframe and avionics skills training to SAAT and JM Aviation workers, facilitating a knowledge transfer to support the growth of black-owned businesses in Africa's aviation sector, among the fastest-growing in the world.

"We're excited to lend our award-winning experience to reduce costs to the airline and support growth of Africa's air travel industry for years to come," said John Holmes, Chief Operating Officer, Aviation Services, AAR.

"Africa is a dynamic and growing market full of potential. Working with SAAT not only is an opportunity for AAR to grow its presence in Africa, it is an opportunity for SAAT to create access to lucrative jobs and business opportunities for locals through the skills training that AAR will provide," added Cheryle R. Jackson, President, AAR Africa.

SAAT will gain access to AAR's operational analysis and technical assistance for MRO, as well as warehouse facilities and integrated IT solutions for MRO. AAR has a global reputation in the aviation sector for improving operational efficiencies and turn times, and lowering costs through its customer-centric solutions. AAR also will support expansion of SAAT's component repair capabilities, including landing gear, and potentially support a new MRO facility in West and Central Africa to meet growing regional travel in sub-Saharan Africa and increasing international travel to the continent.

"We are excited to work with an industry-leading partner that not only will enable us to reduce costs and improve fleet readiness but will also fortify our workforce with mission-critical skills necessary to support future growth," said Musa Zwane, CEO of SAAT.

The agreement represents a significant expansion of AAR in Africa, where the Company recently established a base of operations in Johannesburg and appointed Jackson its first president of AAR Africa. The Company has been solidifying its foothold in Africa the last two years, signing its first PBH component inventory management and repair services contract in 2014 with Kenya Airways to support its fleet of 737NGs. More recent deals include a PBH contract with fastjet, the award-winning, Africa-based low-cost airline, illustrating the global reach of AAR's supply chain solutions.



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