What's Happening?
AAR Corp has observed an increase in the availability of used serviceable material (USM) feedstock, yet the market remains tight due to high whole-asset prices and low retirement rates of popular airframe and engine platforms. According to AAR CEO John Holmes, the company experienced a 32% increase in USM sales for the fiscal first quarter ending August 31, 2025. Despite this growth, margins remain below historical levels due to the high cost of materials. The Parts Supply segment, which includes USM, reported total sales of $317.8 million, marking a 27% year-over-year increase.
Why It's Important?
The tightness in the used parts market reflects broader supply chain challenges in the aviation industry, particularly affecting the availability of new aircraft parts. This situation has forced airlines to retain older aircraft longer than planned, impacting fleet modernization efforts. The high demand for USM indicates a shift towards cost-saving measures among operators, which could influence future procurement strategies. As major manufacturers like Airbus and Boeing work to increase production, the market may see a gradual easing of these constraints, potentially leading to improved margins for companies like AAR.
What's Next?
As Airbus and Boeing ramp up production, the aviation industry anticipates an increase in aircraft retirements, which could alleviate some of the current market pressures. AAR expects that as more supply becomes available, margins in the USM business will improve. The company will likely continue to monitor market conditions closely and adjust its strategies to capitalize on emerging opportunities. The ongoing supply chain issues and their resolution will be critical factors in shaping the future landscape of the aviation parts market.
