AAR Corp. (NYSE:AIR) Q1 2021 Earnings Conference Call - Final Transcript

Thank you. [Operator Instructions] And our first question comes from Robert Spingarn from Credit Suisse.

Hey, good afternoon.

Hey, Rob. How are you?

Good. Thanks. Thanks, John and Sean. Couple of questions. So, you mentioned that you are encouraged and you're seeing some positives. Could you talk a little bit, John, about the volumes as they progressed in the various businesses, but primarily just commercial overall through the quarter-by-month? And should I interpret your comments, you're more bullish now at this point than you were three months ago?

Sure. Yes, let me -- I'll talk through the businesses. Thinking about the parts business -- trading and distribution -- we did see relatively consistent performance from each of those businesses in terms of order volume, each month during the quarter.

MRO did improve through the quarter. And August, for example, was a better month than June. We expect MRO to improve from the Q1 level as we head into Q2.

What we meant by being encouraged is -- yes, as we sat here three months ago, we didn't have clear visibility, and I would say had lower expectations of the MRO loading that we expected to see in the second quarter as we head into the fall and in the winter. And so far, the indications from our customers are better than we expected at the beginning of Q1.

Is there any way to quantify the loading in MRO in terms of the percentage, utilization of your Hanger capacity, let's say, in the fiscal one versus what you're expecting in fiscal two and so on?

I would say that we certainly look at it in terms of labor hours that we produced. Q2 will be a better quarter in that regard than Q1, but still well below what we produced a year ago. Beyond that, at this point, I wouldn't want to give any specifics.

What I would say is that, as you're talking and seeing from all of the commercial airline, there continues to be quite a bit of movement out there in terms of what they expect in the way of demand, and certainly headlines in the last few days would indicate there's things going on in Europe, etc., and questions about what could happen here in the U.S. But at this point, we've got pretty good dialog and reasonable visibility to what we expect to see in the second quarter.

And would MRO reflect the down -- I think it was 48% commercial volume decreases. When we think about the number of hours in fiscal quarter one, is it similar to that or is there something --

Yes, I would say, in MRO, yes, I would say it's consistent to that in Q1.

And that that improves a bit in Q2.

Yes.

Are airlines positioning for a return in traffic in calendar '21, is that what drives your Q2?

Yes, we're seeing some positioning for holiday travel. So, that's typically what drives the demand in the fall. And then