Aircraft Maintenance Technology

APR-MAY 2018

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DPS: Well, that's a heck of a lead-in Ron. I believe what's always driven this company is our ability to stay in touch with the industry and to understand what's happening in the industry; by networking and face-to-face contact with other leaders in this industry. To really try to understand and put ourselves in their shoes as to what challenges they are facing. Once we understand this we then figure out how to create solutions for their challenges. The needs of the aircraft operator have changed and by staying very close and listening to the customer, we've been able to adjust our product offerings. Yes, I think that's been the skill of the company. And, it's important to say doing all of this by maintaining our financial strength. Our financial strength has, at times, been challenged. However, we've always maintained the financial flexibility to allow us to pivot as our customers' needs have evolved and changed. One example was taking on the former United Airlines maintenance space in Indianapolis. At the time, the airline industry was really in a bad way. The facility had been vacant for two years and I looked at it as an opportunity with risk; but an opportunity to fill a void that you could see coming. The void you could see coming was the airline industry needed to focus on what they were good at: flying people and freight from point A to point B. There was a possibility that there could be growth in the third-party maintenance business as a result of that shift in focus at the airlines. We went into that facility when airlines were either in or on the verge of bankruptcy. The requirements had definitely been diminished as the fleet sizes had shrunk or diminished. Moving into the facility at the time was risky. But if you looked to where the future was heading and how airlines were reorganizing you could make the business case. RWD: So, talking about transformations, in a recent AAR press release announcing John Holmes as your successor you said, "We are well into the transformation of AAR with more actions coming to better serve the needs of the commercial and government customers worldwide." So, what are some of transformations yet to come? DPS: So Ron, when 9/11 happened, we had an extraordinarily large percent of our business supporting U.S. commercial airlines. In the midst of the 9/11 recovery I said, "This is one of those life experiences I never want to go through again." Why do I say this? In the financial period directly after this, our revenues had dropped 30 percent from the period ending Aug. 31, 2001. So in a 90-day period we had a 30 percent drop in our revenues. I then said, "how should we be looking at this company going forward because we don't want to be in this situation again." So I set out on a path to diversify the company in three ways. One was, I wanted 50 percent of our business to be domestic, 50 percent international. At the time it was 85 percent domestic, 15 percent international. I wanted 50 percent of our business to be military, defense, or government; 50 percent commercial. At the time, 85 percent of our business was commercial, 15 percent was military. And I wanted to go 50/50 on what I called front-end and back-end. At the time the company had little manufacturing businesses. I wanted more manufacturing because I wanted to have more control more or less over our destiny. So over 10 years say 2002 to 2012 we diversified the company. We opened up more international business. We acquired defense-oriented suppliers and we acquired manufacturing capability to be more what I call front-end versus back-end only. In the 2015/2016 timeframe, we also sold off some of our front-end I believe what's always driven this company is our ability to stay in touch with the industry and to understand what's happening in the industry ... We've always maintained the financial flexibility to allow us to pivot as our customers' needs have evolved and changed. AAR WORLD Headquarters in Wood Dale, IL. AAR CORP. www.AviationPros.com 15

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