Yesterday, AAR Corp. (AIR: 25.44 -0.41 -1.59%) signed a Memorandum of Agreement (MoA) with Sikorsky Aircraft Corporation under which the two companies will work together to identify opportunities for expanding their business relationship. In addition to becoming an exclusive supplier of composite interiors for the Sikorsky S-92® helicopter program, AAR will provide precision machining services for S-92 helicopter flooring and a structural component of the H-60 helicopter airframe. The combined value of initial orders is approximately $18.8 million, with potential contract value exceeding $60 million.
The MoA represents a formal agreement between AAR and Sikorsky to explore opportunities to align AAR’s diverse engineering, manufacturing, maintenance and parts supply capabilities with Sikorsky’s production and aftermarket support requirements. The fabrication of S-92 Offshore/Airline helicopter composite interiors will be performed by AAR Composites. Precision machining services will be provided by AAR Summa Technologies. Together, these AAR businesses offer a complete range of design engineering and manufacturing services for both advanced composite and metallic aerostructures. This is an important contract for AAR, in terms of expanding its presence in the helicopter market.
In addition to winning defense contracts AAR has been successful in securing new business with several airline customers. The company won a very significant and meaningful contract to provide supply chain logistics support as a member of the Northrup Grumman team for the United States Air Force KC10 fleet. This is the largest program in the company’s history, which will begin booking revenue for AAR in February 2010, and will be fully operational by the fourth quarter of fiscal 2010.
We have a Neutral recommendation on the stock.
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