AAR Corp.'s Last Three Years: A $55.6 Million Settlement and a Corporate Makeover

The story

Summer 2023: a steady parts distributor, quietly reorganizing

In the summer of 2023, AAR was a steadily growing parts company — $1.99B in revenue, operating margins in the 6–7% range — that had just split its old, catch-all "Aviation Services" segment into Parts Supply, Repair & Engineering, and Integrated Solutions, adding Expeditionary Services (government logistics) as a fourth. On early-2024 calls, CEO John Holmes repeated one phrase almost every quarter: "ten consecutive quarters of operating margin improvement" — a steady, unglamorous growth story.

Late 2024: two shocks land on the same day

Then, on December 19, 2024, two things happened at once. A Foreign Corrupt Practices Act investigation AAR had self-reported to the Department of Justice back in 2019, tied to conduct in Nepal and South Africa, was settled for $55.6 million. The very next day, the company announced it was selling its long-running Landing Gear maintenance business to GA Telesis. Net income for FY2025 collapsed as a result, from $46.3M the prior year to just $12.5M. It got more complicated still: Nepali authorities pursued a separate criminal case over the same conduct, and a 2025 court ruling assigned a 1.5-year prison sentence not just to the AAR International entity but personally to CEO John Holmes — a mechanism under Nepali law where a company's sentence can be assigned to its representative.

The response: acknowledge the numbers, don't change the tone

What's notable is how little management's language shifted through the crisis. "We are very proud of the performance we delivered" appeared on earnings calls in quarters with record revenue and in the quarter that absorbed a $55.6M settlement, almost verbatim. But the strategic direction did change: AAR exited the slow-growth, capital-heavy Landing Gear business and redirected capital toward higher-margin new-parts distribution and software (Trax, Aerostrat, Airvoyant). That redirection culminated in a second segment overhaul in Q4 FY2026 — just two years after creating them, Integrated Solutions and Expeditionary Services disappeared entirely, replaced by Government Solutions (combining defense and logistics work) and a new Legacy Commercial Programs segment slated for wind-down over three to four years.

Where it stands now: "the cleanup is done"

Management's current framing is that the restructuring phase is over. FY2026 delivered record results — $3.31B in revenue (+19%) and $278M in operating income — while absorbing four acquisitions in a single year. FY2027 guidance (excluding the departing Legacy Commercial Programs segment) calls for low-double-digit to mid-teens revenue growth, and management stated it is confident in meeting or beating its three-year Investor Day targets. Over the past three years, AAR has consistently guided conservatively and beaten those numbers — a pattern that supports management credibility, even amid the scandal.

Guidance vs. actual results

Source: Q1, Q2 FY2024, Q1, Q2, Q4 FY2025, and Q1, Q2, Q4 FY2026 earnings-call transcripts.

Four of five confirmed cycles were met or beaten, and the last two years show a clear pattern: guide conservatively, then beat by a wide margin — reassuring for credibility, though it also means the guidance itself carries less predictive information than it once did.

Timeline

• 2023AAR splits into four segments: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services.
• Dec. 19, 2024FCPA investigation settled for $55.6M (Nepal/South Africa conduct self-reported in 2019).
• Dec. 20, 2024Sale of the Landing Gear maintenance business to GA Telesis announced.
• 2025Nepali court assigns a 1.5-year sentence to CEO John Holmes personally, alongside the AAR International entity.
• Q4 FY2026Second segment overhaul: Integrated Solutions and Expeditionary Services retired; Government Solutions and Legacy Commercial Programs (wind-down) introduced.
• FY2026Record revenue ($3.31B, +19%) and operating income ($277.8M); four acquisitions completed in one year.

Our read

These three years read as two consecutive rounds of surgery on the same company — cutting away low-margin, capital-heavy businesses (Landing Gear, and now the whole Legacy Commercial Programs bucket) while the scandal that dominated headlines provided both a real cost and possibly useful cover for accelerating that shift. The fine itself was a one-time hit; the timing of the business exits that followed it looks deliberate, not incidental. What hasn't moved at all in a year is the language around the Nepali criminal case tied to the CEO personally — identical wording in two consecutive 10-Ks suggests this is one part of the story that isn't actually finished, whatever the "cleanup is done" framing on earnings calls suggests.

What we still don't know

• How the Nepali court's 1.5-year sentence assigned to CEO Holmes personally will ultimately be resolved — the company says it will not participate in the proceedings or pay the fine, but the eventual outcome is unclear from filings alone.
• The exact size and timing of goodwill impairment tied to the Legacy Commercial Programs wind-down hasn't been disclosed yet.
• Whether FY2027 guidance holds can't be assessed until results following the Q4 FY2026 call are reported.
• Country-level revenue detail remains undisclosed, as in prior years.