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By November 28, 2012 2 Comments

AAR Corp (NYSE: AIR) What’s in store this holiday season?

AAR Corp (NASDAQ: AAR) What's in store this holiday season?

AAR Corp (NASDAQ: AAR) What’s in store this holiday season?

Tis the season for travel and spending and companies are preparing for a bonanza. This year in particular, prospects are high as consumer spending towards the end October edged up 0.8 percent in light of increased incomes. In addition, crude oil prices seem to be on the low in Q4, with the trend expected to stay that way up until next year. With these factors in play, travel companies like AAR Corp (NYSE: AIR) Corp have a lot at stake in the coming month.

Near term prospects are somewhat uncertain

While sales are expected to rise during the holiday season, AAR is not that well positioned compared with most of its competitors. Most commercial customers will take a slant toward bigger companies like Southwest Airlines (NYSE: LUV) and Delta Airlines (NYSE: DAL), both of which have a wider footprint in the commercial sector.

Nevertheless, there is a leeway for AAR. In case the authorized flight attendant strike at U.S Airways Group Inc. (NYSE: LCC) spills into the holiday season, AAR will have a chance to secure a solid footing come December.  The strike, which involves an approximated 6700 flight attendants, will not only paralyze operations at U.S Airways Inc. but it will also add to pressure created by the economic woes at the company. AAR can use this factor to its advantage.

Long term prospects are rosy

While a cloud of incertitude shadows AAR’s near term prospects, the long haul looks rosy, particularly after the holiday season and moving forward into 2013.

There has been a key inside trade by company director Marc Jay Walfish. The director invested $69000 in 5000 shares sometime back, signaling that there is an expected windfall gain in the company.

Being a strong dividend stock, AAR is a company that manages to operate above the break-even point for most, if not all, parts of the year. While most of AAR’s competitors will be looking to cash in on the commercial market during the holiday season, AAR has expanded its focus to include its defense customers. By creating custom-tailored solutions for both its commercial and defense customers, AAR will have a safety net in case the holiday season does not pan out.

Aside from providing Airlift support in the Pacific Rim and Africa, AAR has managed to consolidate its reputation even further by winning a third year extension for Airlift support in Afghanistan. The extension, which was granted by the United States Transportation Command, will certainly extend material benefits to the company.

In addition, AAR is sourcing and modifying 737-400s for the Columbian Air Force; a program that may net AAR an approximated $31 million towards the second half of the company’s current fiscal year.

In conclusion, the next couple of months will present a host of opportunities for AAR. The companies can either double its efforts in light of increased consumer travel or it can put more focus on defense. Either way, there is some windfall gain headed its way- the key insider buy by Director Walfish couldn’t say less.

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