Eat as little as possible. Yeah. Sorry, the catering is so bad. All right, yeah, so thank everybody, thank you all. We're gonna kick off AAR Corp. We've got Sean Gillen, Chief Financial Officer, and Dylan Wolin, the Vice President of Strategy here. So, let me hand it over.
All right. Thank you, Ron. Thanks for hosting us here. Appreciate that. So we have a handful of slides that I'll run through somewhat quickly, to just kind of level set on who AAR is, what we do, and then we'll jump into some Q&A fireside chat with Ron. So going to the slides here, you know, who is AAR? So we're an aviation services company focused solely on the aftermarket, and we sell to both the commercial as well as the government end markets. As you can see on the slide here, you know, market cap is about $2.5 billion, pro forma sales of about $2.5 billion as well.
When we say pro forma on this page, we mean pro forma for the TPS acquisition we announced before the holidays and closed on March 1, which I'll go into some more detail as well. About 5,700 employees across the globe. Selected customers, you can see there, really kind of blue chip across the commercial space as well as government end markets. And then the businesses listed on the right-hand of the page, I will discuss in more detail on here, page 4. So on this page, you can see the activities that we do, how we've organized our business into four segments, three primary segments and one, what I'll call kind of a non-core manufacturing business, which is a bit of a legacy business.
In terms of the three core areas, you know, Parts Supply is our largest segment. It's also our most profitable in terms of the margin profile. Part supply consists of two primary activities. There's used serviceable material, or U.S.M, as well as new parts distribution. U.S.M is actually what the company was founded on when you go way back to refurbished parts that come off the aircraft or off the engine. They can go through a repair cycle and be sold back into the market. We're a leading independent player in that space and really a big part of what we do in Parts Supply. In new parts distribution, we distribute new parts on behalf of OEs into the global aftermarket.
And so our global reach is a differentiator, as well as our ability to sell to both commercial and government end markets. A lot of our competitors do one or the other. We, we, we do both. Parts Supply has been a nice growth business for us. Strong characteristics or strong demand drivers on U.S.M, and then in new parts, not only have we grown with the market, but we've outgrown the market by taking market share from competitors, and that's really winning new product lines from OEs that we distribute on their behalf. So that's the Parts Supply activities. Next segment, Repair and Engineering.
And so in this segment, prior to the TPS acquisition, the largest activity here was our overhaul work that we do in our heavy maintenance work we do in our hangar network. We have 6 hangars, 2 in Canada, 4 in the U.S., and this is where we do work for large commercial airlines. Think United, Southwest, Air Canada, and every... There are maintenance intervals that those aircraft require heavy maintenance events. So they come into our hangar. They're with us for 2, 3, 4 weeks. We do the overhaul work on the aircraft and send it back to the customer. It's a narrow body focus work that we do here domestically, and like I said, on behalf of some of the larger domestic carriers, as well.
I'll touch on it, but we are expanding the hangar network based on demand from customers has exceeded the footprint, so we're expanding in both Miami and Oklahoma City. More on that in a few minutes. The other activity we have there is component repair. The TPS acquisition brings significant scale and capability into this segment on component repair. Next segment, Integrated Solutions. Three main areas here. These are supply chain programs that we do on behalf of commercial airlines or the government. And so they outsource this work to us. They're able to fix their costs. We manage the supply chain on their behalf and get paid a fee associated with those activities.
This is also where our Trax acquisition, from a little over a year ago now, is in the Integrated Solutions. Trax is an ERP software, that is targeted towards airlines as well as MROs. And then the last segment, just, you know, 3% of total revenue is Expeditionary Services. It's a, it's a business that manufactures pallets to the DoD. So as I mentioned, a bit of a legacy business, I think over time, will make sense, you know, elsewhere, because it's not in the aviation services core that we're focused on. So, a little more detail on the Triumph Product Support acquisition you can see on, on page 5 here. So like I mentioned, just before the holidays, we announced the acquisition. We subsequently closed the acquisition on March 1st.
I'm very excited about this deal for a few reasons. You know, one, it really scales our capabilities in component repair. Before this acquisition, you know, we're kind of number one player in parts supply, both U.S.M and distribution. Number one independent in the heavy maintenance activities. In component repair, we didn't have the same scale. So this brings significant scale, as well as differentiated capabilities that we did not have, previously, specifically some capabilities on DER, as well as capabilities on structural component repair, things like that, that we just didn't have, before. It also brings a footprint in Asia Pacific, specifically in Thailand. They stood up a facility, I think at this point, almost 15+ years ago.
Mature facility, performing well, and now for the first time, we have bricks and mortar for repair activity. We've had, you know, sales offices and warehouses in Asia Pacific. This is the first time that we have, you know, repair capability in region, wholly owned, and that's a real differentiator that we're excited about, as well. The overall business is accretive to AAR's margins. You know, it's about 18%-20% operating profit business. AAR today is about 8%, so pretty meaningfully expanding our margins. All of this will go in the repair and engineering segment that I just touched on. And we also have the ability, now that we have this capability in-house, to drive volume from existing AAR activities into these facilities.
So specifically, on our U.S.M activities trading, as well as Integrated Solutions, where we are managing the repair, but we're using third-party repair stations today. A portion of those volumes can now be done in-house at the formerly Triumph, now AAR Component Repair Services facilities. So pretty excited about what that means for our business. And then when we announced the deal, we did also announce $10 million in run rate cost synergies. I think we've characterized those as really high conviction in those synergies, kind of identified as part of the deal thesis, and really around, you know, cost and footprint optimization is really what underpins that $10 million.
And then on a combined basis, strong free cash flow because of the margin profile of this business, as well as, you know, not as working capital intensive as some of our current activities. I think the combined free cash flow has improved from prior. Next couple slides I'll touch on briefly. Just here you see that, you know, we do have a global reach. We're about 75% North America, the balance, rest of the world, growing presence in Asia Pacific, also with the, Triumph acquisition that I just mentioned.
We're proud of the customer base that we have, not only across commercial airlines, but as well as regional airlines, cargo airlines, and then OEMs that we frequently partner with for distribution, and then we'll also work with on some of our supply chain management contracts. Similarly, on the government side, the U.S. government is our single biggest customer, but that's spread across a lot of different activities and parts of the U.S. government, different parts of the DoD, the State Department, and then outside of the U.S., do work with the, you know, Japanese and U.K. MOD, and a handful of other governments across the world. So the Trax acquisition, I mentioned that, when I was going over the segments and what we do.
We announced this acquisition a little over a year ago, March of 2023. Very excited about the capability that it brings to AAR. As it says here, it's a software business, and it's targeted on airlines and maintenance facilities, as well. Business has been around for over 20 years, was previously privately held. The founders are still with us. We brought them on board, knew them for a number of years. We were able to get this deal done about a year ago, and the early going or one year in, excited about the combination and our ability to sell Trax to a broader set of customers and bring some of the capability that AAR had married up with what Trax does. And it's been a good combination so far.
I think over time, having a seat with this ERP software, I think will enable us to be in a position to do some things in the aftermarket that we couldn't do before, specifically around some digital initiatives to improve the efficiency for our customers, as well as marrying up some of our parts supply capabilities and their digital capabilities. So over time, really excited about the opportunity that Trax brings. So what are the AAR growth drivers? I think everyone, you know, here and listening knows well that we're in an industry that has a lot of tailwinds to it. Aviation industry overall, but specifically the aftermarket.
A lot of good demand drivers just in terms of demand for travel globally, and a supply chain-constrained OE side leads to additional opportunity for aftermarket providers like us. So not only are we operating in a growing market, I think we're uniquely positioned to take share and grow in excess of that. And it's for the reasons you see on this page here, page nine. One, increasing U.S.M adoption. There's airlines that don't buy U.S.M in a meaningful way today that increasingly are looking for ways for cost savings.
U.S.M is a cost savings, and I think that'll increase the adoption of U.S.M, as well as away from the commercial side, the government utilizing U.S.M, which we're really leading those discussions with the U.S. government on how they can utilize, you know, commercial best practices across their purchasing activity. In distribution, we'll continue to increase our market share. We've had a really nice run in this business for about a decade now and continue to see a lot of opportunity for our offering to differentiate against not only peers, but also OEs who manage their aftermarket today, saying, rather than doing it themselves, they should use a third party, and AAR is at the top of that list, alphabetically, as well as in terms of capability.
So and then the other thing, as I mentioned, additional airframe maintenance capacity. We're expanding the hangar network, specifically in Miami and Oklahoma City. So those are places that we have hangars today. We're expanding those existing hangars to meet our customers' need. Customers came to us and said, "We have, you know, we need more lines available to us." And we said we'd be willing to expand for them, but we need them to commit to that, and they've done so. So very excited about that. Breaking ground, basically, as we speak. You know, and those will take about a year and a half or so to come online. We do continue to see government growing demand for our services.
I mentioned Trax on the previous page in terms of what that can do for our offering over time as well. And then some technology-driven MRO efficiency, bringing increased efficiency into the hangar network for us, as well as bringing it to customers via Trax elsewhere. And then we have developed our own proprietary PMA parts activities, greenfielding this ourselves, identifying parts that we think are good candidates for PMA, working with some of our customers around that as well. And the TPS, the Triumph acquisition came with some PMA capability, as well. I'd say there where they are where we wanted to be in a year or two, so we're getting there that much quicker with the Triumph acquisition. Historical financial performance on page 10. I won't go through all the detail here.
I'll just say you can see the impact of COVID, you know, in that FY 2021 time period. We're a May fiscal year end. And then I think the thing we are most, you know, proud about is how we've been able to significantly expand our margins on essentially flat revenue. So if you look at FY 2023 and the LTM Feb period, and what that operating margin is, 7.5%-7.9% on an LTM basis, and that compares to a pre-COVID high of about 5.6%. And a lot of the activities that we did to improve our margins are shown here on page 11.
This is a quarterly look that you can see coming out of COVID, continued to improve our margin profile, essentially at an all-time high, in the last quarter, and on a pro forma basis for the TPS acquisition, which has higher margins. I won't go through everything on the right side of the page, but a lot of actions went into place to make that possible. I think we took cost out of the business. We exited some underperforming businesses and contracts, and then also have been, you know, benefited from, Parts Supply growing in excess of other parts of the business. That's a higher margin, that's the highest margin segment for us. We brought on Trax. We're bringing on TPS.
So a lot of the activities that we've done or the actions we've taken have all been around improving the margin profile of the company, which I think this page is a good proof point of what that means, not only in margin, but then you can see on the bottom portion of the page how that flows down to adjusted EPS. So lastly, before jumping into Q&A, just wanted to touch on our capital allocation framework. We think of that in three main buckets. One is maintaining a flexible balance sheet, two, investing organically in the business, and then three, pursuing opportunistic acquisitions. You know, on the back of the Triumph acquisition, on a pro forma basis, levered at 3.6 times, so clearly debt paydown.
Well, integration and execution, as well as debt paydown, are kind of the key priority now on the back of the acquisition. We did fund the acquisition with a portion of prepayable debt, so we have the ability to delever as we generate free cash flow in addition to growing EBITDA. And we did, as part of the deal, upsized our revolver, which provides, you know, the liquidity and flexibility that we want and need to run the business. After that, we do continue to see really attractive ways to organically invest in the business. I think specifically for us, that's inventory in Parts Supply. When we grow U.S.M, when we win new distribution lines, it comes with an upfront inventory outlay that we then manage for distribution over the life of that contract.
In U.S.M, you know, we find the demand in the market when we procure the material. So we'll continue to invest in that business to support growth there, which we see, you know, in the next few years. I mentioned the airframe maintenance expansion. Importantly, you know, all or substantially all of that capital will be either refunded or repaid over time from state and local governments. So they're kind of putting up the money to help fund the expansion. We're of course signing a long-term lease with both in Miami and Oklahoma City, or I should say, extending our leases. But a very good invested capital ROIC framework, given that a lot of the invested capital is coming from the state and local governments.
And then on acquisitions, clearly where we are today, like I said, focused on integration and execution and debt paydown. But over time, we do think that opportunistic acquisitions will continue to be part of the story, both in terms of us increasing our scale, bringing new capabilities in, and improving the margins of the company. So that's how we look at capital allocation. So with that, I think we'll jump into the Q&A portion of the presentation.
Maybe I'll kick it off. U.S.M today, I mean, how's it going? I mean, I would imagine demand must be, like, through the roof.
Yeah. Yeah, U.S.M activity is very strong. Demand, like you said, is, you know, through the roof, very strong. A lot of, a lot of users of U.S.M are looking for it because it's a cost savings, and because they're using engines and airframes longer than they would have expected, which is driving more maintenance than they would have thought. So the demand side is very strong. The supply side is constrained, because, you know, we rely on retirements of, of aircraft and engines as feedstock to support that demand. And it's been, you know, very well covered in the industry that the retirements have continued to be lower than expectations.
Yeah.
I think with the, you know, newest year to date, coming out of the OE and the supply chain, that will likely continue to be the case. I think it will increase, but we are operating in a more supply-constrained environment in the U.S.M world.
There you go.
There you go.
Some of these are tough.
It's a tough one.
So kind of back on the supply piece, in an environment where you'd need maybe I guess older aircraft to get the U.S.M out of, and the number of older aircraft that are actually coming out is declining. I mean, what's-
Yep.
What do you do? I mean...
Yeah, I think this is where we're advantaged overall for a couple reasons. You know, one, you know, we have some truly proprietary arrangements, like our arrangement with Fortress on the CFM56, where, you know, they have a large and growing pool of CFM56 engines. We came together over two years ago now, 'cause they knew that there was U.S.M opportunity on those that they weren't monetizing, and that's, you know, our bread and butter. So we kind of... We did a lot of work together before then, but formally came together a little over two years ago.... So we have an exclusive supply arrangement on, you know, the largest installed base for engines, and we're driving a lot of maintenance activity.
So I think that's an area where, you know, we have a line of sight on supply that competitors don't. And then I think, you know, that's a proprietary contractual relationship. Other than that, I think our market position and our reputation in terms of how long we've been around and our speed to transact is a differentiator, which helps us on the margin source material, where maybe some of our competitors at times are a bit more constrained. All that being said, it is still a supply constrained environment, and we're operating in that, so continue to try to, you know, see where there's opportunity.
Gotcha. And then, I'll grab you in one sec. You mentioned on the chart PMA. So where, where are you in that, and how's that going?
Yeah. So as I mentioned, you know, we kinda put up a greenfield initiative about a year ago, to stand up our own capability to identify candidates for PMA and then do the design and engineering and shepherd through an FAA approval process. We do have, you know, a part or two that's in the process to be approved. You know, the timeline for them to generate revenue and be meaningful for the financial results is still a little bit longer. But like I said, Triumph brings some capability that we didn't have, parts that are already through the process and in the market. And I think it just accelerates our penetration in PMA.
You know, for us, obviously, we navigate our OE relationships and where there's PMA, so the playing field's a bit, you know, smaller for us than maybe other players. But we do think that there's room for more than, you know, one, two, three parties of PMA providers, and so that's one of the reasons we've gotten into that business.
Can you say, or if you can't, where those initial parts are? Like, what are they?
Yeah. More interiors, you know, interior components. I'll leave it at that.
Okay
... interior components of the aircraft.
Gotcha. Cool. Yeah.
You mentioned the supply constraints.
Yes.
Have you been able to get any pricing advantages from it, in excess of your inflation and everything, or you are using this opportunity to actually-
Yeah
... gain market share?
Yeah, good, good question. You know, on the parts supply side, you know, the supply constraints have led to a dynamic pricing environment. U.S.M is priced at a discount. Generally, U.S.M is priced at a discount to the OE list price, and OE list prices have gone up, so U.S.M prices have gone up as well. It's not always one for one, 'cause it depends on the condition of the asset and how much repair work needs to go into it. But the cost to procure the material has gone up as well, you know, so we've maintained a margin spread, but it's not like that pricing increase, you know, fully falls to the bottom line for us because the cost to procure has gone up.
I think where we have seen price, you know, in excess of our contractual amounts is more on the repair and engineering side. So in the heavy maintenance business, we sell labor, essentially. It's a labor-intensive business. The contracts are structured based on labor hours. And obviously, the cost of labor has gone up, you know, meaningfully over the past couple of years, not just for us, but for, well, for everyone, but the entire aviation space as well. And so we've been able to go to our airline customers and say, "Hey, the contract says this, our labor wages or our labor inflation is higher than that, so we need to get something in excess." And again, that's not price in excess of cost, but I think it's just maintaining the margins.
And I think the airlines recognize we're a critical part of the supply chain, and keeping that labor force intact is very important for them as part of their overall maintenance strategy. So we have been able to get that price in an inflationary environment, in a couple different parts of the business.
Thank you, and one more on distribution. Would you mind discussing how you think about distribution as critical for your own sales, like pushing your U.S.M, PMAs, or own solutions, but also how you compare to actually get, like, other OEMs sold through your distribution channels when there is a lot of consolidation in that industry right now?
Yeah. In our view, I mean, so in parts supply, U.S.M's one distinct component, distribution's another. We utilize the same sales force, and then PMA is obviously very nascent and, and, and kind of, you know, separate from, from that. But in distribution, you know, I think our value proposition just continues to resonate with the OEs, okay? So they're thinking about: How do I service the aftermarket? Should I do it myself? I think increasingly, OEs are drawing the conclusion they're better off using a distributor, rather than, you know, calling on airlines across the world and MROs across the world to sell their parts. And then, once they make that decision, they have to decide what distribution partner they want to use. And the two biggest players in the industry are more of a catalog-type model.
We, as well as ones that look like us, are more of an exclusive model. I think, you know, 96% or something of our distribution lines are exclusive in nature, and that means that we only sell that OE's part. We don't sell competitors' parts. And what we can show them is that we help them, you know, increase their market share, push their price increase in the aftermarket, and all that. We, we serve as a, as an extension of their sales force, essentially. And I think that value prop's resonated. And then, how do we win business versus other ones that look like us?
I think our global scale and reach, our sales force technical selling capabilities, as well as the fact that we sell both commercial and government, are all differentiators when we think about some of the other players who are, you know, like us, the independent aftermarket distributors.
... Can you speak to, with the Triumph acquisition, how's that going? You know, how integrated is it now? Has there been any, you know, have you been able to retain everybody, and so on-
Yeah
... and so forth?
It's going well. And I'd say on retention, yes, we've been able to retain everyone. A lot of the team was pretty excited about AAR being the new owner of the business, given that we're solely focused on the aviation aftermarket, like they are. And I think in the early going, the customer feedback's been very positive as well. I think we didn't appreciate how some customers, you know, weren't sure, kinda, was this asset gonna stay with Triumph? If it didn't, where would it go? And then when it turned out that it was AAR, who's a company they know, trust, they already use for a variety of activities, the feedback has been very positive from that standpoint. Integration is going pretty well so far.
I think the good thing is we knew this business pretty well. We were in this business, not totally in the way of the capability we got, but we had our own component repair facility, so we knew how to, you know, run these businesses. So in the early going, so far, so good.
That's great. That's great. Then you mentioned, you know, kinda back to labor, how's it been actually retaining your workforce-
Yeah
... attracting talent? 'Cause the one theme we've heard, you know, kind of across this conference, but we've obviously, we've been hearing it for, you know, quarters and quarters now-
Yep
... is that, you know, technically skilled labor is hard to find, hard to retain, so on and so forth.
Yeah, and, I mean, we're at the forefront of that. I mean, you see-
Right
... labor availability continues to be tight. I do think that some of the things we put in place, and this actually goes back pre-COVID for us, 'cause I'd say our industry was maybe an early warning sign or hit earlier than most around labor tightness. You know, we partnered with community colleges, local trade schools, and other industry organizations to increase the supply of labor into the market, and in many ways, we're the first job for a lot of people who enter the aviation technician world. And retaining them can be difficult. You know, they come with us. They're with us for two, three, four, five years. They get trained up, and they're a pretty attractive person to go be hired by an airline or someone like that.
But we do retain, you know, a lot. And then, like I said, it's critical that we've been able to get some of that price increase to be able to pay the wages we need to keep attrition manageable. As it stands today, I'd say it's stable. You know, it hasn't gotten better, but I think it certainly hasn't gotten worse, and so we've been holding the labor force together, and maintaining really good quality and service, at the same time.
Gotcha, and the software product you guys sell to airlines, how's that going? And, you know, where are we relative to the plan when you first got into that business?
Yeah, good question. Yeah, I think we are, it's going well, and again, I think one of the one thesis when we bought Trax was you got 100 people in Miami, privately held business, three founders still with the business, still with us today. And they're competing against very large software companies. I mean, it spoke to kind of the special sauce that they had. But what we thought was, with AAR's backing, they should be it should be that much, easier is never the right word, but they should have that much more win probability because now they have bigger backing.
You know, if you're an airline and you're looking to make an ERP decision, are you picking a, you know, a team of 100 in Miami that's got a great product or a team of thousands at a large software company? And so now with AAR behind them, you know, it's been able to open doors, and we've been- we know that they've, you know, kinda won some business that otherwise might have gone somewhere else. So I think in the early going, performing in line to slightly ahead of expectations in terms of their ability to penetrate the market and continue to sell the, the offering.
Yeah, and just curious, I mean, the business model there is what the initial sale plus upgrades or something, or?
Exactly. It's a traditional software. You know, the initial sale will come with an implementation component, which is more kinda people heavy, right? 'Cause you're on site, and you're-
Yeah
... helping them stand up the implementation, and then over time, you know, there's a hosting model and a software-as-a-service model. So as it scales up, you'll have a component, you'll have an increasing percentage of the overall business that's recurring revenue, and then you'll always kinda be winning new business and standing up new programs.
Gotcha, and then, on the defense business, I think in the last quarter you said it was down a little bit?
Yeah.
I remember it. Can you just talk about what's going on there and-
Yeah
... yeah.
So our defense sales are really in kind of three main categories: defense distribution, so distribution, selling into the DoD, the government portion of Integrated Solutions, which are long-term supply chain contracts, and then the Expeditionary Services segment is essentially all government. We've had a few quarters now where government has been a headwind year-over-year decline. It's partly because of the slight decline in the defense distribution. In the long-term programs and Integrated Solutions, we've had some contracts that have kinda reached their end, and we haven't replenished them yet with kind of new business wins.
And then Expeditionary's been down as some of the funding's been diverted for some efforts in Ukraine, although we know that that ultimately will come back to the business because the need at the DoD is there, and and they're below the levels that they need to be at. So we have had a few quarters now where that's been a headwind. On the last call, we kinda mentioned that, you can see, particularly on the defense side, on the distribution side, sequentially, some improvements, seeing some order activity tick up. So I think that's starting to show on that part, you're starting to see an improvement. And then in the long-term contractual ones, we've got a good pipeline with the government.
The government is slow to award, and when they do award, it still takes time for it to ultimately kinda go through a protest phase. But we're kinda optimistic of the portfolio we have there, or the pipeline we have there, and getting some new business wins.
Got it, and then, from an M&A perspective, I guess maybe is it, it... You, you wanna pay down some debt, but... That should happen-
Yeah
- probably sooner than later, given what's gone on in some of your end markets. Is there any areas you're also interested in looking in, or is there anything in the portfolio that you want to fill in, or-
Yeah.
Can you-
I think, like you said, you know, execution, debt pay down is the focus. But we think that acquisitions will continue to play a role in accelerating our strategy. As you look at the portfolio today, you know, the TPS acquisition really filled a need in repair and engineering, so I think we're in a really good position there. Our Parts Supply, particularly on the distribution side, you know, I think to the extent that we could add, you know, penetrate new OEs, add scale, maybe add more heft in certain regions, that would be of interest to us.
And then on the government side, if we could, you know, bring capability that we don't have today, and in particular, on the government side, when you acquire a business, you get credit for their past performance, which improves your win rate probability when you're bidding new contracts.
Mm-hmm.
So that'd be another area that we would look. Dylan, anything else you'd add on the kind of acquisition side and areas of the portfolio?
Well, I'd just add that, you know, if we found software opportunities, you know-
Yeah
... like Trax, that would be great. Those are very hard to find, but, that would be another area of interest.
Got it. Just to open it up, any other questions in there? Great.
Thank you. On the Miami and Oklahoma facilities, how much is the CapEx you need to build those up? And then when you have this client interest, do you have some kind of, like, long-term agreement-
Yeah
... that you're sure that you can recover?
Yeah, thanks for asking that. So first on the customer side, both of them, we have customers that are committing to the volume that necessitates the expansion. The kind of if you build it, they'll come model is tough in this, you know, if you build the hangar, then go try to win the business. So today, we have the business. They've committed to the new lines, and so that's in place. In terms of the CapEx, you know, a new hangar is $40-ish million. But importantly, the state and local government is reimbursing in Miami, you know, essentially all of that in Oklahoma City, the vast majority of that, and then the balance will come in some kind of rent concessions over time.
So, from an invested capital perspective, for us, once they're up and running, pretty low invested capital for what you're getting, given that the CapEx is largely coming from the state and local governments.
And then how you think about labor as-
Yes
- get?
So, the three things that we needed to be true to expand is the customer commitment, which I touched on, to the extent that government kind of funding would help build the facility, and then lastly, labor. Labor's tight everywhere. Miami and Oklahoma City are, you know, relatively deep labor pools for aviation technicians, which is one of the reasons that we kind of said yes to expanding there. So, it's still tight, and we're gonna have to scale up, once these get, you know, built or once they're near to being, completed. But we're also leveraging our existing labor pool that we have in place, so you have some kind of built-in advantages of doing it where you already are versus doing it in a totally new area.
So we'll ramp up as completion nears.
I think we're just out of time, so thank you.
Good.
Thank you very much. That was great.
All right, appreciate it. Thank you.
Yeah, you bet.