USM Business Challenges and Outlook
Q: How are you forecasting whole asset sales amid USM challenges?
A: The USM market remains tight due to limited asset availability, partly exacerbated by the Boeing strike, which pressures the existing fleet and extends the tightness in the USM market. Despite this, individual parts sales are strong, with the last quarter being our second-highest ever in individual part sales. We expect that as aircraft retirements increase, more assets will become available, positioning us to capture that opportunity. Overall, USM constitutes 15% of our business, and while forecasting whole asset sales is challenging, the robust demand benefits the rest of the company, which delivered 20% growth in the quarter.

Navy P-8 Engine Services Contract
Q: What revenue growth can we expect from the Navy engine contract?
A: The engine services contract for the Navy's P-8 aircraft is entirely new business for AAR, where we'll manage the supply chain and provide parts, partnering with another company for engine overhauls. We expect this contract to be a meaningful contributor to revenue and income, but we need full clarity from the government before providing specific figures. The start date depends on the government process, but we feel confident it will have a positive impact.

TRAX Acquisition Progress
Q: When will TRAX become a viable sales channel for parts?
A: TRAX had a good quarter, making a nice contribution by upgrading existing customers and capturing new ones. We're encouraged by the pipeline, particularly with large airlines, and once we've improved TRAX's operations to scale for larger customers, we'll focus on integrating it to sell parts. This integration is expected to unlock significant value, but we're still a bit away from realizing that.

Parts Supply Margins and Growth
Q: Can parts margins improve without USM whole assets?
A: While the USM business is situational and depends on asset availability, we continue to see strong performance from our new parts distribution business. The margins there are better due to our exclusive distribution model, and with each new win, we leverage our fixed cost base. Over time, we expect margin improvement in Parts Supply to come steadily from growth in distribution, complemented by USM opportunities when they arise.

In-sourcing Repairs from Triumph Acquisition
Q: What progress on in-sourcing repair work via Triumph?
A: We're on track with transferring work from our New York facility to Wellington, Kansas, and Dallas, with the majority of commercial work already transferred. For USM support, we're in-sourcing all we can today, which is largely done. We see more opportunity than initially anticipated to in-source work supporting our commercial programs, which will require modest investment and take longer due to customer approvals.

Cash Flow Outlook
Q: Will cash generation improve after first quarter burn?
A: We expect a similar cadence to last year, with improved cash flow generation starting in the second quarter. Inventory will be a net user of cash as we grow the parts supply business, but overall cash flow should be higher than last year. Interest expense should come down in the back half due to rate relief on the revolver and reduced net debt.

Airline Customer Spending Outlook
Q: Any changes in airline customers' spending plans?
A: While some lower-cost carriers have seen softness, they are not major customers of AAR. Our larger carriers, which are our main customers, continue to perform well and express strong demand signals. We remain confident in their demand throughout the rest of the fiscal year.

MRO Hangar Expansion and Labor Pipeline
Q: Will you have the workers to staff new MRO hangars?
A: The capacity expansions in Oklahoma City and Miami are sold and set to be ready by fall 2025. We're confident in our ability to recruit talent in both favorable labor markets, leveraging our longstanding presence and relationships with local providers and schools. There will be a ramp-up, but we anticipate a relatively short period to hire the necessary labor.

Quarterly Adjustments Details
Q: Details on investigation and contract termination costs?
A: The investigation costs of $0.14 per share are ongoing and consistent with past quarters. The contract termination costs of $0.09 per share relate to the Expeditionary Services talent contracts mentioned in our opening remarks.