John M. Holmes
AARAbout John M. Holmes
Chairman, President and Chief Executive Officer of AAR CORP. since 2018; Director since 2017; Chairman since 2023; Age 48; also a director at GATX Corporation . Under Holmes, AAR grew sales from $1.99B (FY2023) to $2.78B (FY2025) while expanding operating income from $133.9M to $185.2M; adjusted diluted EPS reached a record $3.91 in FY2025 (GAAP diluted EPS $0.35 due to non-GAAP items) . FY2025 growth was driven by new parts Distribution, strong MRO performance, and portfolio optimization including the 2024 Product Support acquisition and scaling of Trax (acquired 2023) .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| AAR CORP. | Chairman of the Board | 2023–present | Oversight of strategy; combined Chair/CEO structure; chairs Executive Committee |
| AAR CORP. | President & CEO | 2018–present | Led acquisitions (Trax 2023; Triumph Product Support 2024); record FY2025 adjusted EPS; margin expansion |
| AAR CORP. | President & COO | 2017–2018 | Operational leadership pre-CEO transition |
| AAR CORP. | COO, Aviation Services | 2015–2017 | Drove Aviation Services growth |
| AAR CORP. | Group VP, Aviation Services – Inventory Mgmt & Distribution | 2012–2015 | Built distribution capability |
| AAR CORP. | Director of M&A; roles of increasing responsibility | 2001–2012 | M&A execution; business leadership |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| GATX Corporation | Director | — | Current public company directorship |
Fixed Compensation
| Component | FY2024 | FY2025 | Notes |
|---|---|---|---|
| Base salary ($) | 1,050,000 | 1,082,000 | FY2025 +3% merit increase |
| Company 401(k) contributions ($) | 20,922 (FY2025) | 20,922 (FY2025) | FY2025 disclosed; FY2024 breakdown not itemized in table |
| Company SKERP contributions ($) | 603,329 (FY2025) | 603,329 (FY2025) | Non-qualified plan contributions |
| Perquisites and other personal benefits ($) | 75,682 (FY2025) | 75,682 (FY2025) | Club dues, financial planning, executive physicals, limited aircraft/spousal travel; club dues $51,178 |
Performance Compensation
- FY2025 short-term incentive (cash bonus): 80% adjusted diluted EPS from continuing operations; 20% adjusted net working capital turns . Targets and outcomes below.
| Metric | Weight | Threshold | Target | Maximum | Actual | Payout |
|---|---|---|---|---|---|---|
| Adjusted diluted EPS (cont. ops) | 80% | $2.93 | $3.90 | $4.29 | $3.91 (after standard adjustments) | 103% |
| Adjusted net working capital turns | 20% | 2.48 | 3.31 | 4.14 | 3.29 | 99% |
| Total payout | — | — | — | — | — | 102% |
- FY2025 long-term incentives (100% equity): 60% performance-based restricted stock (PBRS); 20% stock options; 20% time-based restricted stock (RS) .
| Award type | Metric(s) / Vesting | Grant date | Shares / Options | Grant date fair value ($) | Vesting |
|---|---|---|---|---|---|
| PBRS | 70% adjusted income; 20% avg ROIC; 10% relative TSR (target at 55th percentile; max 80th) | 2024-07-22 | 45,120 target | 3,023,942 | Cliff vest 2027-07-31; 0–200% payout curve |
| Time-based RS | Service-based | 2024-07-22 | 15,040 | 1,007,981 | Cliff vest 2027-07-31 |
| Stock options | Price appreciation | 2024-07-22 | 39,510 | 1,007,900 | 1/3 on 2025-07-31, 2026-07-31, 2027-07-31 |
- Recent PBRS payout: FY2023 grant achieved 221% based on adjusted income, ROIC, and TSR (59th percentile), delivering 96,312 shares to Holmes on 2025-07-31 .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial ownership | 598,869 shares; 1.7% of outstanding (35,964,153 shares as of 2025-07-22) |
| Options exercisable within 60 days | 271,323 shares (included in beneficial ownership) |
| Unvested time-based RS (as of FY2025 year-end) | 50,865 shares |
| Unearned PBRS (as of FY2025 year-end) | 130,815 shares (target) |
| Unexercisable options (outstanding) | 39,510 (granted 2024; tranche schedule below) |
| Upcoming option vest tranches (Holmes) | 41,217 on 2025-07-31; 23,944 on 2026-07-31; 13,170 on 2027-07-31 |
| Ownership guidelines | Meaningful stock ownership guidelines in place; all directors and NEOs compliant as of 2025-05-31 |
| Pledging/hedging | Company prohibits short sales, pledging (except cashless exercise), and hedging |
| Shares pledged | “None of the shares shown…is pledged” for persons listed (as of 2025-07-22) |
Vesting and potential liquidity events: 2025-07-31 option tranche vested; FY2025 PBRS/RS cliff vest on 2027-07-31; FY2023 PBRS paid 96,312 shares on 2025-07-31 . This cadence can create windows of increased trading activity around vest dates.
Employment Terms
| Provision | Key terms |
|---|---|
| Agreement | Amended & Restated Employment Agreement effective 2018-06-01; amended 2020-07-30; auto-renews annually |
| Base salary | $900,000 per agreement (committee may increase; $1,082,000 as of 2025-05-31) |
| Target bonus | Agreement: 100% of base; Committee set FY2025 target at 120% of base ($1,298,400) |
| Equity | Annual stock/option awards at Committee’s discretion |
| Perquisites | Financial planning/tax prep (≤$15k/yr), executive physical, club dues, SKERP participation |
| Non-compete | 18 months post-termination for certain scenarios (payments cease upon breach) |
| Severance (no CIC) | If terminated other than for Cause/Disability or resign for Good Reason: 24 months’ salary plus 2× greater of target bonus for year of termination or average of last two years’ actual bonuses (lump sum), subject to 409A delay |
| CIC equity vesting | Legacy single-trigger: upon CIC, all Holmes equity vests (performance at higher of target or actual); stock options vest |
| Severance (within 18 months post-CIC) | Lump sum: unpaid amounts + pro-rata target bonus + 3× (salary + greater of target/actual bonus per formula); 3 years welfare benefits; legal fees; excise-tax best-net option |
| Clawback | NYSE/Rule 10D-1 compliant recoupment policy adopted Sep 2023 |
| Tax gross-ups | None |
Note: Other NEOs have double-trigger CIC treatment; Holmes’ single-trigger vesting arises from a legacy 2018 agreement (board acknowledges as exception) .
Performance & Track Record (selected)
| Metric (USD) | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Sales ($M) | 1,990.5 | 2,318.9 | 2,780.5 |
| Operating income ($M) | 133.9 | 129.2 | 185.2 |
| Diluted EPS – continuing ops | 2.52 | 1.29 | 0.35 |
| Adjusted diluted EPS – continuing ops | — | 3.33 | 3.91 |
| Cash from operations – continuing ops ($M) | 23.8 | 43.8 | 36.1 |
Execution highlights under Holmes:
- Acquired Trax (Mar 2023) and expanded significantly; nearly doubled revenue since acquisition .
- Acquired Triumph Group’s Product Support business (Mar 2024), scaling Component Services and APAC presence .
- FY2025: Extended FTAI Aviation USM agreement through 2030; new Trax wins (Delta TechOps, Cathay Pacific); two U.S. Navy P-8A contracts; divested Landing Gear Overhaul; MRO digitalization and capacity expansions underway (OKC and Miami) .
Board Governance (Holmes as Director)
- Role: Combined Chairman, President & CEO; Board periodically reviews leadership structure; Lead Independent Director in place (Marc Walfish) .
- Independence: 11 of 12 directors are independent; Holmes is non-independent .
- Committees: Holmes chairs Executive Committee; not on Audit/Human Capital/NGC/Aviation Safety committees .
- Meetings/executive sessions: Board held 7 meetings in FY2025; all directors ≥75% attendance; independent directors met in 10 executive sessions .
Dual-role implications: Combined Chair/CEO concentrates authority; mitigants include Lead Independent Director authority (agenda setting, executive sessions), majority independent board, and committee oversight . Independence status: not independent; requires robust lead director and committee functioning .
Director Compensation (as Director)
- As an employee director, Holmes receives no additional director compensation; annual director equity/retainers apply only to non-employee directors .
Compensation Peer Group (benchmarking)
- FY2025 peer group (17 companies): Air Lease, Applied Industrial Technologies, Barnes, Crane, Curtiss‑Wright, Ducommun, Heico, Hexcel, Moog, MSC Industrial Direct, Spirit AeroSystems, The Timken Company, TriMas, Triumph Group, V2X, VSE, Woodward .
- Target positioning: generally around market median for base, total cash, and total direct compensation; structure emphasizes performance-based equity .
Say‑on‑Pay & Shareholder Feedback
- After a sub‑50% Say‑on‑Pay in 2022 (driven by one-time CEO awards), AAR engaged investors and enhanced design (raised PBRS weighting to 60%, removed qualitative STI goals, set TSR target at 55th percentile, reduced PBRS max to 200%); 2023 Say‑on‑Pay approval rebounded to 98.5% .
Risk Indicators & Red Flags
- Legacy single‑trigger equity vesting for CEO at CIC (exception to company practice; others are double‑trigger) .
- FCPA settlement and investigation costs flowed through non‑GAAP adjustments in LT/STI calculations (e.g., $80.5M in FY2023 cycle; $1.84/share in FY2025 adjustments), warranting scrutiny of add‑backs .
- No tax gross‑ups, no option repricing, robust clawback and anti‑pledging/hedging policies mitigate governance risk .
Compensation Structure Analysis
- Mix shifts and discipline: 100% equity LTI with 60% PBRS emphasizes performance; STI purely financial (EPS, working capital turns) links to capital efficiency .
- Targets trend higher: FY2025 adjusted EPS target ($3.90) up 28% vs prior target ($3.05); net working capital turns target increased vs prior year actuals, indicating rising hurdle rates .
- Discretion/adjustments: Committee uses consistent non‑GAAP adjustments (e.g., integration, FCPA, divestiture items) aligned to earnings releases; total STI payout 102% in FY2025 vs 178% in FY2024 as growth normalized .
Employment & Contracts – Economics Snapshot
| Scenario | Cash (multiple) | Benefits | Equity vesting |
|---|---|---|---|
| Termination w/o Cause or for Good Reason (no CIC) | 24 months’ salary + 2× (greater of target bonus for yr or average of prior 2 yrs’ actual) | Medical/dental/life for 2 yrs (Disability scenario) | Forfeiture unless Retirement/Disability/Death per plan |
| CIC (Holmes; single trigger for equity) | Upon CIC, all RS/Options vest; performance at higher of target/actual | — | RS vest value est. $11.16M; options $0.41M at $61.41 share price as of 2025-05-31 |
| Termination within 18 months post-CIC | Lump sum: 3× (salary + greater of target/actual formula) + pro‑rata target bonus + prior unpaid | 3 yrs welfare; legal fees; excise-tax best-net | As above (equity vests at higher of target/actual) |
Upcoming Vesting & Potential Selling Pressure
- Options vesting tranches: 2025‑07‑31 (41,217), 2026‑07‑31 (23,944), 2027‑07‑31 (13,170) .
- FY2025 grants: RS/PBRS cliff on 2027‑07‑31; FY2023 PBRS paid out on 2025‑07‑31 at 221% (96,312 shares) .
- Company prohibits pledging/hedging; none of Holmes’ disclosed shares are pledged .
Supporting Data – Selected Company Financials
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Sales ($ millions) | 1,990.5 | 2,318.9 | 2,780.5 |
| Operating income ($ millions) | 133.9 | 129.2 | 185.2 |
| Diluted EPS – cont. ops ($) | 2.52 | 1.29 | 0.35 |
| Adjusted diluted EPS – cont. ops ($) | — | 3.33 | 3.91 |
| Cash from operations – cont. ops ($ millions) | 23.8 | 43.8 | 36.1 |
Investment Implications
- Alignment: Heavy performance equity (PBRS 60%) tied to income, ROIC, and relative TSR with higher hurdles supports pay-for-performance; meaningful ownership (1.7%) and compliance with ownership guidelines reinforce alignment .
- Governance watchouts: Legacy single‑trigger CIC vesting for CEO is a notable outlier versus best practice (double‑trigger), potentially increasing M&A event cost; continued independent lead director oversight is important given combined Chair/CEO .
- Trading signals: Scheduled option/RS/PBRS vests through 2027 (notably 2027‑07‑31) may create liquidity events; FY2023 PBRS payout in 2025 illustrates material equity realization cadence .
- Performance durability: Strong organic growth, integration of Product Support, and Trax scaling underpin FY2025 results; however, reliance on non‑GAAP adjustments (e.g., FCPA, integration, asset exits) in incentive calculations warrants continued monitoring of quality of earnings and cash conversion .