AAR To Open Major Maintenance Base in Duluth

AINmxReports » April 25, 2012
AAR has plans to reopen the former Northwest Airlines maintenance facility in Duluth, Minn.
AAR has plans to reopen the former Northwest Airlines maintenance facility in Duluth, Minn.
April 25, 2012, 3:34 PM

AAR has signed a letter of intent with the city of Duluth, Minn., to reopen the maintenance facility previously operated by Northwest Airlines.

“The Duluth Economic Development Authority [DEDA] approached us a year ago about the facility. When we began talking internally about expanding the company we decided to go to Duluth to take a closer look. We found a purpose-built facility, in good condition, designed to provide heavy maintenance on commercial aircraft. DEDA also showed us there was a trained workforce in the area that remained after Northwest Airlines left. It was clear the City of Duluth was eager to work with us,” Danny Martinez, vice president of technical services for AAR Aircraft Services, told AIN.

Brian Hanson, business and community development director for the City of Duluth, said his team put together an incentive package designed to help establish AAR in the community.

DEDA was able to put together extremely low facility lease rates to facilitate entry into the market. The rates are structured to ramp up over time as the company gets established,” he said.

The package includes low-interest loans and grants of up to $5 million, including a forgivable loan for $500,000 from the state of Minnesota. “When AAR meets certain job-creation goals the loan is forgiven,” Hanson said.

Also included is customized training assistance in the form of a Minnesota Job Skills Partnership Grant that allows AAR to work with state education institutions to provide customized curricula and training. According to Hanson, AAR is eligible to apply for multiple grants of up to $400,000.

AAR will lease 152,000 sq ft of the 188,000-sq-ft facility, with the goal of opening for business this summer. The company is in the process of obtaining necessary FAA approvals and is looking for a launch customer.

“We’ve been up front with the city about the need for a launch customer, but we feel our marketing efforts, combined with partnering with the city, put us in a good position to find one,” Martinez said.

The company expects initially to implement a single work line that will require approximately 60 technicians and a dozen support employees. Personnel will be added as demand requires more work lines. At full capacity, with four lines of maintenance, the operation could employ as many as 225 people. Jobs at the facility are estimated to pay between $30,000 and $80,000 per year, depending upon the skills required, giving a substantial boost to the local economy when the facility is running at full capacity.

AAR’s business model works best in the airline industry. We prefer commercial aircraft with their heavy nose-to-tail check work. However, we never say never; we’re open to whatever opportunities may arise,” Martinez said.

AAR’s newest facility joins the company’s other MROs in Miami; Indianapolis; Oklahoma City; and Hot Springs, Ark.

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JoePilot
on April 25, 2012 - 4:44pm

On the one hand, this is a feel good story for aviation, and any hiring in aviation is cause for celebration. On the other hand, isn't this a story about corporate welfare? (loan forgiveness) How about forgiving my student loans (aviation degree), as the job market for pilots hasn't gone anywhere for over many years, although there are signs of life now. However "signs of life" does not put food on the table.

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David A. Lombardo
on April 25, 2012 - 5:46pm

Joe,

I can understand your frustration but Duluth is an area that needs jobs. There is money available to attract employers to the area that have the ability to create jobs and they are using that money to attract AAR.

Consider that the facility has stood vacant for years which not only represents loss of tax revenue but a loss of local area jobs. Additionally, the City of Duluth must maintain the building so it doesn’t deteriorate.

Also consider that a company capable of taking over such a facility and creating jobs would have to take a significant financial risk to do it.

Duluth is essentially investing in its own future by attracting a top rated, international  maintenance, repair and overhaul operator by offering incentives for them to take the risk. The loan forgiveness is tied to specific employment goals. If AAR doesn’t meet the goals they have to pay back the loan; if they do then the loan is forgiven. It becomes a win-win situation.

dal

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