ESG Report | AAR
2021 Environmental, Social and Governance Report
Table of contents About this report 2 Letter from our President and Social 19 Governance 32 Chief Executive Officer 3 Empowering people: Work as one. Governing with integrity: Be honest. About AAR CORP. 5 Be inclusive. 20 Inspire trust. 33 ® Supporting our employees 20 Our Board of Directors 33 Doing It Right to better connect the world 9 Workforce overview 20 Governance best practices 34 Our purpose and our values 10 Diversity and inclusion 21 Recruitment and retention 22 Risk management 34 Our approach to ESG 11 ESG oversight and governance 11 Training and development 24 Stakeholder engagement 35 Our ESG focus areas 11 Employee engagement 25 Culture of ethics and compliance 36 Health and wellness 25 Our Code of Conduct and related policies 36 Supporting communities 26 Ethics hotline 37 Environment 12 Active military and veteran programs 26 Global anti-corruption policy 37 STEM and aviation-focused education 26 Supplier expectations 38 Protecting the planet: Ideas matter. Think Charitable donations, events and activities 30 Complying with safety standards 40 new. Think ahead. 13 Cybersecurity 43 Our environmental impacts and initiatives 13 Political engagement 43 Waste prevention and reduction 14 Conflict minerals 43 AAR aircraft and engine teardown 15 Appendix 44 Sustaining the life of aircraft engines 16 GRI and SASB Index Environmental data collection and management 17 Facilities highlights 18 Membership of associations Forward-looking statements 1
About this report ® This 2021 ESG Report demonstrates AAR CORP.’s commitment to Doing It Right . Engagement with our stakeholders in recent years increasingly has emphasized not only the importance of embedding a sustainability mindset into our business and culture but also the need for enhanced transparency about our current environmental, social and governance (ESG) focus areas and related evolving strategies. This inaugural report provides insight into how our business and values have guided our ESG practices and actions in the areas where we believe we can make the most meaningful impact. This report highlights the ESG activities of AAR CORP. and its consolidated subsidiaries (AAR) over Fiscal Years (FY) 2021 and 2020. Included data is current as of May 31, 2021 or FY 2021 (June 1, 2020 through May 31, 2021), unless otherwise indicated. Our current expectation is to issue an ESG report annually. Disclosures in this report reference the latest Global Reporting Initiative (GRI) Standards. GRI provides a globally recognized framework for companies to measure and communicate their environmental, economic, social and governance performance. This report is also prepared using the framework of the Sustainability Accounting Standards Board (SASB), following the guidance for the Aerospace & Defense industry. References to specific GRI and SASB Standards are outlined in the attached GRI and SASB index. Beyond reporting on performance indicators in line with GRI and SASB Standards, this report references additional indicators important to our broad range of stakeholders. AAR management is responsible for the preparation and integrity of the information reported as of May 31, 2021, and for FY 2020 and FY 2021. We did not seek or obtain external assurance from third parties with respect to most of the information in this report. Exceptions are noted. Note about environmental data: The current reporting boundary for our Energy and Emissions data consists of our MRO and manufacturing facilities in the United States and Canada, as well as our corporate headquarters. We believe these sites have the most significant impact on our footprint. Data is excluded from sites with less than 10 individuals or where we may have a significant presence, but no control of the operations. For example, we have excluded the locations where we engage in work contracted by government agencies, but where financial control is maintained by these agencies. Many of the photos used in this report were taken prior to the COVID-19 pandemic and may not reflect related social distancing guidelines, including the wearing of masks. For questions about our report, contact editor@aarcorp.com. 2
Letter from our President and Chief Executive Officer On behalf of AAR, I am pleased to share our inaugural ESG report. For over 65 years, we have been committed to the well-being of our employees, our customers and our communities. Our inspiration to make a positive difference is ongoing. While we have been engaged in ESG-related activities for years, this marks the first time we have consolidated ®, we are guided by our and communicated our actions comprehensively in a single report. As we continue on this journey of Doing It Right purpose and our values, reflecting on our impact on the world and contemplating how we can make meaningful changes moving forward. Sustainability is not a new concept to us. AAR’s journey began with repairing radio parts and we have evolved into a global provider of SM Store and providing MRO services to equipment and services for the aviation industry. By repairing and supplying aircraft parts via our PAARTS a wide range of government and commercial customers, we are helping to prevent and reduce waste by prolonging the life of aircraft and parts. As a first step toward addressing the environmental impact of our operations, we began developing our baseline inventory of environmental data this year. AAR emphasizes the importance of social empathy and taking care of our approximately 4,700 employees. We provide continued training and professional development opportunities. We also are helping to fill the expected airline technician gap by partnering with colleges and high schools through STEM collaboration and our EAGLE Career Pathways program, equipping the next generation of skilled workers with the tools to succeed. We take care of our veterans and collaborate with nonprofits such as VIPER Transitions and the Working Heroes Program to ensure that veterans interested in aviation have access to opportunities to succeed. We are proud to have a diverse Board and workforce. We are making continued efforts to hire more women, veterans, and individuals from underrepresented groups. We onboarded our first all-female cohort of aircraft maintenance technicians at our Miami MRO services facility in ® As we continue on this journey of Doing It Right , we are March 2021. guided by our purpose and our values, reflecting on our impact on the world and contemplating how we can make We also continue to support important causes in our communities by making charitable donations and organizing fundraisers and events. We meaningful changes moving forward.” were honored to host the FestiVoix music concert in our MRO hangar in Trois Rivières, Québec, Canada for essential healthcare workers earlier this year. John M. Holmes President and Chief Executive Officer 3 3
Inspiring trust by operating ethically is the foundation of our business. Quality and safety are our top priorities, and we maintain a robust Code of Conduct that includes our key policies and practices. An effective governance structure and ongoing assessment Notable recent ESG highlights, which you can read more of best governance practices support our goals. about in this report: For over Developed baseline inventory of key 65 years, environmental data 17 we have been committed to the well-being of our employees, our customers and our communities. Launched AAR Public Diversity Statement 21 For this first report, we have looked to known ESG reporting frameworks for guidance. We believe this is critical to holding ourselves accountable and demonstrating transparency around our commitments. As we continue to develop more company- Hired first all-female cohort 23 wide strategies and initiatives, we are interested in the perspectives of our stakeholders and look forward to engaging more on ESG topics to understand their priorities and share our progress. Recognized by Smithsonian for $500,000 I would like to thank our customers for their partnership, our stockholders for their confidence in AAR, and our Board of Directors donation 27 for their guidance. I specifically wish to extend my gratitude to our employees for their continued dedication, especially during this time of uncertainty, to maintaining the highest level of service and commitment to our customers around the world. Adopted “Rooney rule” for ® 33 We look forward to continue Doing It Right going forward, together. Board candidates Formed Board’s new Aviation Safety and 40 Training Committee John M. Holmes Set standard for safety 41 President and Chief Executive Officer TM with APRISe safety management system 44
About AAR CORP. AAR is an independent provider of aviation services to commercial and government customers in over 100 countries. Founded over 65 years ago to repair equipment rather than discard it, we are proud to provide sustainable and efficient solutions to commercial airlines, the U.S. government and its allies. We provide aftermarket expertise and award-winning Market Solutions, including Maintenance, Repair and Overhaul (MRO) Services, Parts Supply, Integrated Solutions and Mobility Systems, which can be integrated or leveraged separately to help our customers increase efficiency and reduce costs and waste. ® Our commitment to Doing It Right by our customers, employees, communities and the planet positively impacts the aviation ecosystem. 5
Our services support commercial, cargo and Parts Supply Integrated Solutions government operators AAR’s Parts Supply offers a vast inventory of new and serviceable, overhauled With our Integrated Solutions, we help the world’s airlines and governments around the globe. and repairable airframe and engine parts for most commercial aircraft types maximize aircraft uptime, minimize downtime and reduce costs. and many military platforms. • Commercial • Serviceable and OEM factory-new parts • Total fleet services • Airframe and engine parts sale, exchange, loan and leasing • Flight-hour support • Engine solutions, management, sales, leasing and exchange • Consumables and Expendables aggregator • Aircraft sales and leasing • Government • Online PAARTSSM store offering over 1.6 million parts • Contractor Logistics Support (CLS) • OEM Solutions for commercial and government • Performance-Based Logistics (PBL) • 24/7 worldwide AOG service • Third-Party Logistics (3PL) MRO Services Mobility Systems As the largest independent MRO services provider in North America, our Our Mobility Systems, as part of our Expeditionary Services, delivers service offerings include: specialized mission-tailored configurations, custom integration and modification, mobile shelter systems re-fit, and life-cycle support for • Airframe governments, militaries, and nonprofit organizations worldwide. It also • Landing Gear produces pallets for the movement of products for the military. • Component Repair • Wheels and Brakes • Air cargo containers (ISU®) and pallets • Engineering Services • Rapidly deployable mobile tactical shelters ® • SPACEMAX shelters • Integrated Command Control (C4) centers 6
v AAR operates at 60 locations serving customers in 100+ countries and Commercial employs approximately 4,700 people in over 20 countries. 49% • Contracts with over 130 commercial airlines • Strong focus on narrow-body aircraft and international operators • Long-term customers include Air Canada, Alaska Airlines, Delta Air Lines, Southwest Airlines and United Airlines FY 2021: Government aircraft maintained, 600+repaired and overhauled 51% • Prime contractor to the U.S. Air Force, man hours on aircraft U.S. Navy, U.S. Army, U.S. Marine 3.3M Corps, U.S. Marshals Service and U.S. Corporate Department of State (DOS), and four MRO Services new foreign government partnerships Parts Supply • DOS Worldwide Aviation Support Integrated Solutions – Commercial Services (WASS) program sites in Integrated Solutions – Government Asia, Central and South America, the Mobility Systems Middle East and the United States • 29 government fleet types • $4 billion in government assets managed 7
We are honored to have received several awards in the past few years, including the following: Aviation Week Best Airframe MRO Provider – Bloomberg Top 200 Boeing Performance Defense News Top 100 Defense Top 10 Airframe MROs, 2019 Worldwide, 2015 Federal Industry Leaders, 2016-2020 Excellence Awards, 2016 Contractors, 2009-2021 FAA Diamond, Forbes America’s Best Midsize Fortune 1000 Military Friendly Employer, 2021 Military Times 2020* Employers, 2018, 2019 & 2021 2020-2021 Best for Vets Employers, 2020 NSPA #1 Outstanding Source of Top Shop 2019 Wheel and Brake & Top 100 Aerospace & Defense U.S. Veterans Magazine Top Veteran- Repair, 2019 Landing Gear Services* Companies 2021 Friendly Companies, 2020 & 2021 * For the following facilities: Landing Gear Miami, Component Repair New York, MRO Miami, MRO Indianapolis and MRO Oklahoma City 8
® Doing It Right to better connect the world 9
Our purpose and our values Our values As a startup back in 1955, we were supplying parts to the aviation industry, efficiently moving inventory and setting in motion our participation in America’s great technology boom. Today, as we continue to expand, our values, purpose-driven model and a culture of integrity help provide safe, efficient and sustainable solutions for the aviation industry so they can do what they do best – fly and connect the world. From Chicago to London to Singapore to Dubai, we are Doing It Right®, even when it’s not always the easiest course of action. We act knowing that the critical work we perform impacts the safety of commercial and military aircraft, and their passengers and cargo each year, across the globe. 10
Our approach to ESG Our ESG focus areas ESG focus areas Our ESG focus areas are long-standing AAR priorities that align with Environment Although this 2021 ESG report is our first time publicly sharing our our business and our values and are also areas where we believe that Protecting the planet environmental, social and governance (ESG) practices in a consolidated we have the greatest opportunity to make a meaningful impact. ® report, we have focused on Doing It Right to connect and make a Waste prevention and reduction positive impact on the world every day. With long-standing values that In our product and service offerings, as well as in our facilities, prioritize quality and safety, inclusion, creative thinking and integrity, we diligently seek ways to become more efficient, including by our commitment to ESG principles is embedded in our culture. preventing waste and limiting our use of natural capital, benefiting not just our bottom line but our planet. We also strive to positively ESG oversight and governance impact the economic and social well-being of our employees and Our focus on ESG matters is embedded in our strategy, which to make valuable contributions to the communities where we live is overseen by our Board of Directors. The Board’s standing and work. Supporting all of our ESG initiatives is a sound corporate committees oversee our ESG focus areas based on the delegated governance framework and our company-wide commitment to Social subject matter: the Aviation Safety and Training Committee (ASTC) operating with integrity and honesty. Empowering people oversees all aspects of aviation safety, including our culture of As we continue to evaluate our ESG impacts and develop our ESG safety compliance; the Nominating and Governance Committee strategies, we consider the perspectives of our many stakeholders. Diversity and inclusion (NGC) oversees our governance policies and practices and the Through ongoing engagement, we expect to increasingly discuss Audit Committee receives reports related to our ethics hotline and ESG priorities and seek feedback on our focus areas. For more Military and veteran programs oversees AAR’s cybersecurity planning and protections efforts. Our information, see Stakeholder engagement on page 35. ESG report is reviewed by the NGC on behalf of the Board. STEM and aviation-focused AAR’s membership in industry and other associations provides education At the management level, we have assembled a multidisciplinary team additional channels for communication, collaboration and advocacy. of senior leaders representing legal, communications, human resources, See Appendix for a list of AAR’s membership of associations. and environmental, health and safety. This group, with input and guidance from senior business leaders, assess risks and opportunities related to our ESG focus areas, monitor and implement our ESG strategies, track our progress and guide our reporting to stakeholders. Governance Governing with Integrity Our manufacturing activities Ethics and compliance We are generally engaged in only limited manufacturing activities – primarily restricted to our Mobility Systems business, comprising approximately Safety 5% of our sales. Accordingly, at this time, our ESG focus areas may not include impacts typically reported by manufacturing companies. 11
Environment 12
Protecting the planet: Reducing atmospheric ozone Ideas matter. Think inside aircraft new. Think ahead. In 2020, AAR teamed with the sustainable chemical As AAR’s global presence grows, so does our sense of innovator BASF to help remove ozone and certain responsibility to protect the environment and the people odorous Volatile Organic Compounds (VOCs) like of the world. We are committed to understanding our jet fuel from inside aircraft. Air at high altitudes environmental impacts – both positive and negative – contains significant levels of atmospheric ozone that and evolving our ESG strategies to further reduce our can enter the aircraft through air conditioning ducts. ecological footprint. Exposure to ozone is known to cause headaches, shortness of breath, coughing, chest pain and eye, Our environmental impacts nose or throat irritation. and initiatives Source: BASF. As the proud distributor and MRO services provider We are proud of our role in the aviation ecosystem, in for BASF Deoxo™ aircraft cabin ozone VOC which we help prevent and reduce waste by prolonging converters around the globe, we are doing our part the life of aircraft and parts. We also have taken proactive to protect the health and safety of passengers by steps to manage and minimize waste in our operations, delivering quality cabin air compliant with Federal including the proper disposal and treatment of hazardous Aviation Administration (FAA) regulations. waste. Our other environmental projects have been largely decentralized and managed locally at each of our facilities. We recently engaged an independent third-party consultant to assist with environmental data collection and management. 13
Waste prevention and reduction At the core of our business is the responsible use of resources within Our Parts Supply business acquires used parts from various sources, the aviation industry. We repair aircraft and equipment, extending including airlines, leasing companies and other financial institutions. not only the lifespan of airplanes but the useful life of their parts. We We often purchase whole aircraft and engines for purposes of believe our business model is intrinsically linked to preventing and disassembly and part-out. AAR outsources teardowns to third-party reducing waste within the aviation industry. contractors (typically members of the American Fleet Recycling Association) and provides a pull list for parts based on the specific As the largest independent MRO provider in North America, we airframe or engine. Our goal is to remove, repair and reuse or resell repair, rebuild and refurbish all aspects of an aircraft as needed as much of a teardown as possible. If we cannot reuse or resell to for our global customer base. Our Parts Supply business, which our global customer base, then material may be recycled or sent for maintains one of the industry's largest inventories of serviceable, proper disposal. Instead of going to landfills, some materials can be overhauled and repairable airframe parts, focuses on extracting as turned into other usable items. We also sometimes donate parts and much value as possible from the parts it acquires with the intent materials to be used as furniture, art or for educational materials. to refurbish, recertify and resell. Of the approximately 1.6 million parts available in the PAARTSSM Store, approximately 59% are used serviceable material (USM) parts. Our purpose and business strategy AAR’s business model centers around repairing equipment rather align with, and contribute to, than discarding it. Whether through maintenance and repair global initiatives to substantially of aircraft or extracting and refurbishing parts, our businesses reduce waste generation, including support sustainable consumption and production of aircraft and the United Nations Sustainability equipment, substantially preventing and decreasing waste – and Development Goals – Goal 12. also reducing the aviation industry’s global footprint. Donation of parts to Museum of Science & Industry Chicago, IL (2021) 14
AAR aircraft and engine teardown In connection with an aircraft teardown, 92% (average) of the weight content of an aircraft’s weight is reused or recycled. Source: Tarmac Autosave (2021 website) 1 2 3 ASSET IDENTIFICATION REMOVAL OF VALUABLE AIRCRAFT REPAIR AAR identifies aircraft and engine types & ENGINE PARTS AND COMPONENTS AAR identifies which parts & components will go through the repair process based on priority that meet our business needs AAR partners with teardown vendor customer needs and market demands Source/identify assets from end user Select teardown vendor from trusted network based on Recertify/repair or overhaul parts & Ship parts & components Parts & components ready airlines, leasing companies and financial location, experience and cost components through our component and warehouse in for sale, exchange or lease institutions for purchase or consignment repair shops in New York or strategically located Amsterdam or our extensive network inventory hubs around 1 of repair vendors and OEM’s the world Provide detailed work scope instructions with parts to Obtain aircraft/engine specifications that be removed outline the current condition and basic 4 records link for evaluation DISMANTLING & VALUATION 4 Teardown partner removes parts & components and AAR provides approval for the aircraft/engine to be scrapped per provides a detailed removal manifest/tags outlining acceptable industry standards Visually inspect the aircraft, engines & the part number, serial number and nomenclature components to ensure the asset meets our standards Sold to non-aerospace Recyclable Non-recyclable 1 businesses scraps scraps 2 Recycling & Disposal & 3 valuation landfilling 1 Total number of parts removed for our business needs varies based on aircraft type. 15
Sustaining the life of aircraft engines ® At AAR, Doing It Right means positively impacting the aviation ecosystem and supporting the sustainability practices of our commercial airline and government customers worldwide. We continually enhance our capabilities to support innovative technologies that minimize our industry’s impact on the planet and promote quality and safety. For example, in 2019, as part of our strategy to sustain the life of engines, we were awarded a seven-year contract with the Danish Defense Acquisition and Logistics Organisation (DALO). The contract involves maintenance, repair and overhaul of Pratt & Whitney F100-220 engine components on the General Dynamics F-16 so they can continue serving the Royal Danish Air Force (RDAF) for years to come. In addition, as part of our efforts to minimize waste, certain of our facilities have implemented comprehensive waste minimization plans. These plans focus on recycling more materials whenever possible, including used oils, off-spec fuels and other hydrocarbons, as well as cardboard. We are also focused on complying with evolving waste handling regulations and requirements, including with respect to chemicals. The treatment and disposal of hazardous waste is a critical component of our environmental compliance. 16
Environmental data collection and management In March 2021, with the assistance of an independent third-party consultant, we began working towards the development of an inventory of our environmental impacts. In doing so, we have adopted the operational control method to determine how to represent our footprint most accurately and where we can actively manage our impact. Energy Emissions We consume electricity and fuel across our global operations. We have developed an initial baseline of our greenhouse gas Energy use reduction As we progress with our ESG program, efforts are underway to emissions footprint based on the energy consumption across our assess energy consumption and opportunities to reduce energy significant sites set forth in the table to the right. Our Scope 1 consumption across significant sites within our operational control. footprint stems from the combustion of natural gas and Scope 2 from FY20 141,241 53,947 195,188 our electricity consumption. We observed a decrease in our Scope 2 AAR consumes fuel from natural gas for heating. Other sources emissions driven by reduced electricity consumption and an increase include propane for forklifts, gasoline for vehicles, and diesel for back- in renewable energy sources from utility providers. As we assess our up generation. We have prioritized the collection and disclosure of reporting boundary, energy sources and energy mix, we will continue natural gas consumption and will assess these additional fuel sources, to evolve our emissions reporting framework. FY21 138,774 45,556 184,330 including jet fuel, for future reporting. The process of regularly tracking and monitoring utility-based Water Natural gas (MWh) Electricity (MWh) data is being put into practice now and we expect to improve the overall process in years to come. When we identified gaps in our AAR uses water for various purposes, including for cleaning in our energy data, we used estimates based on standard energy inventory offices and cooling in our operations. We have identified water as a preparation practices and past performance. We do not believe these potential impact area and are evaluating quantifying our footprint to estimates materially impact the overall footprint of the reported sites. determine its significance for disclosure. We are currently evaluating Emissions reduction systems and processes to consistently report our consumption The table to the right summarizes our natural gas and electricity volumes across sites, relative to the potential impact. use for FY 2020 and FY 2021. As we improve our data collection efforts, we will look to restate past performance upon any significant Waste FY20 25,648 24,884 50,532 discrepancies in reported performance. From there, we should be able to further assess trends and set reductions targets from solid Fuel, components and equipment are recycled, re-purposed and/ baselines. or sold to third parties for reuse when possible and in alignment with our strategy. As we advance our ESG program, AAR will consider the FY21 25,151 19,069 44,219 inclusion of diverted and landfilled waste for public disclosure. We are currently evaluating systems and processes to consistently report our consumption volumes across sites, relative to the potential impact. Scope 1 (MT CO e) Scope 2 (MT CO e) 2 2 17
Facilities highlights In recent years, we have focused on using energy more efficiently and are working to convert to LED lighting at our facilities. We also continue to identify and evaluate opportunities to create a cleaner, safer workplace, and to adopt sustainable practices to reduce our environmental impact. Recent actions include: ELECTRICITY WATER WASTE AIR Amsterdam Cadillac, Michigan Garden City, New York Rockford, Illinois Decreased electricity usage by 40,000 kilowatt Installed a chiller at one of its facilities that Installed new plastic media blast cabinet with Installed five ION generators in two HVAC hours in 2017 and 2018. recirculates chilled water to cool presses as an advanced filter recovery system that allows units to provide ionized air to the main and Installed automatic switch-off of lighting in opposed to using city water from a well field 99% recycling of media and minimizes waste. support office area, and to airplanes when several areas. that was released to the sewer, resulting in under maintenance. savings on water and sewer usage. Oklahoma City, Oklahoma Cadillac, Michigan Continued focus on reduction of classified waste. Installed LED lighting in several areas. Miami, Florida Dispose of waste oils and off-spec fuels Garden City, New York Airplanes are washed with recycled water. from the aircraft with waste disposal services Installed LED lighting throughout the facility in Wastewater from our aircraft wash is treated that recycle. the past five years. to reduce metals before discharge to the sanitary sewer. Trois-Rivières Quebec Miami, Florida Recycle battery and fluorescent tubes via a Installed LED lighting in several areas. governmental program and disposes of used and Oklahoma City, Oklahoma expired hazardous products (Alodine, alumiprep, Installed LED lighting in several areas. paint, oil…) through a recycling supplier. Wood Dale, Illinois Windsor, Ontario In process of upgrading to LED lighting Partnered with Safety Kleen to remove waste in our 100,000 square foot office space, chemicals safely. where possible. 18
Social 1919
Empowering people: Workforce overview* Work as one. Location Diversity (United States) Be inclusive. 29%29% IntlIntl At AAR, we collaborate as a team, we encourage diverse 49% 18% 22% perspectives and we work to partner with those making a difference. minority female veteran We support talent and diversity in the aviation maintenance workforce. Our investment in our communities via education through our STEM and EAGLE Career Pathway Program helps launch the careers of many aspiring young individuals in the aviation industry. 71% Although some of the social programs described in this report U.S. have been temporarily impacted by the COVID-19 pandemic, we remain committed to making a positive impact on people across our value chain. ® Employment status (United States) Age (United States) Doing it Right means treating people fairly and respectfully. For more information about our policies intended to protect people 1% 16% 16% across our organization, our partners and our suppliers, see Culture part time >60 <30 of ethics and compliance on page 36. Supporting our employees 26% 20% We continually invest in making AAR a great place to work, and 50s 30s are committed to creating an enriching environment for our approximately 4,700 employees. 99% 22% full time 40s * Information as of May 2021. Minority information represents non-Caucasian workforce. Percentage of global workforce is 18% female as well. 20
Guard/Reserve and those who support veterans. The primary goals of VRG are to foster the continued growth of a military/ Diversity and inclusion veteran-friendly environment at AAR and enhance recruitment, training and retention of veterans. VRG conducts special events, activities, training and seminars. Public Diversity Statement Each of these ERGs are led by an executive sponsor and create As reflected in our values, we have a long-standing commitment to a sense of belonging, contribute to retention, offer mentorship embracing diversity and fostering a culture of inclusion. In July 2021, opportunities and sponsor events. We currently have plans to launch AAR’s Veterans Resource Group (VRG) is a community we adopted and published the following Public Diversity Statement: ERGs to support our Black, Latinx, Asian and LGBTQ+ employees, committed to a shared, common purpose: creating unique Just as unique parts are essential to an aircraft’s ability to fly, to provide a platform and a safe space for our employee population opportunities while providing support for our Veteran unique talent is essential to AAR’s ability to succeed. Our strength that is often under-represented. employees. Not only is it a safe space for vets to share stories is rooted in our commitment to diversity, equity and inclusion. We and experiences, it’s also a place where everyone can learn and We are also focused on increasing diversity as part of our grow together.” create opportunity through new thoughts and ideas to embrace hiring practices. an ever-changing world. These values empower our people to be David Tillich a team of producers, innovators and world class leaders, who are Diversity and inclusion education Manager, Strategic Supplier Management “Doing it right” to better connect the world. In 2021, we also rolled out additional diversity and inclusion This statement was developed by a group of employees selected education. AAR has engaged an outside expert to conduct more from throughout the business, reflecting the varied perspectives, than 40 leadership sessions and 150 workshops for employees from f AAR scend en o wom h the experiences and priorities of our workforce. May to October 2021. wit Commitment to inclusion Leadership sessions At AAR, facilitating an inclusive culture means everyone feels • Diversity and Inclusion and the role of the leader • Communication styles, dialog and team success Ascend, AAR’s Women’s Business Resource Group, has been a welcome and appreciated. tremendous resource in terms of networking and professional • Unconscious bias and the impact on performance development. Open to all employees, it provides an additional In 2015, a women-focused Employee Resource Group (ERG) was • Micro-messaging and microaggressions space to work with inspirational women who are committed formed, dedicated to elevating the careers of women at AAR. The to the empowerment, professional, and personal growth of group, now called Ascend, provides opportunities for members • Active listening, empathy and leadership to expand their professional networks, gain leadership skills and • Advocacy one another.” develop skills to advance professionally. Individual contributor sessions Meredith Fabian In 2021, we formed VRG, our veteran-focused ERG for employees Senior Manager, Contracts – Government Program Management • Diversity and Inclusion overview coming from the military community. Members include veterans, • Unconscious bias employees with military connections, those serving in the • Micro-messaging and microaggressions 21
Recruitment and retention Training and direct hire programs At AAR, we invest in the future of the aviation industry by actively helping to develop a skilled workforce through programs focused on veterans, high school graduates and individuals transitioning from the military, and providing opportunities to work for us. Some of our programs include: Embry-Riddle SkillBridge program Direct Hire Aviation Maintenance Education program After serving 4 years in the United States Marine Corps, I One of our main goals is to build a bridge between skilled military AAR initiated a direct hire program for high school graduates in decided to pursue a carrier in aviation. The Embry-Riddle veterans and successful careers in the aviation industry. As part of Indiana’s Decatur Township to help students gain real-world job SkillBridge Program allotted the opportunity to become an our partnership with Embry-Riddle Aeronautical University (ERAU), experience to fill the gaps in aviation for middle skills that do not aviation maintenance technician with AAR. I have been with the we have partnered on a SkillBridge program. The intensive nine- require a bachelor’s degree. AAR family since September 2020 and feel the program has week program trains veterans, transitioning military and eligible prepared me well for my future endeavors.” military spouses in aviation maintenance. Graduates receive an Modeled after our successful EAGLE Career Pathways Program, 18-credit hour Aviation Maintenance Certificate, a Boeing 737NG the Direct Hire Aviation Maintenance Education program allows Tracer Hickman General Familiarization certificate and one guaranteed interview students to train for an entry-level position as a Material Handler Technician III, A&P with industry partners, including AAR. We have hired 11 graduates and transition into an apprentice-level aircraft maintenance of the SkillBridge program since the program launched in 2019. technician. Certification can be acquired through Vincennes Although COVID-19 temporarily slowed the progress of this University or by working a minimum of 18 months as an AAR program, we look forward to building on the momentum and aircraft maintenance technician. success of the SkillBridge program in the years to come. After serving 4 years in the United States, Navy I decided to enter the Embry-Riddle SkillBridge program to help transition my AAPA ACCELerate! Apprenticeships program experience into a career in the aviation industry. I’ve now been at In March 2021, AAR signed a Memorandum of Understanding AAR since April 2021 and feel the program has trained me well (MOU) with the American Association of Port Authorities (AAPA) for my current role as a support technician.” ACCELerate! Apprenticeships program. The goal of this specialized Mariah Passman program is to provide competency-based curriculums, on-the-job training, program development assistance and incentive funding Technician III, A&P to expand apprenticeship opportunities for careers within the transportation and maritime industries. 22
Focus on diverse hiring AAR is an equal opportunity employer and recognizes the value of a diverse workforce. Although we are proud of our workforce diversity, we acknowledge that we still have work to do. We are continually seeking out new ways to broaden our exposure to underrepresented groups in the aviation industry and to develop a diverse talent pipeline. In August 2020, we partnered with the nonprofit Corporation for Skilled Workforce (CSW) to diversify the talent pool of aviation maintenance technicians (AMT) through a program funded by a Lumina Foundation grant. As part of this collaboration, AAR and CSW engage community colleges and technical training providers in various locations to develop competency-based programs, curricula and stackable credentials that meet FAA Airframe and Powerplant (A&P) requirements. In 2020, we focused on building partnerships with Historically Black Colleges and Universities (HBCUs) to create a talent pipeline for future employment. In particular, we established a relationship with the North Carolina A&T State University to help students become better at their professional job search by reviewing resumes, providing LinkedIn workshops and conducting mock interview challenges. In March 2021, we hired our first all-female cohort of aircraft maintenance technicians that were first mentored and developed through our partnership with CSW. Half of the cohort were hired from the Aviation Institute of Maintenance, one of our EAGLE Career Pathway Program partners, and the other half from traditional workforce recruiting channels. See pages 22 and 26 for information on veterans hiring initiatives. First all-female cohort of AMTs at AAR 23
We believe our performance review process is a valuable tool for Employee benefits Training and development To recruit, retain and support the well-being of our associates, we We believe developing leaders that promote our values and employee development. Our robust process occurs three times a provide a competitive and comprehensive benefits program. providing opportunities for career growth are intrinsically related year for most employees: an annual review and two check-ins. We to workforce retention and engagement. Accordingly, AAR invests aim to identify key talent and high-performing individuals, and also Our “total rewards” approach to compensation and benefits varies in creating a culture that encourages and supports employee develop individual development plans. by position, location and business. We typically offer traditional talent development. We also are committed to providing all of our employees with benefits, such as medical, dental, vision, disability and life, and learning opportunities through on-the-job training, quarterly “lunch accidental death and dismemberment insurance, and also may In 2018, AAR created the role of Director of Talent Management and learn” events, tuition reimbursement (up to $10,000 a year) and include: to focus on training our employees, specifically on leadership priority application opportunities for all open jobs. • 401(k) plan development, people skills and manager skills. We hired three new Leadership Development Trainers between 2019-2021 and • Education assistance (full-time only) participants in our leadership programs can take courses such as • Employee assistance program Introduction to Leadership, Leadership 101 and Leadership 102, In FY 2021, we held management training which includes the Crucial Conversations curriculum from VitalSmarts. classes focused on soft skills development, • Online recognition system management training, leadership development • Employee wellness opportunities Other leadership development opportunities include: and career development. • Company discounts • Mentorship – Our mentorship program provides a mentor to • Legal assistance any employee requesting to participate in the program, and mentor-mentees are encouraged to meet monthly. • Manager Leadership Academy – We’ve developed a training Parental leave and related benefits program with a menu of courses for managers or those looking to Our Dependent Care Policy provides all U.S. employees, following become managers. I have worked at AAR for five years, entering at the manager the birth or adoption of a child, the opportunity to take up to • Bell Leadership Institute’s Achievers™ program – Each year, level. Through our Talent Management program, I’ve taken 14 weeks of leave, which includes FMLA (Family Medical Leave we identify around 30 high potential employees to enroll in advantage of a 360-review and multiple development Act) time plus an additional two weeks. Parents may also request this customized program, which helps employees gain a deep courses like the DDI Leadership Series, where I honed my flexible work hours upon returning from leave for the birth or understanding of their strengths, weaknesses and motivations. leadership skills which prepared me for my current role as a adoption of a child. We provide mothers’ rooms in our facilities. director. I am grateful to work for a company that recognizes We also offer adoption benefits, including $3,000 per adopted the importance and provides development opportunities for child for full-time employees. its employees.” Karla Hein AAR Marketing and Communications Director 24
Employee engagement Through our “Ideas Matter” program, we encourage employees to submit Health and wellness their ideas for improving AAR. We reward revenue-generating and cost- The health and wellness of our employees is paramount and as such We continually seek out ways to engage employees, recognize saving submissions that we implement. achievements and cultivate a sense of team. We also periodically we provide an onsite nurse at our MRO locations, medical screenings, conduct engagement surveys to seek feedback on how to make AAR a a free flu shot program in the U.S. and counseling at no cost. We ® better place to work. New scholarship opportunity for children of also periodically organize events at our facilities such as a Fitbit step employees challenge and sponsor participants in their wellness efforts, such as Our CEO regularly hosts company-wide “town hall” meetings to answer running the Chicago Marathon. We have on-site fitness centers at questions directly from employees, which can be submitted anonymously. At a town hall meeting, we received a suggestion to create some of our locations to allow employees to take advantage of their We also hold quarterly “Coffee with the Leaders” opportunities for a college scholarship for children of our employees. AAR free time to stay fit. employees at all levels to engage with senior leaders. thought this was a great idea and, in March 2021, we In addition, we support health and wellness through our charitable launched a new scholarship program geared towards children giving and partnerships focused on research and advanced treatment Business leaders can nominate employees who have gone above and of U.S. employees earning a bachelor’s degree in an aviation/ therapies for various diseases and medical conditions, homeless beyond for our customers, or come up with a new way of doing things, aerospace related major. This program will not only support veterans and families in need. See pages 26-31 for information on our ® community outreach and charitable donations. for our annual Employee Recognition Award called Doing It Right . the children of our employees, but will bolster the future of Five finalists are invited to attend the special town hall meeting where our industry. they meet with the CEO, and share their stories and receive a monetary reward. The over-all winner also receives a travel gift certificate. Our COVID-19 response As part of the essential critical infrastructure sector (as defined by the Department of Homeland Security), AAR remained fully operational throughout the COVID-19 pandemic. While supporting our commercial and government customers in accordance with current federal, state and local orders, we took extra steps to ensure the safety of our employees by taking the following measures: • Established a COVID-19 Action Team that meets weekly. • Deployed temperature taking process (including touchless devices with facial recognition for reporting to work), COVID-19 Policy and communication procedures. • Developed process for contact tracing and COVID-19 Dashboard for tracking cases. • Provided appropriate PPE to protect employees and visitors. • Provided onsite vaccination programs at AAR locations in Oklahoma City, Miami, Wood Dale and Rockford. 25
Supporting communities STEM and aviation-focused AAR’s recent partnerships include: Giving back to the community is a critical part of AAR’s culture. We education support nonprofits and organizations that work to improve society, with an emphasis on veterans’ programs and education for high As a pioneering aviation company, we have a responsibility to think school and college students. Our support also includes charitable ahead and see the big picture. A Boeing study estimated that donations, event sponsorship and volunteering. Although the 192,000 new aircraft technicians in North America and 739,000 new pandemic has slowed our giving rate and the number of events aircraft technicians worldwide will be needed through 2039, and we Working Heroes Program we have participated in this past year, we remain committed to our are determined to help fill the gaps with our workforce development communities and look forward to ongoing collaboration. strategy involving two successful programs, STEM education with Our country’s veterans are disciplined and loyal workers capable of partner schools and our EAGLE Career Pathway Program. quickly becoming valued mechanics and natural leaders. In collaboration with LAUNCH, AAR hires veterans through the Working Heroes Program Active military and veteran Source: Boeing Pilot and Technician Outlook 2020-2039. to fill the industry-wide shortage of aviation maintenance personnel. programs LAUNCH is an ongoing program, for several years, which helps Both programs are geared towards inspiring young minds and experienced veterans and transitioning service members successfully AAR’s success in supporting the U.S. Military and allied countries is creating pathways to successful careers in aviation. In essence, we integrate into the workforce. in large part due to the valuable skills of our dedicated employee are preparing the young generation to take up the mantle when they base of military veterans. Veterans make up 22 percent of our U.S. are ready to spread their wings. workforce and are a key focus in our local recruitment efforts. Inspiring youth As a proud military-friendly employer, we recruit veterans through To instill a deep interest for aerospace in young people and VIPER various military and academic partners, including: create a talent pipeline for the aviation industry, we collaborate In April 2021, AAR partnered with VIPER Transitions to launch the with elementary, middle and high schools and organizations to nonprofit’s first aircraft maintenance workforce program. VIPER is a • Air Force Academy • Naval Station Great Lakes demonstrate the relevance of STEM subjects (Science, Technology, veteran-run job training initiative providing resources and transferable High School • University of Chicago Engineering and Mathematics) and introduce them to career skills for service members transitioning from military to civilian life. • Chicago Veteran Summit Veterans pathways in aerospace in a fun and engaging way. We started the new alliance with a $25,000 grant powered by the Lumina • Embry-Riddle Aeronautical • Veteran Career Summit In the cities where we operate, we encourage students to learn about Foundation for tools and equipment to be used by participants. The program University’s SkillBridge • Women in the Air Force the aviation industry firsthand by regularly opening our doors to students includes a general aviation curriculum developed by the Aviation Institute of Program for transitioning for tours and mentorship programs. Our “Taking Flight” national Maintenance (AIM) and a week each of airframe and powerplant instruction for military (part of our EAGLE 10-15 students for twelve weeks (totaling 480 hours). Career Pathway Program) education initiative introduces young students to exciting careers in aviation. The successful program includes participation in career days, Graduates will continue training at an AIM campus or work at a partner field trips and paid internships at AAR locations across the country, company like AAR. including Miami, Indianapolis, Oklahoma City and Chicago. We also promote aviation as a viable vocation in underserved areas. 26
ORGANIZATIONS AND SCHOOLS AAR ACTIVITIES Smithsonian National Air & Space Museum Cradle of Aviation Museum • Internships and access to STEM related careers as part of the “Taking AAR previously donated $500,000 to support the construction of the Long Island, New York Flight” education initiative. new Design Hangar in the transformed “How Things Fly” exhibition at the flagship building of the National Air & Space Museum in Commemorates Long Island’s part in the Washington, D.C., scheduled to open in 2024. The museum named history of aviation. the space the “AAR Design Hangar” in appreciation of the gift. Since its inception in 2014, 62,000 visitors have engaged in hands-on Perspectives Charter Schools • Internship/mentorship program. learning experiences in core STEM topics in the Design Hangar. Chicago, Illinois • Tours of the Aviation Technology Center at Vincennes University. In July 2021, AAR’s donation was acknowledged by the Smithsonian Five open-enrollment, tuition-free high- • Students taxi in style across the airfield in a Boeing 737 to AAR Aircraft Services. as part of its Ignite Tomorrow campaign. performing public schools serve students in grades six through twelve. Overtown Youth Center • To support the Center’s STEM program and for construction of a new facility, Miami, Florida in 2013, pledged $250K which was paid in four annual installments, and in 2019, pledged an additional $125K to be paid in five annual installments. The youth center provides comprehensive • Kicked off program with AAR employees helping to launch rockets. services to at-risk youth. • Classes for elementary school students taught by the Nutty Scientist. AAR is connected to Miami by its two • Miami Central High School juniors and seniors get their first glimpse of facilities – Landing Gear Services and aviation education and careers during “Taking Flight,” a day-long STEM Aircraft Services – that employ more than excursion to AAR’s 226,000-square-foot aircraft maintenance, repair and 1,000 residents and directly generate overhaul (MRO) facility at the Miami International Airport. more than $114 million annually in • Contributed and participated in charity basketball tournament that benefits economic impact for the area. under-privileged youth in Miami. 27
EAGLE Career Pathway Program AAR launched our EAGLE Career Pathway Program in early 2019 to create clear pathways to career advancement for college students across the country and to fill the predicted skill gaps in aviation with multi-leveled certified aircraft mechanics. Educational institutions we work with include community colleges, high schools and youth centers located near AAR’s four U.S.-based aircraft repair stations in Miami, Oklahoma City, Indianapolis and Rockford, Illinois, and our global headquarters near Chicago’s O’Hare International Airport. The program provides students with real-life work experience inside the hangar and includes job shadowing and mentoring. Students receive academic support and monitoring. Graduates of the EAGLE program have the opportunity to begin working for AAR immediately or continue the program to obtain an additional certification, including FAA airframe and powerplant (A&P), maintenance operations, management, quality control and safety. Participants are eligible for tuition reimbursement from AAR upon completion. In March 2021, AAR’s EAGLE program was recognized by the U.S. Department of Labor’s (DOL) Employment and Training Division as a nationally registered apprenticeship. Our EAGLE partner schools include: Aviation Institute of Maintenance (AIM) Lake Superior College (LSC) Rock Valley Community College Western Michigan University HAMPTON ROADS, VA DULUTH, MN ROCKFORD, IL KALAMAZOO, MI Embry-Riddle Aeronautical University Olive-Harvey Chicago Community College Vincennes University, Aviation Technology Center Wichita State University Tech DAYTONA BEACH, FL CHICAGO, IL (ATC) WICHITA, KS INDIANAPOLIS, IN 28
Olive-Harvey Chicago Community College Rock Valley College Our first EAGLE program initiative launched at the Olive-Harvey Chicago Community College in AAR designated Rock Valley as an EAGLE Career Pathway partner in 2019; however, we have just four months. The program, offered at the new 12,000 square-foot Aviation Futures Training worked closely with the community college since we began operating our MRO facility at Chicago Center, focuses on aviation sheet metal in a 60-day curriculum that provides an opportunity for Rockford International Airport in 2016. those not pursuing a traditional college path. Launched in 2019, the Center is an extension of Olive-Harvey College’s Transportation, Distribution and Logistics (TDL) Center. As part of our collaboration, we donated equipment to Rock Valley College’s Aviation Career Education Center – which sits across the street from our twin-hangar facility – and we send AAR donated the curriculum and pays the instructor for the aviation sheet metalworking course, subject-matter experts to the school to speak with students studying to be an aircraft mechanic. which prepares students for the CertTEC Certification with 300 hours of instruction and hands-on training with sheet metal from airplane fuselages so they can gain entry-level employment in aviation or a similar industry. The program’s subsequent coursework on composite repair and aviation electronics allows students to earn stackable credentials to pursue several career tracks that include management jobs. 29
Charitable donations, events and activities Charitable giving ® We identify organizations to support with charitable giving primarily Support of DE&I organizations AAR also believes in Doing It Right outside of work, and we demonstrate this by giving back to the communities where we live through our leadership, employees and customers. In addition, We also support organizations dedicated to diversity, and operate. We support nonprofits and organizations that work our employees have supported each other through hardships by equality and access to economic opportunity, including the to improve society in four primary areas: veterans/active military; holding fundraising luncheons, with AAR often providing a company following over the past years: education with an emphasis on STEM; health and wellness; and matching donation. • Legal Aid Society diversity and inclusion. Over the last decade, we have donated and sponsored events to • International Aviation Women’s Association (IAWA) support numerous organizations, including the following: • Special Olympics FY 2021 highlights: FY 2020 highlights: • POSSE Chicago (nonprofit that supports diverse students persisting through college) • American Cancer Society • American Cancer Society • Dress for Success (helps underprivileged women with At AAR, we encourage getting involved and supporting • Brain Research Foundation • Anti-Defamation League resume writing, interviewing and workforce readiness) our communities. Although making charitable • Business Executives for • Brain Research Foundation contributions is a part of that dynamic, it’s important to National Security (BENS) • Chicago Humanities Festival Support of veteran organizations not underestimate the value of what many believe to be • Golf Fore Charity • Lincoln Park Zoo Our team supports, volunteers and donates to groups that our most precious resource: our time. Many of my most • Lincoln Park Zoo help veterans, our active-duty men and women and their • Lurie Children's Hospital of families, including the following over the past years: meaningful contributions have been through participation • Lurie Children's Hospital Chicago • Marine Corps Scholarship Foundation in events to benefit veterans organizations, local childrens’ • Marine Corps Association & • Marine Corps Scholarship • Navy SEAL Foundation hospitals, American Cancer Society and Ronald McDonald Foundation (MCAF) Foundation • Operation Support Our Troops – America charities. Not only am I helping these organizations, • Mayo Clinic • Mayo Clinic • Women in the Air Force but in joining with my AAR team, customers and other • Ronald McDonald charities • National Runaway Safeline • VetsAid stakeholders, we are strengthening personal connections • Shedd Aquarium • Ronald McDonald charities • Folds of Honor with each other and within our communities.” • Smithsonian Institution • Gary Sinise Foundation • World Business Chicago • Headstrong Chris Jessup • Illinois Joining Forces AAR, Chief Commercial Officer 30
Charitable events and activities AAR employees are proud to participate in events that support our communities. Clockwise from top: AAR supports communities by packing, collecting and distributing food to organizations like Feeding America and Rise Against Hunger (2019); AAR participates in the LitterBlitz Program, Oklahoma City, hosted by the City of Oklahoma and Oklahoma’s Department of Environmental Quality in May 2021. In addition, in Oklahoma City, we support the local food bank with food drives, as well as participate and host a toy drive at our hangar every year; FestiVoix music concert in our MRO hangar in Trois Rivières, Québec, Canada, March 2021 for essential healthcare workers; Breast Cancer Awareness, Miami, Florida (2019); AAR participates in Republic Airline’s Plane Pull at Indianapolis, Indiana (2019) 31
Governance 3232
Governing with integrity: Be honest. Inspire trust. ® We believe that our Doing It Right culture is based on a foundation of strong corporate governance and values that emphasize not only ethics and compliance, but integrity. We strive to establish, implement and maintain an effective governance structure that is agile and responsive to business needs and evolving best practices, and to set high ethical standards. Consideration of inclusive diversity and expertise Our Board of Directors Our Nominating and Governance Committee considers the racial, ethnic and Our Board of Directors is elected by AAR’s stockholders and represents their interests in overseeing our management, strategic direction and financial success. gender diversity of the Board and director We believe our Board is currently well-balanced and able to provide appropriate oversight. The additions of Messrs. Robert F. Leduc and H. John Gilbertson in 2020 candidates to assure that AAR maintains and Ms. Ellen Lord in 2021 have increased the Board’s diversity of thought in recent years and prepare us for future growth and innovation. the benefit of a diversified, balanced and effective Board. The Nominating and Governance Committee and the full Board maintain a matrix of skills, competencies and experiences of each director. This 12 25% 2 1 matrix enables the members to ensure that the Board as a whole has the diversity of Directors Diversity Women African-American expertise and experience necessary for effective oversight. To help facilitate the evaluation of diverse candidates, the Board adopted amended 65.75 Corporate Governance Guidelines in 10 10.16 75 December 2019, mandating that a diverse Independent directors Director average tenure Director average age Director retirement age candidate must be included in any director search. 33
Governance best practices Risk management Good corporate governance is an essential part of our culture. We review our corporate governance policies and procedures on an annual basis. Effective risk management is an important Board priority. The We strive to emulate “best practices,” tailoring them, as appropriate, to fit our culture, strategy and performance. We believe that we comply risk oversight function at the Board begins with a fundamental with all applicable SEC and NYSE corporate governance rules and regulations. We also have adopted additional corporate governance practices understanding of AAR’s culture, business and strategy. The Board that we believe are in the best interests of AAR and our stockholders. delegates significant aspects of its risk management oversight responsibilities to its committees. The Board also works with management to manage risk through robust and comprehensive internal processes, an effective internal control environment and an Independent Lead Director Code of business ethics and conduct enterprise risk management program. Majority voting in uncontested director elections Ethics hotline policy Stock ownership and retention guidelines Related person transaction policy Annual stock grant to non-employee directors Disclosure committee for financial reporting Executive sessions of Independent directors Annual stockholder approval of executive compensation Independent compensation consultant Stockholder engagement program Annual Board and Board Committee self-evaluations Separation of Chairman and CEO Roles Director orientation and continuing education programs Independent Board Committees All directors on the audit committee are “audit Enterprise Risk Management Program committee financial experts” 34
Stakeholder engagement We recognize and value the importance of engaging with our stockholders and other key stakeholders, as we believe that open communication helps promote a culture of transparency and the feedback we receive helps to shape our ESG strategies. STAKEHOLDER HOW WE ENGAGE TOPICS DISCUSSED • Earnings calls • Business • Operating performance Stockholders • Annual stockholder meeting • Strategy • Executive compensation • Stockholder engagement program • Financial results practices • Investor Day • Digital initiatives • Employee town halls • Business • Health and wellness • Engagement surveys • Strategy • Diversity and inclusion Employees • Employee resource groups • Safety • Company culture • Performance appraisals • Required and voluntary training • Contract negotiations • Business • Regulatory compliance Customers • Customer audits • Digital initiatives • Ethics and compliance • Performance reviews • Quality and safety • Procurement process • Quality and safety • Diversity and inclusion Suppliers • Supplier Relationship Program • Ethics and compliance • Supplier Day Government • Formal and informal meetings at all levels • Safety • Diversity and inclusion of government • Regulatory compliance • Industry environmental impact See page 43 for information on political engagement. 35
Culture of ethics Human rights (fair compensation and labor laws) Anti-retaliation We believe everyone who works for AAR or a third-party business To maintain an environment where everyone feels comfortable and compliance partner should be treated fairly and respectfully. We follow all laws raising concerns or posing questions, AAR does not and will not related to working hours, working conditions and compensation. tolerate retaliation for making a report in good faith. When questions Our compliance culture is reflective of our purpose and our values. or issues arise that are not covered by the Code, anyone can turn ® AAR has a zero-tolerance policy regarding trafficking in persons and to the resources listed in the “Speaking UP” section of the Code At the heart of Doing It Right is a commitment to conducting forced labor. Employees are expected to monitor for indications business ethically. to report a concern or pose a question. There is no retaliation for of forced labor or human trafficking, whether by AAR or any third- speaking up. Our Code of Conduct and related policies party business partner we work with, and report any suspicious activity immediately. Conflicts of interest Our Code of Conduct comprises more than just policies and As part of our commitment to act with integrity, we avoid conflicts procedures. The purpose of the Code of Conduct is to promote the of interest or situations where we might have to choose between highest ethical standards in our business practices and procedures. All employees are trained annually on the doing what is best for AAR and what is best for us personally or for AAR takes violations of our Code of Conduct and the law very principles of Supporting Human Rights: a member of our immediate family. Based on AAR’s long history of seriously. Unethical or illegal actions detract from our workplace’s Modern Slavery Act. working with the government and other companies in our industry, ethical culture. Anyone who is found to have violated our Code of we take all reasonable measures to avoid organizational conflicts Conduct or the law will be subject to discipline, up to and including of interest. termination of employment. In FY 2019, AAR created a Chief Compliance Officer position to Anti-discrimination oversee and implement enhancements to our compliance program. We view fairness as paramount when it comes to hiring, firing, These enhancements focused on anti-bribery and anti-corruption promoting or including someone in professional development policies and procedures, third-party due diligence, risk assessments activities. AAR does not make employment-related decisions ® and similar measures designed to promote our Doing It Right based on an individual’s legally protected personal characteristics. corporate purpose. These commonly include race, religion, color, age, gender, sexual orientation, disability, gender identity, veteran status and national origin. We require all new hires to complete Code of Anti-harassment Conduct training, and training is also an annual requirement for all employees. Our commitment to inclusivity means that we want everyone to feel respected and safe in the workplace. As such, harassment and bullying have no place at AAR. We do not tolerate behavior that creates an intimidating, hostile or offensive work environment. 36
Ethics hotline Global anti-corruption policy We encourage good-faith concerns to be reported to the employee’s AAR has zero tolerance for any form of bribery or corruption. It is our Compliance Champion Network manager, Law Department, Human Resources, or through the policy to comply with all applicable laws, including the U.S. Foreign Our Compliance Champion Network is a group of AAR AAR ethics hotline. The hotline is operated by an independent Corrupt Practices Act (FCPA), the UK Bribery Act, and any local anti- employees embedded in our facilities and business units third party, EthicsPoint, and is available 24 hours a day, 7 days a corruption laws. We do not offer, give or accept, directly or indirectly, around the globe to serve as an extension of AAR’s Global week via telephone calls and web reports. Anyone may contact any bribes, kickbacks or other corrupt payments, regardless of Compliance Program. Key responsibilities include: EthicsPoint with confidential complaints, information, suggestions whether we are working with commercial entities or government or recommendations. EthicsPoint permits individuals to identify officials, including employees at state-owned or -controlled airlines. • Promote AAR’s Compliance Program and AAR’s themselves or remain anonymous at their election; however, Doing It Right® values to their colleagues in their business individuals are encouraged to provide contact information to more unit and region. easily investigate the report. We conduct separate anti-corruption training for • Act as a local resource to allow employees to voice new hires and for employees annually. We also concerns and ask questions about compliance issues. The Audit Committee of the Board receives reports concerning our • Triage issues to the appropriate subject matter experts ethics hotline activity and any investigations of non-compliance with require training of certain third parties. our Code of Conduct by any AAR officers. within the organization. • Document and report issues raised for tracking and www.aar.ethicspoint.com reporting as appropriate to management and Board. +1-855-822-9536 Compliance Champions are selected by the CEO and company leadership based on a number of qualities: • High performers • Friendly and approachable • Trustworthy and honest • Respected by fellow employees and leadership • Expert communicators, including a strong ability to listen and respond • Solid judgment • Ability to issue-spot 37
Supplier expectations Supply chain overview Our Supplier Diversity Program We value the relationships we have developed throughout our global Consistent with our values and culture of inclusion, we recognize the importance of diversity in our supply chain. We strive to support supply chain. Although procurement is largely decentralized across minority-owned, women-owned, veteran- and service-disabled -owned, and other businesses owned by disadvantaged groups. our business units, we maintain corporate oversight to analyze spend Although we have historically reported supplier diversity spend as required by our government customers (typically at the business unit and leverage costs. We also have a centrally managed Supplier level), we are launching during FY 2022 our company-wide Supplier Diversity Program to provide for consistent, centralized tracking Relationship Management (SRM) program. Through this program, across our businesses. This program is intended to be more than a reporting tool; we are looking to establish goals, targets and initiatives we review 50-100 suppliers annually and identify approximately to develop diverse supplier relationships, support their business growth and forward their success. 25 suppliers with whom key AAR stakeholders commit to an ongoing cadence of engagement. The nature and frequency of this focused engagement is based on the level of supplier performance, critical Supplier Code of Conduct nature of products and services provided, and level of guidance to maximize the strategic relationship. Corporate integrity, responsible product sourcing and the safety and well-being of workers across the global supply chain are of paramount ® importance to AAR and align with our Doing It Right values. Global procurement – approximately 50 countries AAR’s Supplier Code of Conduct (Supplier Code) applies to all distributors, manufacturers, vendors, consultants, contractors and other suppliers and third parties that engage in business transactions with AAR. We expect our suppliers to adhere to applicable legal and regulatory * requirements, and our Supplier Code establishes the minimum standards that must be met to do business with AAR regarding: $1.1B • Treatment of workers, including anti-discrimination, fair • Trade controls and customs matters employment practices and human rights • Intellectual property • HSE laws and regulations and workplace safety • Ethical business practices, including conflicts of interest, fair • Parts suppliers • Environmental impact of supplier activities competition and anti-bribery • Repair service suppliers • Data security and privacy • Indirect product/services suppliers * As of May 31, 2021 38
Human rights (fair compensation and labor laws) Our suppliers must observe applicable laws and regulations governing wages and hours, recruitment, employment contracts and working conditions. They aren’t allowed to engage in slavery, human trafficking or employ workers younger than the applicable minimum age. Suppliers shall not engage in the use of forced, bonded (including debt bondage) or indentured labor, and involuntary prison labor. Suppliers must protect employee personal information under applicable law or regulations and not require workers to surrender control over original identification papers or documents giving foreign workers the right to work in the country, or pay fees for the right to work. A supplier must ensure its workers have the right to freedom of movement and respect the rights of employees to freely organize and bargain collectively in accordance with all applicable laws and regulations. They must also ensure that their personnel observe the highest standards of personal and professional conduct. We expect our suppliers to raise questions or concerns promptly. The failure to comply with our Supplier Code may result in immediate termination of business with AAR. 39
Complying with safety standards Our first and utmost priority is safety as we provide critical products All employees must comply with our Safety Policy and are and services that impact the safety of commercial and military aircraft required to report safety hazards, issues or concerns and solicit across the globe. recommendations for safety improvements through our “Report © Something” system via APRISe , described on page 41. Each Our Board’s Aviation Safety and MRO facility is overseen by an SMS manager who facilitates hazard Training Committee identification and risk analysis and monitors effectiveness of safety To further solidify our commitment to “Quality First, Safety Always”, risk controls. The SMS manager regularly reports to a designated our Board formed an Aviation Safety and Training Committee (ASTC) accountable executive on SMS performance and any need for in December 2020. Comprised of three independent, experienced improvement. aviation professionals, the ASTC provides oversight of safety matters relating to AAR’s operations and monitors our efforts to create a Product safety policy culture of safety compliance. The ASTC also periodically reviews our We aim to: safety and quality systems, training and reporting. Safety policies and culture of reporting • Comply with the customers’ regulatory and technical requirements AAR is committed to the highest level of safety performance and • Adhere to our established process controls to verify meeting or exceeding regulatory requirements while delivering compliance to technical data and regulatory requirements aviation services to our stakeholders. Our Safety Policy and • Thoroughly investigate and take corrective actions against Philosophy sets forth our pledge that no staff member will be asked any reported discrepancy to compromise our safety standards to “get the job done”. • Measure our performance to the technical data and correct Our operations are continuously examined to proactively eliminate any discrepancies prior to returning the finished product to hazards and contain or mitigate risks. We believe it is critical to the customer report incidents, identify risks, train staff on safety management, • Utilize customer feedback to make quality improvements in document our findings and our responses and strive for continuous our process improvement to facilitate airline safety. 40
© The four SMS components APRISe : AAR Performance Reporting Information System Safety policy We are proud that AAR has been recognized as the first independent Safety Assurance (SA) third-party MRO for implementing an SMS in accordance with Establishes senior management’s Evaluates the continued effectiveness requirements set forth in the SMS Voluntary Program by the Federal commitment to continually improve safety; Policy of implemented risk control strategies; Aviation Administration (FAA), the European Union Aviation Safety defines the methods, processes and supports the identification of new hazards Agency (EASA), Transport Canada Civil Aviation (TCCA) and the organizational structure needed to meet International Air Transport Association (IATA). safety goals © In 2019, we implemented and advanced APRISe software, our proprietary closed-loop system for quality and safety management SRM SA to track environmental, health and safety, all in one. Our SMS allows us to better serve our customers and the flying public by proactively Safety Risk Management (SRM) Safety promotion identifying quality and safety issues, tracking root causes and contributing factors and verifying corrective actions. This system Determines the need for, and adequacy of, Safety promotion Includes training, communication, and other encourages proactive employee reports to insure that we continue to new or revised risk controls based on the actions to create a positive safety culture deliver the highest level of safety in the aircraft we maintain. assessment of acceptable risk within all levels of the workforce © APRISe includes: • Risk assessments (damage/rework, airworthiness/ • Injury reporting maintenance processes) • Import and export compliance • Audit findings • Investigations of environmental health and safety issues • Communications • Regulatory compliance • Corrective and preventive action requests • Supplier management • Customer feedback Our APRISe© • Directives and IFAs system is implemented in our Repair and Engineering Services facilities and is expected to be implemented • Event management at our MRO AAR sites in the future. • Government communication and visits 41
Certifications Employee aviation safety training • AS9100, AS9110 and AS9120 certification Quality First, Safety Always is a core value that we live every day. As • Ten 14 CFR Part 145 certificated repair stations worldwide a critical component for the safety of flight, we invest annually to • FAA Diamond Certificate of Excellence for Safety Training of provide our employees the necessary tools to work safe, proactively Aircraft Maintenance Technicians (5 in 2020) identify risk and prevent workplace injuries. As an example, our technicians receive specialized training for each aircraft type that they work on and are required to complete that training before Increasing efficiency and safety using drones transitioning from one aircraft type to another. Our aviation In 2019, we launched the first fully automated Donecle inspectors receive specialized training to perform critical aircraft, drone technology at our Miami MRO facility to conduct engine, and component inspections. aircraft inspections with more precision, conserving time and AAR continuously develops and tests safety training by teaming resources for our customers. With laser positioning, the drone with subject matter experts and in coordination with the FAA and can safely perform end-to-end airframe visual inspections of academia. Two examples of this training are Human Factors and Risk B737 and A320 aircraft within an hour, detecting any structural Management. We use these skills to diagnose the most common damage, assessing paint quality and markings and signs of root causes for errors and develop innovative training to deliver to lightning strikes. our employees. In compliance with FAA requirements, AAR performs manual At AAR, Safety is part of our DNA and we continue to focus on aircraft inspections in addition to drone inspections. developing and implementing effective safety training classes and programs. Our goal is to have a culture that is engaged, proactively reduces risks and prevents accidents. We couple our culture with our Business Management and Safety Management Systems to improve the safety of flight. 42
Cybersecurity Conflict minerals Our approach to cybersecurity is comprehensive and we Our Board places emphasis on the identification and management AAR is committed to complying fully with the reporting requirements continue to invest in an integrated toolset that leverages event of cybersecurity risks. The Board and its committees receive periodic of the Securities and Exchange Commission (SEC) with respect to aggregation and correlation using machine learning techniques to reports from management of system vulnerabilities and security Conflict Minerals (as defined by the SEC). To that end, AAR and help us remain responsive to the ever-changing and challenging measures in effect to deter and mitigate threats that can lead to its manufacturing subsidiaries work with applicable suppliers to cybersecurity space. hacking, unauthorized access, or compromise. perform the necessary due diligence in determining the potential for Conflict Minerals in their supply chain and products. AAR and its Globally, our privacy model conforms to the GDPR (General Data Our key initiatives for calendar years 2021 and 2022 are ensuring manufacturing subsidiaries designed their due diligence program Protection Regulation) standard, the highest recognized standard the availability of systems and resources, managed through our in accordance with the Organization for Economic Cooperation with the most stringent regulations. Our SOX (Sarbanes-Oxley Act) comprehensive incident response plan and disaster recovery and and Development Due Diligence Guidance for Responsible Supply cybersecurity compliance program is designed to manage IT general business continuity plan. We are also focused on enhancing the Chains of Minerals from Conflict-Affected and High-Risk Areas. For and access controls. effectiveness of our third-party managed Security Operations Center more information, see our Conflict Minerals Policy on our website. by building our own internal Security Operation Center for greater Complying with government standards such as NIST (The National internal threat visibility. Institute of Standards and Technologies), CMMC (Cybersecurity Maturity Model Certification) and ITAR (International Traffic in Arms Political engagement Regulations) allows us to have a leading edge in our ability to pursue, win and deliver on new business opportunities. We participate in the political process through regular and constructive engagement with government officials and In addition to compliance, we place our greatest emphasis policymakers. This engagement includes making political on security, protecting our digital assets and monitoring our contributions, and by encouraging the civic involvement of its infrastructure. We have counter measures in place to identify and employees. AAR complies with applicable laws and regulations respond to potential security vulnerabilities. related to its participation in the political process. We also focus on confidentiality and integrity of information for Our Government Affairs Department is responsible for managing protection of data and to ensure information is reliable and correct. and coordinating AAR’s political participation. The Board of Directors is responsible for overseeing our lobbying activities and political contributions, and for reviewing annual contributions and lobbying AAR’s employees take an annual hour-long reports. AAR’s participation in the political process is governed by Security Awareness Training that is primarily our Political Participation, Lobbying, and Contributions Policy. For focused on information security, specifically more information, see Political Engagement on our website. social media usage, phishing emails and anti-virus protection. 43
Appendix 4444
GRI and SASB Index This reporting index aligns disclosures addressed in this report to selected standards of the Global Reporting Initiative (GRI) Standards, as well as applicable Sustainability Accounting Standard Board (SASB) indicators. SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION GENERAL DISCLOSURES 102-1 Name of the organization AAR CORP. 102-2 Activities, brands, products, and services About AAR CORP., pages 5-8 2021 Form 10-K Item 1. Business, pages 2-7 102-3 Location of headquarters Wood Dale, Illinois, USA 102-4 Location of operations About AAR CORP., page 7 https://www.aarcorp.com/about/international-presence/ 102-5 Ownership and legal form 2021 Form 10-K Item 1. Business – General, page 2 102-6 Markets served About AAR CORP., page 7 2021 Form 10-K Item 1. Business – Business Segments, pages 3-4; Customers, page 5 https://www.aarcorp.com/about/international-presence/ 102-7 Scale of the organization About AAR CORP., pages 5-7 2021 Form 10-K Item 1. Business – Human Capital Resources, page 6 2021 Annual Report Selected Financial Highlights, page 3 102-8 Information on employees and other workers In countries where it is legally required, our employees have employment contracts. We generally do not have employment contracts in the US. We do have US citizens who are deployed to our government programs sites (OCONUS) who are on a renewable FSA (Foreign Service Agreement). We have 56 part time employees as of May 31, 2021. Supporting our employees, page 20 102-9 Supply chain Supplier expectations, pages 38-39 102-13 Membership of associations Membership of associations, page 59 45
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION 102-14 Statement from senior decision-maker Letter from our President and Chief Executive Officer, pages 3-4 102-15 Key impacts, risks, and opportunities Our ESG focus areas, page 11 Our environmental impacts and initiatives, pages 13-14 2021 Form 10-K Item 1A. Risk Factors, pages 8-16 102-16 Values, principles, standards, and norms of behavior Our purpose and our values, page 10 102-17 Mechanisms for advice and concerns about ethics Culture of ethics and compliance, pages 36-43 102-18 Governance structure ESG oversight and governance, page 11 2021 Proxy Statement The Board’s role and responsibilities – Role and responsibilities of the Board committees, pages 25-29 102-19 Delegating authority ESG oversight and governance, page 11 102-21 Consulting stakeholders on economic, environmental, and Stakeholder engagement, page 35 social topics 102-22 Composition of the highest governance body and its committees Our Board of Directors, page 33 2021 Proxy Statement 2021 Proxy statement summary – Corporate governance highlights, page 9 102-23 Chair of the highest governance body 2021 Proxy Statement Board structure – Board leadership, pages 29-30 102-24 Nominating and selecting the highest governance body Our Board of Directors, page 33 2021 Proxy Statement Our strategy – Director nominations and qualifications, pages 22-23 102-25 Conflicts of interest Our Code of Conduct and related policies, page 36 2021 Proxy Statement Our strategy – Director nominations and qualifications, pages 22-23; Board practices and policies – Related person transaction policy, page 32 102-26 Role of highest governance body in setting purpose, values, ESG oversight and governance, page 11 and strategy 46
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION 102-27 Collective knowledge of highest governance body 2021 Statement Our strategy – Director orientation and continuing education, page 31 102-28 Evaluating the highest governance body’s performance 2021 Proxy Statement Board practices and policies – Board and committee evaluations, page 30 102-29 Identifying and managing economic, environmental, and Our approach to ESG, page 11 social impacts Risk management, page 34 Stakeholder engagement, page 35 102-30 Effectiveness of risk management processes Risk management, page 34 2021 Proxy Statement The Board’s role and responsibilities – Role and responsibilities of the Board committees – Audit committee, page 27 102-31 Review of economic, environmental, and social topics ESG oversight and governance, page 11 102-32 Highest governance body’s role in sustainability reporting ESG oversight and governance, page 11 Our ESG report is reviewed by the Nominating and Governance Committee (NGC) on behalf of the Board. 102-33 Communicating critical concerns Ethics hotline, page 37 2021 Proxy Statement Board Practices and Policies – Communications with the Board of Directors, page 33 102-34 Nature and total number of critical concerns AAR discloses material legal proceedings in its SEC reports. 102-35 Remuneration policies 2021 Proxy Statement Director compensation, pages 33-35; Compensation discussion and analysis, pages 39-69 102-36 Process for determining remuneration 2021 Proxy Statement Director compensation, pages 33-35; Compensation discussion and analysis, pages 39-69 102-37 Stakeholders’ involvement in remuneration Stakeholder engagement, page 35 2021 Proxy Statement Our strategy – Stockholder engagement, page 21; Say-on-pay vote, page 51 102-38 Annual total compensation ratio 2021 Proxy Statement Other compensation matters – CEO pay ratio, page 69 47
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION 102-40 List of stakeholder groups Stakeholder engagement, page 35 102-41 Collective bargaining agreements Approximately 200 of our employees are subject to a collective bargaining agreement. 102-43 Approach to stakeholder engagement Stakeholder engagement, page 35 102-44 Key topics and concerns raised Stakeholder engagement, page 35 102-45 Entities included in the consolidated financial statements 2021 Form 10-K Item 8. Financial Statements and Supplementary Data, pages 32-72 102-46 Defining report content and topic Boundaries About this report, page 2 102-47 List of material topics Our ESG focus areas, page 11 102-48 Restatements of information Not applicable. 102-49 Changes in reporting This is the inaugural report. 102-50 Reporting period About this report, page 2 102-51 Date of most recent report This is the inaugural report. 102-52 Reporting cycle Our current expectation is to issue an ESG report annually. 102-53 Contact point for questions regarding the report About this report, page 2 102-54 Claims of reporting in accordance with the GRI Standards About this report, page 2 102-55 GRI content index GRI and SASB index, pages 45-60 103-1 Explanation of the material topic and its Boundary About this report, page 2 48
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION PROCUREMENT PRACTICES 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Supplier expectations, pages 38-39 Ethics hotline, page 37 103-3 Evaluation of the management approach ANTI-CORRUPTION 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Ethics hotline, page 37 Global anti-corruption policy, page 37 103-3 Evaluation of the management approach RT-AE-510a.3 205-2 Communication and training about anti-corruption policies Global anti-corruption policy, page 37 and procedures RT-AE-510a.1 205-3 Confirmed incidents of corruption and actions taken AAR discloses material legal proceedings in its SEC reports. RT-AE-510a.2 Revenue from countries ranked in the “E” or “F” Band 2021 Form 10-K Note 14, Business Segment Information, pages 68-71 of Transparency International’s Government Defence We report sales in North America, Europe/Africa and Other. We do not put revenues from other geographic areas in the public Anti-Corruption Index domain due to commercial confidentiality. ANTI-COMPETITIVE BEHAVIOR 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Our Code of Conduct and related policies, page 36 103-3 Evaluation of the management approach 49
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION 206-1 Legal actions for anti-competitive behavior, anti-trust, and AAR discloses material legal proceedings in its SEC reports. monopoly practices MATERIALS 103-1 Explanation of the material topic and its Boundary Our approach to ESG, page 11 Waste prevention and reduction, page 14 RT-AE-440a.1 103-2 The management approach and its components 2021 Form 10-K Item 1. Business – Raw Materials, page 4 103-3 Evaluation of the management approach 301-2 Recycled input materials used AAR is generally engaged in limited manufacturing activities. 301-3 Reclaimed products and their packaging materials Waste prevention and reduction, page 14 ENERGY 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Environmental data collection and management – Energy, page 17 Facilities highlights, page 18 103-3 Evaluation of the management approach RT-AE-130a.1 302-1 Energy consumption within the organization Environmental data collection and management – Energy, page 17 (1) Total energy consumed in Fiscal Year 2021 was 663,589 (GJ), or 184,330 (MWh), which consisted of 499,587 (GJ), or 138,774 (MWh), of natural gas and 164,002 (GJ), or 45,556 (MWh), of electricity. (2) Grid electricity in FY 2021 represented 24.7% of the overall energy consumed. (3) 0% of energy consumed, beyond the renewable portion of the electricity grid mix, is from renewable sources. Note about environmental data: The current reporting boundary for our Energy and Emissions data consists of our MRO and manufacturing facilities in the United States and Canada, as well as our corporate headquarters. We believe these sites have the most significant impact on our footprint. Data is excluded from sites with less than 10 individuals or where we may have a significant presence, but no control of the operations. For example, we have excluded the locations where we engage in work contracted by government agencies, but where financial control is maintained by these agencies. 50
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION 302-3 Energy intensity In Fiscal Year 2021, our energy intensity was 111.6 MWh/$M or 401.7 GJ/$M compared to 94.2 MWh/$M or 339.1 GJ/$M in Fiscal Year 2020. WATER AND EFFLUENTS 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Environmental data collection and management – Water, page 17 Facilities highlights, page 18 103-3 Evaluation of the management approach EMISSIONS 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Environmental data collection and management – Emissions, page 17 Facilities highlights, page 18 103-3 Evaluation of the management approach 305-1 Direct (Scope 1) GHG emissions Environmental data collection and management – Emissions, page 17 305-2 Energy indirect (Scope 2) GHG emissions Environmental data collection and management – Emissions, page 17 305-4 GHG emissions intensity In Fiscal Year 2021, our emissions intensity was 26.8 MT CO e/$M compared to 24.4 MT CO e/$M in Fiscal Year 2020. 2 2 RT-AE-410a.1 Revenue from alternative energy-related products AAR CORP. does not generate revenue from alternative energy-related products. RT-AE-410a.2 Description of approach and discussion of strategy to address Aviation Services, AAR’s primary business segment, provides aftermarket support and services. AAR is generally engaged in fuel economy and greenhouse gas (GHG) emissions of products limited manufacturing activities. We have limited control of use–phase emissions as our customers dictate flight plans and flight paths. However, in our maintenance and repair operations, we are continuing to investigate ways to minimize the use of jet fuel in diagnostic testing and repair situations. 51
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION WASTE 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Waste prevention and reduction, page 14 103-3 Evaluation of the management approach Environmental data collection and management – Waste, page 17 Facilities highlights, page 18 306-1 Waste generation and significant waste-related impacts Waste prevention and reduction, page 14 Environmental data collection and management – Waste, page 17 306-2 Management of significant waste-related impacts Waste prevention and reduction, page 14 Environmental data collection and management – Waste, page 17 RT-AE-150a.1 306-3 Waste generated As we advance our ESG program, AAR will consider the inclusion of diverted and landfilled hazardous waste for public disclosure. RT-AE-150a.2 We are currently evaluating systems and processes to consistently report our consumption volumes across sites, relative to the 306-4 Waste diverted from disposal potential impact. 306-5 Waste directed to disposal RT-AE-150a.2 Number and aggregate quantity of reportable spills, quantity There were no significant spills in FY21. AAR consumes fuel from natural gas for heating. Other sources include propane for forklifts, recovered gasoline for vehicles, and diesel for back-up generation. However, we believe these are considered de minimis and not reported. While we consume jet fuel in our operations within the reporting boundaries, we also believe jet fuel use to be immaterial to our overall energy consumption. ENVIRONMENTAL COMPLIANCE 103-1 Explanation of the material topic and its Boundary Our approach to ESG, page 11 Our environmental impacts and initiatives, pages 13-14 103-2 The management approach and its components 103-3 Evaluation of the management approach 307-1 Non-compliance with environmental laws and regulations AAR discloses material legal proceedings in its SEC reports. 52
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION SUPPLIER ENVIRONMENTAL ASSESSMENT 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Supplier expectations, page 38 103-3 Evaluation of the management approach Ethics hotline, page 37 EMPLOYMENT 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Supporting our employees, pages 20-25 103-3 Evaluation of the management approach 401-1 New employee hires and employee turnover AAR considers this information to be confidential. 401-2 Benefits provided to full-time employees that are not provided to Recruitment and retention – Employee benefits, page 24 temporary or part-time employees 401-3 Parental leave Recruitment and retention – Employee benefits, page 24 OCCUPATIONAL HEALTH AND SAFETY 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Complying with safety standards, pages 40-42 103-3 Evaluation of the management approach Health and wellness, page 25 © 403-1 Occupational health and safety management system Complying with safety standards – APRISe :AAR Performance Reporting Information System, page 41 403-2 Hazard identification, risk assessment, and incident investigation Complying with safety standards – Safety policies and culture of reporting, page 40 53
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION 403-3 Occupational health services Health and wellness, page 25 © Complying with safety standards – APRISe :AAR Performance Reporting Information System, page 41 © 403-4 Worker participation, consultation, and communication on Complying with safety standards – APRISe :AAR Performance Reporting Information System, page 40 occupational health and safety We have joint management-worker health and safety committees at our MRO facilities, which are comprised of a combination of management and employees. 403-5 Worker training on occupational health and safety Complying with safety standards – Employee aviation safety training, page 42 403-6 Promotion of worker health Health and wellness, page 25 403-7 Prevention and mitigation of occupational health and safety Complying with safety standards, pages 40-42 impacts directly linked by business relationships © 403-8 Workers covered by an occupational health and safety Complying with safety standards – APRISe :AAR Performance Reporting Information System, page 41 management system 403-9 Work-related injuries AAR considers this information to be confidential. 403-10 Work-related ill health AAR considers this information to be confidential. TRAINING AND EDUCATION 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Training and development, page 24 103-3 Evaluation of the management approach 404-1 Average hours of training per year per employee Since we started live training sessions in February 2019, we have conducted approximately 4,779 hours in total of training (not including talent reviews, introductions to new programs and online training). 54
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION 404-2 Programs for upgrading employee skills and transition assistance Training and development, page 24 programs 404-3 Percentage of employees receiving regular performance and Training and development, page 24 career development reviews All employees receive an annual performance review. DIVERSITY AND EQUAL OPPORTUNITY 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Diversity and inclusion, page 21 103-3 Evaluation of the management approach 405-1 Diversity of governance bodies and employees Supporting our employees – Workforce overview, page 20 NON-DISCRIMINATION 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Our Code of Conduct and related policies, pages 35-36 Supplier expectations, pages 38-39 103-3 Evaluation of the management approach Public Diversity Statement, page 21 406-1 Incidents of discrimination and corrective actions taken AAR discloses material legal proceedings in its SEC reports. CHILD LABOR 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Our Code of Conduct and related policies, page 36 Supplier expectations, pages 38-39 103-3 Evaluation of the management approach 55
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION FORCED OR COMPULSORY LABOR 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Our Code of Conduct and related policies, page 36 Supplier expectations, pages 38-39 103-3 Evaluation of the management approach HUMAN RIGHTS ASSESSMENT 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Our Code of Conduct and related policies, page 36 Supplier expectations, pages 38-39 103-3 Evaluation of the management approach 412-2 Employee training on human rights policies or procedures Our Code of Conduct and related policies, page 36 LOCAL COMMUNITIES 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Supporting communities, pages 26-31 103-3 Evaluation of the management approach SUPPLIER SOCIAL ASSESSMENT 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Supplier expectations, pages 38-39 Ethics hotline, page 37 103-3 Evaluation of the management approach 56
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION PUBLIC POLICY 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Political engagement, page 43 103-3 Evaluation of the management approach 415-1 Political contributions Political engagement, page 43 https://www.aarcorp.com/investor-relations/political-engagement/ CUSTOMER HEALTH AND SAFETY 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Complying with safety standards, pages 40-42 103-3 Evaluation of the management approach 416-1 Assessment of the health and safety impacts of product and AAR considers this information to be confidential. service categories RT-AE-250a.4 416-2 Incidents of non-compliance concerning the health and safety AAR discloses material legal proceedings in its SEC reports. impacts of products and services RT-AE-250a.1 Number of recalls issued, total units recalled AAR considers this information to be confidential. RT-AE-250a.2 Number of counterfeit parts detected, AAR considers this information to be confidential. percentage avoided RT-AE-250a 3 Number of Airworthiness Directives received, All Airworthiness Directives are publicly available. The most recent information concerning those directives can be found on the total units affected appropriate regulatory sites. 57
SASB GRI GRI DISCLOSURE TITLE RESPONSE OR DISCLOSURE LOCATION CUSTOMER PRIVACY 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 RT-AE-230a.2 103-2 The management approach and its components Cybersecurity, page 43 2021 Proxy Statement – Risk Management, page 24 103-3 Evaluation of the management approach RT-AE-230a.1 418-1 Substantiated complaints concerning breaches of customer AAR discloses material legal proceedings in its SEC reports. privacy and losses of customer data SOCIOECONOMIC COMPLIANCE 103-1 Explanation of the material topic and its Boundary About this report, page 2 Our approach to ESG, page 11 103-2 The management approach and its components Our Code of Conduct and related policies, pages 35-36 103-3 Evaluation of the management approach 419-1 Non-compliance with laws and regulations in the social and AAR discloses material legal proceedings in its SEC reports. economic area SASB Table 2. Activity metrics UNIT OF ACTIVITY METRIC CATEGORY MEASURE CODE RESPONSE REFERENCE Production by reportable segment Quantitative Number RT-AE-000.A The company is continuing to evaluate this reporting element. Number of employees Quantitative Number RT-AE-000.B Supporting our employees, page 20 58
Membership of associations • AFA – Air Force Association • Aerospace Defense & Security Group – ADS Through Life Service Special Interest Group • AIA – Aerospace Industries Association • AREA – Augmented Reality Enterprise Alliance • ARSA – Aeronautical Repair Station • ASA – Aviation Supplies & Academics • AUSA – Association of the US Army • Choose Aerospace • AWAM – Association for Women in Aviation Maintenance • Embry Riddle Aeronautical Asia – Singapore • ERAA – European Regions Airline Association • ISTAT – International Society of Transport • NAG – Netherlands Aerospace Group • NDIA – National Defense Industrial Association • NGAUS – National Guard Association of the US • NDTA – National Defense Transportation Association • NBAA – National Business Aviation Association • NIVD – Foundation Dutch Industries for Defense and Security • Quad A (AAAA) – Army Aviation Association of America • RAeS – Royal Aeronautical Society • PSC – Professional Services Council • BCIU – Business Council for International Understanding • LOA – Logistics Officers Associations • BENS – Business Executives for National Security • DII – Defense Industry Initiative on Business Ethics and Conduct 59
Forward-looking statements This 2021 ESG Report contains certain statements relating to future with laws and regulations that may affect certain of our aviation to product liability and property claims that may be in excess of our results, which are forward-looking statements as that term is defined and government and defense related activities that are subject to liability insurance coverage; (xix) threats to our systems technology in the Private Securities Litigation Reform Act of 1995. Forward- licensing, certification and other regulatory requirements imposed from equipment failures, cyber and other security breaches or looking statements often address our expected future operating by the FAA, the U.S. State Department and other regulatory other disruptions; (xx) the costs of compliance, and liability for and financial performance and financial condition, or sustainability agencies, both domestic and foreign; (viii) a reduction in outsourcing non-compliance, with environmental regulations, including future targets, goals, commitments, and other business plans, and often of maintenance activity by airlines; (ix) a shortage of the skilled requirements regarding climate change; and (xxi) a need to make contain words such as “anticipate,” “believe,” “expect,” “plan,” personnel on whom we depend to operate our business, or work significant capital expenditures to keep pace with technological “estimate,” “project,” “continue,” “will,” “should,” and similar stoppages; (x) competition from other companies, including original developments in our industry. Should one or more of those risks or terms. These forward-looking statements are based on the beliefs equipment manufacturers, some of which have greater financial uncertainties materialize adversely, or should underlying assumptions of management, as well as assumptions and estimates based resources than we do; (xi) financial and operational risks arising or estimates prove incorrect, actual results may vary materially from on information available to us as of the dates such assumptions as a result of operating internationally; (xii) inability to integrate those described. Those events and uncertainties are difficult or and estimates are made, and are subject to certain risks and acquisitions effectively and execute our operational and financial impossible to predict accurately and many are beyond our control. uncertainties, that could cause actual results to differ materially plan related to the acquisitions; (xiii) inability to recover our costs from those anticipated, including: (i) factors that adversely affect due to fluctuations in market values for aviation products and For a discussion of these and other risks and uncertainties, see our the commercial aviation industry; (ii) the continued impact of the equipment caused by various factors, including reductions in air Annual Report on Form 10-K, Part I, “Item 1A, Risk Factors” and our COVID-19 pandemic on air travel, worldwide commercial activity travel, airline bankruptcies, consolidations and fleet reductions; Quarterly Reports on Form 10-Q. The risks described in these reports and our and our customers’ ability to source parts and components; (xiv) asset impairment charges that may be required to recognize to are not the only risks we face, as additional risks and uncertainties (iii) a reduction in the level of sales to the branches, agencies and reflect the non-recoverability of our assets or lowered expectations not currently known or foreseeable or risks that are currently deemed departments of the U.S. government and their contractors (which regarding businesses we have acquired; (xv) limitations on our ability immaterial may materially adversely affect our business, financial were 44.7% of total sales in FY 2021); (iv) non-compliance with to access the debt and equity capital markets or to draw down funds condition or results of operations in future periods. We assume laws and regulations relating to the formation, administration and under loan agreements; (xvi) non-compliance with restrictive and no obligation to update any forward-looking statements to reflect performance of our U.S. government contracts; (v) cost overruns financial covenants contained in certain of our loan agreements and events or circumstances after the date of such statements or to and losses on fixed-price contracts; (vi) nonperformance by government funding received under the CARES Act; (xvii) restrictions reflect the occurrence of anticipated or unanticipated events. subcontractors or suppliers; (vii) changes in or non-compliance on paying, or failure to maintain or pay, dividends; (xviii) exposure 60 08_24_21