WOOD DALE, Ill. - AAR Corp. (NYSE: AIR) announced today that for the Company's first quarter ended Aug. 31, 1998, net sales increased 26% to $215,898,000, compared with $170,906,000 for the same period in the prior year, the highest first quarter sales in the Company's history and the sixteenth consecutive year-over-year quarterly sales increase. Net income increased 32% to a first-quarter record $9,623,000 over the prior year's $7,310,000 and basic earnings per share increased 30% to 35 cents from 27 cents the prior year, while diluted earnings per share increased 31% to 34 cents from 26 cents a year earlier.

For the quarter, gross profit margin increased to 19.0% over 18.7% last year and operating income was $18.0 million, a 40% increase over the same period the prior year. The Company achieved a return-on-sales ratio of 4.5%, up from last year's 4.3%, and successfully controlled costs during the period, reducing selling, general and administrative expense as a percent of sales to 10.6% from 11.1%. The Company's financial strength continues to grow: at quarter's end stockholders' equity reached $308,894,000, total assets were $710,195,000 and net working capital was $329,193,000.

''Our strong financial performance in the quarter reflects double-digit sales growth across all three areas of our business. We are continuing to focus on expanding our customer base and broadening our product and service offerings to become a full-line supplier and contribute to our customers' success,'' David P. Storch, President and Chief Executive Officer, said.

During the quarter, the Company completed certain business agreements aimed at supporting growth and providing more complete services to customers. In one such agreement, AAR joined forces with GE Capital Aviation Services and GE Engine Services, Inc. to create Aviation Inventory Management Co. L.L.C. (AIMCO), a joint venture company that will offer customers a low-cost alternative to owning rotable spares through alternate inventory financing arrangements.

After the close of the quarter, the Company won a five-year contract, subject to annual review by the U.S. Marshals Service, for aircraft maintenance. The multi-year contract follows a one-year contract that AAR was awarded in September 1997, and is valued at approximately $67 million.

AAR CORP., traded NYSE (AIR), is the premier aftermarket supplier of parts and services to the worldwide aviation/aerospace industry. The Company primarily supplies parts and equipment, performs technical services and manufactures proprietary products for aviation customers around the globe.

         AAR CORP. and Subsidiaries Comparative Statement of Earnings
           For the Three-Month Periods Ended Aug. 31, 1998 and 1997

    (In thousands except per share data)     Three Months
                                    1998                  1997
                                            (Unaudited)

    Net sales                    $215,898                $170,906
    Operating income               18,039                  12,894
    Pretax income                  13,806                  10,454
    Net income                      9,623                   7,310
    Earnings per share of
      common stock -- Basic          $.35                  $ .27(a)

    Earnings per share of
      common stock -- Diluted        $.34                  $ .26(a)
    Average shares
      outstanding -- Basic         27,713                 27,489(a)

    Average shares
      outstanding -- Diluted       28,312                 28,042(a)

    (a) Reflects a 3-for-2 stock split paid 2/23/98


             AAR CORP. and Subsidiaries Balance Sheet Highlights
                       (In thousands except per share data)
                                  Aug. 31,                 May 31,
                                     1998                  1998
                                (Unaudited)      (Derived from audited
                                                  financial statements)

    Current assets               $512,308                $468,400
    Current liabilities           183,115                 149,148
    Working capital               329,193                 319,252
    Long-term debt                177,450                 177,509
    Stockholders' equity          308,894                 300,850
    Book value per share           $11.14                  $10.85
    Shares outstanding             27,723                  27,717


                          Net Sales By Business Area

    (In thousands)                       Three Months Ended
                                                Aug. 31,
                                     1998                    1997
    Aircraft and Engines          $90,067                 $79,781
    Airframe and Accessories       92,916                  70,066
    Manufacturing                  32,915                  21,059
        Total                    $215,898                $170,906