SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

One AAR Place
1100 N. Wood Dale Road
Wood Dale, Illinois 60191

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, OCTOBER 10, 2001

To the Stockholders of AAR CORP.:

The Annual Meeting of Stockholders of AAR CORP. for the year 2001 will be held at AAR CORP.'s headquarters, One AAR Place, 1100 North Wood Dale Road, Wood Dale, Illinois, on Wednesday, October 10, 2001, at 10:00 A.M. (Chicago time). At the meeting, stockholders will act on the following matters:

1.

To elect two Class II directors to serve until the 2004 Annual Meeting of Stockholders;

2.

To approve an amendment to the AAR CORP. Stock Benefit Plan ("Plan") to provide a maximum number of shares of Common Stock that may be granted under the Plan to any grantee during any calendar year;

3.

To approve restricted stock performance goals under the Long-Term Incentive Plan for the Company's Chief Executive Officer; and

4.

To transact any other business that may properly come before the meeting.

August 27, 2001

YOUR VOTE IS IMPORTANT

PLEASE DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE ENCLOSED STAMPED, ADDRESSED ENVELOPE, OR SUBMIT YOUR PROXY ELECTRONICALLY BY TELEPHONE OR VIA THE INTERNET SO THAT IF YOU ARE UNABLE TO ATTEND THE MEETING, YOUR SHARES MAY NEVERTHELESS BE VOTED. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.

One AAR Place
1100 N. Wood Dale Road
Wood Dale, Illinois 60191

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS
October 10, 2001

SOLICITATION

This Proxy Statement and the enclosed proxy card were mailed to stockholders on or about August 27, 2001, in connection with the solicitation of proxies by the Board of Directors of the Company to be used at the 2001 Annual Meeting ("Annual Meeting").

If you are a stockholder of record (i.e., you hold your shares in your own name other than through a broker, bank or other nominee), you are encouraged to submit your proxy vote electronically either by telephone or via the internet. This will eliminate the need to sign, date and return your proxy card. To submit your proxy by telephone or over the internet you will be required to enter the control number assigned to you and imprinted on your proxy card accompanying this Proxy Statement. The vote by telephone and vote by internet can be accessed 24 hours a day, seven days a week until the day prior to the Annual Meeting.

•

To submit your proxy vote by telephone:

- using a touch-tone phone, call 1-877-PRX-VOTE (1-877-779-8683) toll-free and follow the voice prompts

•

To submit your proxy vote by internet:

- Log onto internet website at http://www.eproxyvote.com/air and enter your voter control number on your proxy card and mark the appropriate boxes to enter voting instructions

If you are a street-name stockholder (i.e., you hold your shares through a broker, bank or other nominee), you will receive instructions from your broker, bank or other nominee describing how you may vote your shares.

You may change your vote at any time before your proxy is exercised, but only by voting in person at the Annual Meeting, or by submitting another proxy by telephone, over the internet, or delivering a later dated, signed proxy to the Secretary of the Company.

Proxies will be voted in accordance with instructions on the proxy. If no instructions are specified, the named proxy holders will vote FOR the election of the nominees for Class II director designated by the Board, FOR approval of the amendment to the AAR CORP. Stock Benefit Plan, and FOR approval of the restricted stock performance goals under the Long-Term Incentive Plan for the Company's Chief Executive Officer, and upon any other matter that may properly come before the Annual Meeting in their discretion and best judgment. The Board may nominate another person if any nominee becomes unavailable for election for any reason prior to the Annual Meeting vote. In that event, the named proxy holders will vote for that other person.

1

The cost of the solicitation of proxies will be paid by the Company. The Company has engaged D. F. King & Co., 77 Water Street, New York, New York, to aid in the solicitation of proxies at a total estimated cost of $8,000, plus reasonable out-of-pocket expenses. D. F. King & Co. may solicit proxies by mail, by telephone, by facsimile, by e-mail, or in person. Certain officers, directors and employees of the Company may also solicit proxies.

RECORD DATE AND VOTING AT THE ANNUAL MEETING

Stockholders owning Common Stock of the Company ("Common Stock") outstanding at the close of business on the record date, August 15, 2001, may vote at the 2001 Annual Meeting. On that date, 26,945,685 shares of Common Stock were outstanding. Stockholders will have one vote on each matter to be voted on for each share held on the record date. Shares cannot be voted unless the owner is present at the Annual Meeting in person or by proxy. A majority of the outstanding shares of Common Stock entitled to vote, present in person or represented by proxy, will constitute a quorum. Votes cast in person or by proxy will be tabulated by the inspectors of election appointed for the Annual Meeting. The inspectors of election will treat directions to withhold authority, abstentions and broker non-votes as shares that are present and entitled to vote for purposes of determining a quorum. Directions to withhold authority will have no effect on the election of directors, because directors are elected by a plurality of votes cast. Abstentions and broker non-votes will be disregarded for purposes of determining whether a matter has been approved, because they are not considered votes cast.

BOARD OF DIRECTORS

The Restated Certificate of Incorporation and By-Laws of the Company provide that the Board shall consist of between three and fifteen directors. The exact number of directors is set from time to time by the Board. The number of directors is presently set at 10 and is set at eight effective October 10, 2001 when two current directors, Lee B. Stern and Richard D. Tabery, will retire. The members of the Board are divided into three classes: Class I (3 directors), Class II (presently 4 directors, reduced to 2 on October 10, 2001) and Class III (3 directors). One class is elected each year for a three-year term.

During the fiscal year ended May 31, 2001 ("Fiscal 2001"), the Board held seven meetings. All of the incumbent directors attended 75% or more of the aggregate meetings of the Board and of the Committees on which they served during Fiscal 2001.

BOARD COMMITTEES

The Board has an Audit Committee, a Compensation Committee, an Executive Committee, and a Nominating Committee.

Audit Committee

The Audit Committee is comprised entirely of independent directors. Its members are Joel D. Spungin (Chairman), A. Robert Abboud, Howard B. Bernick, and James G. Brocksmith, Jr. This committee acts pursuant to its written charter adopted by the Board of Directors (a copy of which is attached to this proxy statement as Exhibit 1) which was reviewed by the Committee at its April, 2001 meeting and determined to adequately describe the Committee's role and responsibilities. Among other things, the Audit Committee recommends to the Board the independent auditors who audit the Company's consolidated financial statements, maintains communication between the Board and its independent auditors, monitors performance of the independent auditors, has oversight of and reviews the financial reporting process and practices, has oversight of and reviews the adequacy of financial accounting controls and the organization and performance of the Company's internal systems of audit, reviews the scope and results of audits, and meets with the independent auditors and internal auditors without members of management present. The Audit Committee held three meetings during Fiscal 2001.

2

Compensation Committee

The Compensation Committee is comprised entirely of independent directors. Its members are James G. Brocksmith, Jr. (Chairman), A. Robert Abboud, Howard B. Bernick, Edgar D. Jannotta, and Lee B. Stern. This committee reviews and approves compensation policies and practices for all elected corporate officers, fixes the compensation of the President and Chief Executive Officer, and administers the Chief Executive Officer's long-term incentive program, the annual incentive compensation programs for other officers, and the AAR CORP. Stock Benefit Plan. The Compensation Committee held four meetings during Fiscal 2001.

Executive Committee

The Executive Committee is comprised of Ira A. Eichner (Chairman), David P. Storch and Edgar D. Jannotta. The Executive Committee is authorized to meet between meetings of the Board of Directors and exercise the powers of the Board, subject to limitations imposed by law and by the Board. The Executive Committee did not hold any meetings during Fiscal 2001.

Nominating Committee

The Nominating Committee is comprised of David P. Storch (Chairman), Ira A. Eichner, Lee B. Stern, and Richard D. Tabery. This committee reviews and recommends to the Board qualified candidates for election as directors and considers the performance of incumbent directors to determine whether they should be recommended to the Board for nomination for reelection. The Nominating Committee will consider director candidates recommended by stockholders. Stockholders may submit a recommendation to the Nominating Committee for consideration with respect to the Annual Meeting of Stockholders for the year 2002 by writing to the Secretary, AAR CORP., One AAR Place, 1100 N. Wood Dale Road, Wood Dale, Illinois 60191. To be considered, recommendations must be received prior to April 9, 2002, must state the reasons for the recommendation and contain the full name and address of each proposed nominee, as well as a brief biographical history setting forth past and present directorships, employment and occupations, and any other qualifications. Recommendations must also include a statement indicating that the proposed nominees have consented to being named in the proxy statement and to serve if elected. The Nominating Committee held three meetings during Fiscal 2001.

DIRECTORS' COMPENSATION

Each director who is not an officer or employee of the Company or any subsidiary ("Eligible Director") receives an annual retainer of $28,000 payable in Common Stock, a fee of $1,750 for attendance at each meeting of the Board or of any Board committee and reimbursement of expenses. The Chairman of the Board and the chairman of each committee receive an additional $2,000 annual retainer. Each director may elect to defer receipt of the annual retainer and meeting fees pursuant to the Company's Nonemployee Directors' Deferred Compensation Plan.

In addition, each non-employee director receives term life insurance coverage of $200,000 and a one-time grant upon becoming a director of stock options for 10,000 shares of Common Stock under the AAR CORP. Stock Benefit Plan. These options can be exercised in 25% increments on each anniversary grant date at the closing New York Stock Exchange price on the date of grant.

The AAR CORP. Directors' Retirement Plan was terminated effective April 10, 2001. Any eligible non-employee director who was a director on the plan's effective date of termination or retired director currently receiving benefits under the plan will continue to receive benefits pursuant to the terms of the plan as the plan was in effect on the date of termination or date of retirement and applicable to such participant. Benefits are paid upon retirement from the Board on or after age 65 if such director has completed at least five years of service as a director. Benefits are paid quarterly in cash in an amount equal to 25% of the annual retainer payable to an active eligible director and are paid for a period equal to the total number of years of service as a director to a maximum of ten years or until death. The AAR CORP. Directors' Retirement Plan is unfunded. As of May 31, 2001, three former directors were receiving retirement benefits under the plan.

Directors who are officers or employees of the Company or any subsidiary receive no additional compensation for service on the Board or any of its committees.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Jannotta, a director of the Company, is Chairman of William Blair & Company, L.L.C. ("William Blair"). William Blair, from time to time, has rendered investment banking services to the Company and received customary compensation for those services. During Fiscal Year 2001, William Blair received $50,000 from the Company for investment banking services rendered to the Company. The Company may engage William Blair for additional services in the future.

Mr. Eichner, a director of the Company and Chairman of the Board, provides consulting services to the Company pursuant to a four year consulting agreement ending June 1, 2003 under which he receives a quarterly consulting fee in the amount of $25,000; in Fiscal 2001 he received $100,000 in consulting fees.

Mr. Abboud, a director of the Company, has a son, Robert G. Abboud, who is the President of RGA Labs, Inc. ("RGA Labs"). AAR Allen Services, Inc. ("AAR Services"), a subsidiary of the Company, has engaged RGA Labs to provide engineering consulting services in connection with development of a product line at a cost of approximately $100,000. AAR Services may also engage RGA Labs for additional services in the future.

BIOGRAPHICAL INFORMATION

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PROPOSAL 1
ELECTION OF DIRECTORS

The Board of Directors is currently divided into three classes, each having three-year terms that expire in successive years. At this year's Annual Meeting, the Board of Directors has nominated two directors to be elected in Class II, each to serve a three-year term expiring at the Annual Meeting in the year 2004 or until the individual is succeeded by another qualified director who has been duly elected.

The nominees for Director in Class II this year are Edgar D. Jannotta and A. Robert Abboud.

The Board expects both nominees to serve if elected as directors. If either of them should become unavailable to serve as a director for any reason prior to the Annual Meeting, the Board may substitute another person as nominee. Under Delaware law and the Company's By-Laws, the two nominees for director who individually receive the greatest number of votes shall be elected directors of the Company.

THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR BOTH NOMINEES

5

SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS

TABLES

The following tables show the shares of Common Stock beneficially owned, as of July 31, 2001, by (i) each director and nominee for election to the Board, (ii) each executive officer named in the Summary Compensation Table, (iii) all directors and executive officers of the Company as a group, and (iv) each beneficial owner of more than 5% of the outstanding shares of Common Stock. Except as noted, the nature of beneficial ownership for shares shown in the Tables is sole voting and/or investment power.

Security Ownership of Management

¹

Includes the following shares of the identified person that may be acquired within sixty days of July 31, 2001 through the exercise of stock options: Mr. Bernick, 15,000 shares; Mr. Eichner, 229,317 shares; Mr. Jannotta, 15,000 shares; Mr. Pulsifer, 44,388 shares; Mr. Romenesko, 57,465 shares; Mr. Sharp, 10,900 shares; Mr. Slapke, 113,423 shares; Mr. Spungin, 15,000 shares; Mr. Stern, 4,273 shares; Mr. Storch, 1,061,632 shares; and Mr. Tabery, 22,000 shares; and all directors and executive officers as a group, 1,588,398 shares.

²

Does not include 75,000 shares which Mr. Eichner may be deemed to own a beneficial interest in, but as to which Mr. Eichner disclaims beneficial ownership.

³

Retires as a director effective October 10, 2001.

⁴

Does not include 49,500 shares which Mr. Stern may be deemed to own a beneficial interest in, but as to which Mr. Stern disclaims beneficial ownership.

⁵

Includes 29,123 shares beneficially owned by Mr. Storch's wife (18,810 shares) and minor children (10,313 shares), as to which Mr. Storch disclaims beneficial ownership.

6

Security Ownership of Certain Beneficial Owners

¹

Based on a Schedule 13G filing, the reporting person disclosed beneficial ownership with respect to the shares as follows:

²

Based on a Schedule 13G filing, the reporting person disclosed beneficial ownership with respect to the shares as follows:

³

Based on a Schedule 13G filing, the reporting person disclosed beneficial ownership with respect to the shares as follows:

⁴

Based on a Schedule 13G filing, the reporting person disclosed beneficial ownership with respect to the shares as follows:

⁵

Based on a Schedule 13G filing, the reporting person disclosed beneficial ownership with respect to the shares as follows:

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely upon a review of Securities and Exchange Commission Forms 3, 4 and 5 and upon related written representations furnished to the Company with respect to its most recent fiscal year, no person who, at any time during the fiscal year, was a director, officer or beneficial owner of more than ten percent of any class of equity securities of the Company registered pursuant to Section 12 of the Securities Exchange Act of 1934 ("Exchange Act"), failed to file on a timely basis reports required by Section 16(a) of the Exchange Act during the most recent fiscal year.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION

General

The Company's executive compensation program is structured and administered by the Compensation Committee of the Board of Directors. The Committee is comprised of the five individuals listed below, all of whom are independent directors of the Company.

The executive compensation program is designed to enable the Company to attract, motivate and retain talented executives capable of achieving strategic business initiatives and to reward them for their achievement. It is designed to complement the Company's short-term and long-term business objectives and to focus executives' efforts on fulfilling these objectives. The program consists of three elements: (i) base salaries which are generally set between the median and third quartile salary level of comparable positions in similar companies, adjusted up or down to reflect individual responsibilities, performance and other relevant factors; (ii) annual variable incentive opportunities paid in cash and stock based on individual contribution and performance; and (iii) long-term incentive opportunities, in the form of stock option/restricted stock awards.

Total compensation opportunities for each executive are intended to be competitive with those offered by other companies competing for talent in the Company's employment market. In designing and administering the individual elements of the executive compensation program for each executive, the Committee strives to balance short- and long-term incentive objectives and employ prudent judgment in establishing base salary levels and performance criteria, evaluating performance and determining actual incentive payments. To ensure competitiveness and reasonableness of the Committee's compensation decisions, independent compensation consulting firms are retained periodically to advise the Committee in connection with both the design and implementation of the various elements of the program and the level of individual executive participation. The Company uses competitive compensation analyses by independent consultants to ensure that the President and Chief Executive Officer's and other executive officers' base salaries and total compensation are at an appropriate competitive level relative to compensation for such positions at other companies in the relevant employment market. Generally, as an executive's level of responsibility increases, a greater percentage of total compensation is based on performance, and the mix of total compensation shifts toward stock, thereby aligning the long-term interest of senior executives with those of stockholders.

8

Base Salaries

Base salary levels of all elected corporate officers, including the President and Chief Executive Officer, are reviewed annually by the Committee and may be adjusted depending upon the executive's qualifications, responsibilities, assessed performance contribution, tenure in the Company and in the position held, and competitive salary considerations relative to similar positions at other companies competing for talent in the Company's employment market. Adjustments in Fiscal 2001 to the base salaries of the President and Chief Executive Officer and other executive officers named in the Summary Compensation Table reflect the factors referred to above.

Annual Incentive Opportunities

The President and Chief Executive Officer has an annual performance-based incentive bonus opportunity of up to 150% of his base salary. Twenty percent of his incentive bonus is payable in restricted stock that vests ratably in equal amounts over a three year period. The percentage incentive bonus opportunity for other executive positions varies depending on their responsibility level.

Each fiscal year the Compensation Committee establishes specific annual cash bonus performance goals, within guidelines approved by stockholders in 1997 and intended to meet the requirements of Section 162(m) of the Internal Revenue Code ("IRC"), for certain executive officers of the Company. These goals focus on two categories: income and balance sheet management. The importance and weighting of these two categories is established each year by the Compensation Committee. Under the category of balance sheet management, the goals include one or several of the following criteria: shareholder equity, long-term debt to capital ratio, investment rating, debt coverage, cash flow and return on invested capital. Under the category of income, the goals include one or several of the following: pre-tax income, earnings per share and net income. A participant may be eligible to earn up to 100% of such participant's salary for meeting target goals and up to an additional 50% of salary for exceeding target goals. The amount actually earned depends on each participant's position, bonus opportunity and actual performance versus the pre-established goals.

Long-Term Incentive Opportunities

The long-term incentive program consists of stock option and/or restricted stock awards granted under the AAR CORP. Stock Benefit Plan.

Stock option awards typically expire ten (10) years from the date of grant or earlier upon termination of employment, become exercisable in equal increments over a period of three to five years on successive grant anniversary dates at the NYSE closing stock price on the date of grant, and are accompanied by reload features. Restrictions imposed on restricted stock awards vary and are designed, among other things, to encourage executives to stay with the Company and to maintain a focus on long-term objectives of the Company. Restricted stock grants vest over three (3) to ten (10) years, depending on the grant; restrictions on restricted stock used in lieu of cash to pay earned bonuses vests ratably over a three (3) year period. Typically, awards are subject to forfeiture if the employee terminates employment for any reason other than death, retirement or disability or the Company terminates employment for cause, during the award cycle. During the award cycle the participant receives dividends on the restricted shares and also has the right to vote the restricted shares.

In determining stock option and restricted stock awards, the Committee considers the recipient's position and responsibilities in the Company, performance and contributions made during the preceding year, capabilities and potential for future contribution to the Company, the number of options and awards previously granted to the recipient and, for senior management, their progress toward achieving the Company's guidelines for stock ownership by senior management.

The Board believes that Mr. Storch, as the President and Chief Executive Officer, should have the opportunity, based on performance, to become a significant shareholder and that the performance

9

measures that govern his opportunities should be both economic and shareholder value related. Such measures should also be related to the Company's industry and investor communities and reflect business objectives of the Company over the coming years. On October 10, 2000, the Compensation Committee awarded Mr. Storch options for 600,000 shares in two separate grants of 300,000 shares each. The second grant is subject to stockholder approval of an amendment to the AAR CORP. Stock Benefit Plan adopted by the Company on October 10, 2000 which is being presented as Proposal 2 in this Proxy Statement. The amendment increases the number of shares that may be granted to any individual during a specified period in order to qualify the options as performance-based compensation under Section 162(m) of the IRC.

Under a long-term incentive plan approved by the Board, commencing on June 1, 2001 and ending on May 31, 2005, Mr. Storch has the opportunity to receive annually under the AAR CORP. Stock Benefit Plan, in the discretion of the Compensation Committee, (i) options in an amount determined by a fraction, the numerator of which is equal to 1.25 times his then current base salary and the denominator of which is equal to the fair market value of the stock on the date of grant divided by three, and (ii) upon stockholder approval of the restricted stock performance goals described in Proposal 3, up to .9375 times his then current base salary in performance restricted stock based on the Company's average Return on Capital during the performance period as compared to each of (i) the Company's Peer Group Index and (ii) the S&P 500 Index, during the performance period.

Mr. Storch and other named executive officers in the Summary Compensation Table below received the stock options and restricted stock awards reflected in the tables below. The number of shares covered by each grant reflects individual contributions and performance, as well as competitive industry practices, in the view of the Committee. The grant levels also continue the Board's emphasis on executive share ownership and further the Company's objectives of tying incentive compensation to performance and aligning executive's interests with the interests of the Company's stockholders.

Chief Executive Officer Compensation

In Fiscal 2001, Mr. Storch's annual base salary was increased to $676,000 and he received an annual incentive bonus award equal to 40% of base salary. Twenty percent of Mr. Storch's annual incentive bonus was paid in restricted stock.

The tables which follow this report and accompanying footnotes and narrative reflect the decisions covered by the above discussion.

Federal Income Tax Considerations

IRC Section 162(m) generally prevents any public company from claiming a deduction for compensation in excess of $1 million for the Chief Executive Officer or any of the four highest compensated executive officers. This deduction limitation, however, does not apply to performance-based compensation that satisfies certain requirements under Section 162(m). The Committee has determined that it is in the best interests of the Company and its shareholders to structure compensation of executive officers so that compensation will not be subject to the deduction limit to the extent that it can reasonably do so in a manner that provides adequate incentives and allows the Company to attract and retain qualified executives. However, the Committee has previously and may in the future structure compensation arrangements that under certain circumstances may be subject to the deduction limit. None of the compensation paid by the Company in Fiscal 2001 was subject to the deduction limit.

Compensation Committee

James G. Brocksmith, Jr., Chairman
A. Robert Abboud
Howard B. Bernick
Edgar D. Jannotta
Lee B. Stern

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STOCKHOLDER RETURN PERFORMANCE GRAPH

The following graph compares the five-year cumulative total stockholder return (including reinvestment of dividends) of the Company, the S&P (Standard & Poor's) 500 Index, and a peer group index selected by the Company.

The S&P 500 Index is comprised of domestic industry leaders in four major sectors: Industrials, Financials, Utilities and Transportation, and serves as a broad indicator of the performance of the U.S. equity market. The peer group index selected by the Company is comprised of companies engaged in engine, airframe and/or manufacturing activities in support of the aerospace/aviation aftermarket similar to those conducted by the Company. The peer group selected by the Company is comprised of the following companies: Aviall, Inc., Aviation Sales Company, BFGoodrich Aerospace, Kellstrom Industries, Inc., Sequa Corp., SPS Technologies Inc., and Willis Lease Finance Corp.

These indices relate only to stock prices and dividends; they do not purport to provide a direct comparison of the business or financial performance of the companies comprising such indices with the Company or with each other.

Comparison of Five-Year Cumulative Stockholder Total Return¹

¹

Assumes $100 invested on June 1, 1996, and reinvestment of dividends in the Company's Common Stock, S&P 500 Index and companies comprising the Peer Group.

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COMPENSATION TABLE

The following table summarizes the total compensation earned by or paid for fiscal years 1999 through 2001 to the President and Chief Executive Officer and the four other most highly paid executive officers in Fiscal 2001.

Summary Compensation Table

¹

On May 31, 2001, the following shares of restricted stock were held by each named executive: Mr. Storch, 138,718; Mr. Slapke, 55,762; Mr. Pulsifer, 20,755; Mr. Romenesko, 32,562; Mr. Sharp, 3,500. The May 31, 2001 market value of each named executive's restricted stock is as follows: Mr. Storch, $1,942,052; Mr. Slapke, $780,668; Mr. Pulsifer, $290,570; Mr. Romenesko, $455,868; Mr. Sharp, $49,000. Vesting of long term restricted stock awards for executive officers varies from 3 years for Mr. Storch to 7 years for Fiscal 1999 and 2000 awards and 10 years for Fiscal 1998 awards for other executive officers. Dividends are paid on all shares of restricted stock. In the event of a change in control of the Company as defined in the Plan, all restricted stock awards become vested immediately.

²

"All Other Compensation" includes the following: (i) contributions to the Company's 401(k) plan on behalf of each of the named executives as a Company match of 2001 pre-tax elective deferred employee contributions: Mr. Storch, $32,000; Mr. Slapke, $21,000; Mr. Pulsifer, $10,800; Mr. Romenesko, $12,100; Mr. Sharp, $6,400; (ii) the premium paid on group term life insurance for Mr. Slapke, $800; Mr. Pulsifer, $3,600; Mr. Romenesko, $800; Mr. Sharp, $300, and (iii) the value of the benefit of the remainder of the premium paid under the Company's split dollar life insurance program in the following amounts: Mr. Storch, $107,000; Mr. Slapke, $27,700; Mr. Pulsifer, $29,600, Mr. Romenesko, $21,700; Mr. Sharp, $7,700.

³

Includes 68,040 reload option shares.

⁴

Bonus compensation was paid to Mr. Storch 80% in cash and 20% in restricted stock, and to all others, 90% in cash and 10% in restricted stock, based on NYSE May 31 closing price each year. The restricted stock vests over a three year period (one-third each grant anniversary date). Dividends are paid on all shares of restricted stock.

⁵

Mr. Slapke was an executive vice president for only part of Fiscal 2001.

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STOCK OPTIONS

Options generally become exercisable 20% each year over a five-year period. Unexercised options expire ten years after the date of grant. The stock option exercise price is equal to the fair market value (NYSE closing price) of a share of stock on the date of grant. The options have no value unless the stock price appreciates and the holder satisfies the applicable vesting requirements.

The following table shows certain information with respect to stock options granted in Fiscal 2001 to the named executive officers. It also shows how much the named executive officers potentially may realize under two hypothetical situations: if the stock gains 5% or 10% in value per year compounded over the ten-year life of the options. These are assumed hypothetical rates of appreciation required to be shown by Securities Exchange Commission regulations as an example and are not a forecast of future stock price appreciation.

Option Grants in Last Fiscal Year

¹

Options for 300,000 of these shares are subject to stockholder approval of an amendment to the AAR CORP. Stock Benefit Plan dated October 10, 2000, increasing the maximum number of option shares that may be granted under the Plan to any individual during any calendar year.

²

Ten year options subject to reload provisions; 20% of option shares become exercisable on the 1^st, 2^nd, 3^rd, 4^th, and 5^th grant date anniversary.

³

These are reload options resulting from exercise of original option grants. Under the original grants, reload options result upon surrender of shares then owned by the option holder in payment of the exercise price of the initial option. The reload option is for the number of shares surrendered and expires concurrent with the original option. The reload option exercise price is equal to the fair market value of the underlying stock on the date the original option is exercised. Reload options are included in the percentage total options grant to employees shown on the chart. Values shown in the Potential Realizable Value columns are duplicative of the portion of the value disclosed in such columns in the year of the original option grant and do not represent new value above that of the original grant.

The following table shows stock options exercised by named executive officers during Fiscal 2001 and the aggregate gain in value realized over the period between the date of grant and the date exercised. This table also shows the number of shares of common stock covered by both exercisable and non-exercisable stock options as of May 31, 2001, and the value of "in-the-money" unexercised options.

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Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values

¹

Value of unexercised in-the-money options equals the fair market value of the Common Stock at May 31, 2001, less the exercise price, times the number of option shares outstanding. The closing price of the Common Stock on the NYSE at May 31, 2001, was $14.00.

PENSION BENEFITS

Qualified Plan Benefits

The Company provides benefits to all domestic employees including the named executive officers under a qualified retirement program that includes defined benefits (The AAR CORP. Retirement Plan—a cash balance type plan) and 401(k)/profit sharing plan (The AAR CORP. Retirement Savings Plan). The defined benefits are based upon the present value of a participant's benefit as of 12/31/99 and a formula for benefits earned from and after 1/1/00 which takes into consideration the participant's age, years of credited service, a percentage of the participant's compensation for the year and certain interest credits. Compensation includes cash compensation shown as income on an employee's Form W-2, reduced by certain items specified in the plans, plus amounts voluntarily contributed to the AAR CORP. Retirement Savings Plan. Compensation for purposes of the plans cannot exceed an annual compensation limitation of $170,000 as adjusted from time to time by the Commissioner of Internal Revenue in accordance with applicable provisions of the IRC.

The aggregate salary and bonus compensation shown for the named executive officers in the Summary Compensation Table above is the compensation currently included for purposes of determining benefits under qualified plans as well as the Supplemental Key Employee Retirement Benefit Plan ("SKERP") described below (subject to applicable IRC compensation limits for qualified plans). Profit sharing and 401(k) benefits are based on voluntary contributions by employees with a Company match of up to 2 percentage points of the first 5 percentage points voluntarily contributed under the plan, and a profit sharing contribution by the Company based on the individual employee's voluntary contributions and the economic performance of the individual employee's operating unit. The Company's profit sharing contribution can be up to 3% of cash compensation.

Non-Qualified Plan Benefits

The Company provides supplemental retirement benefits to certain executives and key employees under the SKERP. All of the named executive officers are participants in the SKERP. The SKERP is designed to restore the approximate amount of employer-provided benefits under the Company's qualified retirement plans lost as a result of Code limitations, including those limiting compensation for purposes of benefit calculations. The SKERP also provides for aggregate retirement benefits (including qualified plan benefits) at 60% and 50% of final average compensation (as defined in plan documents), respectively, for the President and CEO and for certain other executive officers designated by the Board, including four of the named executive officers, reduced by certain items specified in plan documents. SKERP benefits are unfunded and are forfeited if the participant violates a covenant not to compete set forth in the plan document or if employment is terminated

14

for cause (except that a forfeiture will not occur under certain circumstances in the event of a Change in Control as defined in the plan document).

Table of Pension Benefits

The following table shows the estimated aggregate annual benefits payable upon retirement at normal retirement age (65) and years of service for each of the named executive officers under the AAR CORP. Retirement Plan and SKERP.

Pension Benefit Table¹

¹

The projected benefit is calculated based on 120% of current covered compensation assuming bonus compensation at target.

EMPLOYMENT AND OTHER AGREEMENTS

David P. Storch

The Company has an employment agreement with Mr. Storch designed to assure his continued services with the Company at a base compensation of $676,000 per year or such increased amount as the Board may determine. Mr. Storch's term of employment is continuously extended so as to have a remaining term of three years, but shall expire upon death, disability, retirement or other termination of employment.

Mr. Storch's employment agreement also includes: confidentiality and non-compete provisions; participation in the Company's benefit plans; a severance payment upon termination of employment by the Company for other than cause prior to a change in control of the Company equal to two times base salary then in effect; a severance payment equal to three (3) times his average cash compensation (base salary plus cash bonus) for the last two fiscal years of employment upon termination of employment under certain circumstances in the event of a change in control of the Company; an incentive bonus opportunity of up to 150% of base salary subject to annual financial targets approved by the Compensation Committee (20% of any bonus is payable in three year restricted stock); an annual long-term incentive stock compensation plan consisting of (i) an annual option grant opportunity of an amount determined by a fraction, the numerator of which is equal to 1.25 times his base salary and the denominator of which is equal to the fair market value of the stock on the grant date divided by three, and (ii) upon stockholder approval of restricted stock performance goals (see Proposal 3 in this Proxy Statement), up to .9375 times his salary in performance restricted stock based on the Company's Return on Capital as compared to each of the S&P 500 Index and the Company's Peer Group Index Return on Capital; a supplemental cash payment to the extent necessary to preserve the level of benefits provided for in the employment agreement in the event of imposition of excise taxes in respect of "excess parachute payments" under the IRC and, in the event of a Change in Control of the Company (as defined in the employment agreement), accelerated vesting of awards outstanding under the Company's Stock Benefit Plan and continuation of certain other benefits for a period of three years.

Other Agreements

The Company has entered into severance agreements with certain key employees, including the named executive officers other than Mr. Storch. The severance agreements are substantially identical, include confidentiality and non-compete covenants, and provide for payment of compensation and certain benefits in the event of termination of employment for other than cause, including a

15

Change in Control of the Company (as defined in the severance agreements). Severance equal to base salary plus any earned incentive cash bonus will be paid upon termination of employment by the Company for other than Cause (as defined in the severance agreements) prior to a Change in Control of the Company. Under certain circumstances, upon termination of employment following a Change in Control, the employee will receive severance equal to three times total compensation (base salary plus annual cash bonus) for the most recently ended fiscal year or the preceding fiscal year, whichever is greater, accelerated vesting of awards outstanding under the Company's Stock Benefit Plan, special supplemental retirement benefits determined as if the employee had three additional years of service under the Company's retirement plans, continuation of certain other benefits for a period of three years, and a supplemental cash payment to the extent necessary to preserve the level of benefits provided for in the severance agreement in the event of imposition on such employee of excise taxes payable in respect of "excess parachute payments" under the IRC.

The Company has also entered into split dollar life insurance agreements with certain key employees, including all of the named executive officers. Under the agreements, the Company will fund the annual insurance premiums for the policies subject to reimbursement from the cash value or death benefit proceeds of the policies.

AUDIT COMMITTEE REPORT

The Audit Committee is comprised of four independent directors and carries out its responsibilities pursuant to a written charter (a copy of which is attached to this proxy statement as Exhibit 1) adopted by the Board of Directors. Among other things, the Audit Committee is responsible for overseeing the Company's financial reporting process. The Company's management is primarily responsible for the Company's financial statements and the quality and integrity of the reporting process and systems of internal control. The Company's independent auditors are responsible for auditing the Company's financial statements and for expressing an opinion on the conformity of the financial statements with accounting principles generally accepted in the United States of America.

In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the audited financial statements for the year ended May 31, 2001, with the Company's management and representatives of the independent auditors. The Audit Committee discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended. In addition, the Audit Committee discussed with the independent auditors their independence from the Company and its management, including the matters in the written disclosures required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and considered the compatability of nonaudit services with the auditors' independence.

In reliance on its review of the audited financial statements and the discussions referred to above and subject to the limitations on the role and responsibilities of the Committee referred to above and in the charter, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended May 31, 2001, for filing with the Securities and Exchange Commission.

Audit Committee

    Joel D. Spungin, Chairman
    A. Robert Abboud
    Howard B. Bernick
    James G. Brocksmith, Jr.

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PROPOSAL 2

APPROVAL OF AN AMENDMENT TO THE AAR CORP. STOCK BENEFIT PLAN TO PROVIDE THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK THAT MAY BE GRANTED UNDER THE PLAN TO ANY GRANTEE DURING ANY CALENDAR YEAR

Proposed Amendment to the Plan

IRC Section 162(m) generally precludes a publicly traded company from taking a federal income tax deduction for annual compensation in excess of $1 million paid to the company's chief executive officer or any of the four next highest paid executive officers, subject to several exceptions, including an exception for compensation paid under a stockholder-approved plan that is "performance-based" within the meaning of Section 162(m). Compensation attributable to a stock option or stock appreciation right is deemed to be performance-based if, among other things, the underlying plan, as approved by the stockholders, includes a limit on the number of shares for which stock options or stock appreciation rights may be granted to any one person during a specified period.

The Board of Directors believes that it is in the best interests of the Company to ensure, to the extent possible, the full deductibility of compensation attributable to stock options ("Options") granted under the AAR CORP. Stock Benefit Plan (the "Plan"). Accordingly, the Board unanimously adopted on October 10, 2000, subject to stockholder approval, an amendment to the Plan, effective October 10, 2000, which provides that "the total number of shares of Common Stock with respect to which options may be granted to any Grantee under the Plan within any calendar year shall not exceed the number of shares available for issue under the Plan at the time of grant." Prior to this amendment, the Section 162(m) Plan limit was 300,000 shares in any 12-month period.

If this proposal is not approved by the stockholders, the Company's named executive officers will receive compensation pursuant to the terms of applicable employment agreements or under alternative compensation arrangements approved by the Compensation Committee of the Board of Directors in its discretion.

Summary of the Plan

The Plan was approved by the Company's stockholders in 1992, and an amendment to the Plan was approved by the stockholders in 1996. The Compensation Committee of the Board of Directors administers the Plan and has the authority to determine the key employees to whom awards are to be granted under the Plan, the term and other terms and conditions of each award, the applicable vesting schedule, and the number of shares of Common Stock covered by an award. As of May 31, 2001, approximately 170 employees were eligible to receive awards under the Plan. In Fiscal 2001, 157 employees received such awards.

As of June 30, 2001, a total of 1,079,780 shares were available for issuance under the Plan. On January 1 of each calendar year that the Plan is in effect through December 31, 2001, an additional number of shares equal to 2% of the issued and outstanding shares of Common Stock as of such date becomes available for issuance. Notwithstanding the foregoing, no more than 1,000,000 shares of Common Stock may be subject to incentive stock options granted under the Plan.

Under the Plan, the Company may grant the following types of awards:

Options.  Options may be either non-qualified stock options or incentive stock options. Incentive stock options may not be granted under the Plan after July 15, 2002. Subject to certain limited exceptions, the exercise price must equal the fair market value per share of the Common Stock on the date of grant. Payment of the exercise price may be made in cash, in shares of Common Stock, or as otherwise authorized by the Compensation Committee at the time of grant. Subject to certain limited exceptions, including a Change in Control of the Company (as defined in the Plan), Options may not be exercised before the first anniversary date of grant. Each Option will expire on the date fixed by the Compensation Committee at the time of grant but in no event later than the tenth

17

anniversary of the date of grant. In its discretion, the Compensation Committee, may grant an additional Option (a "Reload Option") for the number of shares used by the grantee to pay the exercise price of the original Option, provided that such Reload Option must be subject to the same terms as the original Option except that the exercise price of a Reload Option must be equal to the fair market value of the Common Stock at the time that the original Option is exercised. The Plan also provides for an automatic grant of a non-qualified stock option to acquire 10,000 shares of Common Stock, exercisable over four years, to each non-employee director on the date such person becomes a director of the Company.

Restricted Stock.  The Compensation Committee may also grant awards of restricted stock to key employees, either separately from or in tandem with, the grant of an Option. Subject to certain limited exceptions (including a Change in Control of the Company), such restrictions may not lapse sooner than the first or later than the tenth anniversary of the date of grant.

Information relating to awards made in Fiscal 2001 under the Plan to the executive officers named in the Summary Compensation Table is presented in the various tables under the caption "Executive Compensation and Other Information." In addition, 450,000 Options at an average exercise price of $13.30 per share were granted to all non-officer employee participants as a group in Fiscal 2001. Awards to be made in the future under the Plan are not yet determinable since they are discretionary (other than the automatic grants to non-employee directors). On July 31, 2001, the last reported sales price for the Common Stock on the New York Stock Exchange was $16.52 per share.

The Board of Directors may terminate, suspend or modify the Plan, without the authorization of the stockholders, to the extent allowed by law. No termination, suspension or modification of the Plan may adversely affect any rights of a holder of an award granted under the Plan before the date of such termination, suspension or modification without the consent of such holder.

Federal Income Tax Consequences

Neither non-qualified stock options, incentive stock options, nor restricted stock awards require the holder to recognize income, or entitle the Company to a deduction, at the time of grant.

Upon the exercise of a non-qualified stock option, the holder will recognize ordinary income in an amount equal to the excess of the fair market value of the option stock as of the date of exercise over the exercise price. Upon the vesting of a restricted stock award, the holder will realize ordinary income in an amount equal to the fair market value of the restricted stock at such time. A holder may elect to recognize ordinary income on the fair market value of the restricted stock at the date of the award, and thus recognize capital gain on the subsequent sale of the stock in an amount equal to the excess of the fair market value of the stock at the date of vesting over the fair market value at the date of the award.

Incentive stock options are not ordinarily subject to taxation until the holder sells the option stock, although the excess of the fair market value of the option stock over the exercise price is a tax preference item subject to alternative minimum taxation at the time of exercise. When stock acquired through exercise of an incentive stock option is sold at least two years after grant and at least one year after exercise, the holder recognizes as capital gain or loss the difference between the sale proceeds of the option stock and the exercise price. If these holding periods are not met, the holder will recognize ordinary income on the excess of the sale proceeds over the exercise price.

Subject to IRC Section 162(m), the Company is entitled to a deduction when and to the extent the holder recognizes ordinary income upon the vesting of a restricted stock award or the exercise of a non-qualified stock option, provided the Company complied with certain withholding requirements. In the case of an incentive stock option, the Company is not entitled to a deduction where the holder recognizes capital gain; the Company is, however, entitled to a deduction when and to the extent the holder recognizes ordinary income upon sale of the option stock within either of the two previously mentioned holding periods.

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Vote Required for Approval

The proposed amendment to the Plan must be approved by a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the 2001 Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSED AMENDMENT TO THE AAR CORP. STOCK BENEFIT PLAN.

PROPOSAL 3

APPROVAL OF RESTRICTED STOCK PERFORMANCE GOALS UNDER
THE LONG-TERM INCENTIVE PLAN FOR THE CHIEF EXECUTIVE OFFICER

Background

The Compensation Committee of the Board of Directors has unanimously adopted a Long-Term Incentive Plan for David P. Storch, the Company's Chief Executive Officer ("LTI Plan"). The LTI Plan will use stock available under the stockholder-approved AAR CORP. Stock Benefit Plan. The LTI Plan is designed to (i) tie a significant portion of the total compensation of the Chief Executive Officer to the creation of stockholder value on the basis of stock price appreciation, (ii) provide incentive compensation opportunities contingent upon achieving better than average economic performance as compared with peers and the general market, (iii) provide an incentive opportunity in the form of stock options and performance-based restricted stock that results in significant stock ownership, the value of which is contingent upon sustained performance of the Company; and (iv) to the extent possible, consistent with the Company's performance and compensation objectives, qualify such compensation as "performance-based" for purposes of IRC Section 162(m) so that the Company will be entitled to a tax deduction on the payment of such awards.

Mr. Storch's LTI Plan consists of two parts: (i) an annual stock option grant opportunity (with options vesting ratably over four years) up to an amount (not to exceed the maximum amount permitted under the AAR CORP. Stock Benefit Plan) determined by a fraction, the numerator of which is equal to 1.25 times his base salary and the denominator of which is equal to the fair market value of the stock on the date of grant divided by three, and (ii) subject to stockholder approval of restricted stock performance goals, an annual performance restricted stock opportunity.

The restricted stock opportunities under the LTI Plan are based on achievement of restricted stock performance goals. Mr. Storch may earn up to .9375 times his then current base salary ("Performance Dollars") each year in restricted stock based on the Company's average Return on Capital during the performance period as compared to each of (i) the S&P 500 Index average Return on Capital, and (ii) the Company's Peer Group Index average Return on Capital during the performance period. Performance Dollars will be earned in accordance with the following performance matrix:

1.

The performance goals will be achieved if the Company's average Return on Capital for the performance period is at least 80% of target; 100% target achievement will be 80% of the median S&P 500 and 60^th percentile of the Peer Group. Results between the amounts shown will be by linear interpolation.

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The number of shares to be awarded, if any, will be determined at the end of each performance period based on achievement of the goals during the period and Performance Dollars earned. Any restricted shares awarded under the LTI Plan will be restricted for three years after the award date with one-third (33.33%) of the award vesting (i.e. restrictions will lapse) on the first, second and third anniversary date(s) of the award.

The first performance period begins June 1, 2001 and ends May 31, 2002. The second performance period begins June 1, 2001 and ends May 31, 2003. The third performance period begins June 1, 2002 and ends May 31, 2004. The fourth performance period begins June 1, 2003 and ends May 31, 2005.

For purposes of the LTI Plan, "Peer Group Index" means the index selected by the Company from time to time for performance comparisons in the Company's annual proxy statement pursuant to applicable Securities and Exchange Commission regulations; and "Return on Capital" means earnings before interest and taxes (EBIT) divided by Total Capital (debt plus equity minus cash).

If this proposal is approved by the stockholders, Mr. Storch's Employment Agreement will be amended to reflect the approved restricted stock performance goals and long-term restricted stock incentive award opportunity described in this proposal. If this proposal is not approved by the stockholders, Mr. Storch may receive compensation pursuant to other alternative compensation arrangements approved by the Board and acceptable to Mr. Storch.

Plan Administration

Mr. Storch's LTI Plan will be administered by the Board's Compensation Committee (the committee that also administers the AAR CORP. Stock Benefit Plan), consisting of at least two non-employee directors, each of whom is intended to qualify as an "outside director" within the meaning of IRC Section 162(m).

Federal Income Tax Consequences

Under present federal income tax law, Mr. Storch will realize ordinary income in the year the restrictions on the shares lapse in an amount equal to the fair market value of the vested restricted shares. The Company will receive a deduction for the amount constituting ordinary income to the participant, provided that the requirements of IRC Section 162(m) which limit the deductibility of non-performance related compensation paid to certain corporate executives are satisfied.

Vote Required for Approval

The proposed restricted stock performance goals must be approved by a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the 2001 Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSED RESTRICTED STOCK PERFORMANCE GOALS.

OTHER MATTERS TO BE VOTED UPON

Management knows of no other matters which are to be brought before the Annual Meeting. However, if any other matters properly come before the Annual Meeting, the named proxy holders will vote all proxies in their discretion and best judgment on such other matters.

INDEPENDENT AUDITORS

During the year ended May 31, 2001, the Company engaged KPMG LLP as the Company's independent auditors principally to perform the annual audit and to render other services.

The Company's Board of Directors, upon recommendation of its Audit Committee after consideration and determination of the independent auditors' independence in light of all services rendered to the Company, has selected KPMG LLP as its independent auditors for the Fiscal Year ending

20

May 31, 2002. Representatives of that firm are expected to be present at the Annual Meeting, with the opportunity to make a statement if they so desire and to be available to respond to appropriate questions.

Audit Fees

The aggregate fees billed by KPMG for audit of the Company's financial statements for Fiscal 2001 and for reviews of financial statements included in the Company's quarterly reports on Form 10-Q were $514,000.

All Other Fees

The aggregate Fiscal 2001 fees billed by KPMG for services rendered to the Company, other than the services described above under "Audit Fees", were $402,724.

STOCKHOLDER PROPOSALS FOR THE YEAR 2002 ANNUAL MEETING

Any stockholder who wishes to present a proposal for consideration at the Annual Meeting of Stockholders to be held in 2002 must submit such proposal in accordance with the rules promulgated by the Securities and Exchange Commission. Under the Company's by-laws, in order for a proposal to be eligible for action by the shareholders at and inclusion in the Company's Proxy Statement and form of proxy relating to the 2002 Annual Meeting, the stockholder must submit such proposal to the Company, in writing, to be received by the Secretary of the Company, AAR CORP., One AAR Place, 1100 N. Wood Dale Road, Wood Dale, Illinois 60191, no later than April 9, 2002.

A stockholder proposal submitted outside the Rule 14a-8 process for presentation at the 2002 Annual Meeting will be considered untimely for purposes of Rules 14a-4 and 14a-5 if notice of the stockholder proposal is received by the Company after April 9, 2002.

August 27, 2001

UPON THE WRITTEN REQUEST OF ANY RECORD HOLDER OR BENEFICIAL OWNER OF COMMON STOCK OF AAR CORP., THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED MAY 31, 2001. REQUESTS SHOULD BE MADE TO MR. HOWARD A. PULSIFER, SECRETARY, AAR CORP., ONE AAR PLACE, 1100 N. WOOD DALE ROAD, WOOD DALE, ILLINOIS 60191, (630) 227-2000.

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EXHIBIT 1

AAR CORP.
Board of Directors
Audit Committee Charter

Purpose

The Audit Committee is appointed by the Board to assist the Board in fulfilling its oversight responsibilities relating to (i) corporate accounting, disclosure and reporting practices and legal compliance of the Company, (ii) the quality and integrity of the Company's financial reports and (iii) the independence and performance of the Company's internal and independent auditors.

Organization

The Audit Committee shall be comprised of not less than three directors of the Company who shall meet the independence and experience requirements of the New York Stock Exchange. The members of the Audit Committee shall be appointed by the Board on the recommendation of the Nominating Committee.

Policy and Procedure

The Audit Committee will maintain flexible policies and procedures and meeting schedules to enable the Audit Committee to best react to changing circumstances and provide that the Company's accounting, disclosure and reporting practices are in accordance with applicable legal and regulatory requirements. The Chairman of the Audit Committee may call meetings during the year as necessary.

The Committee will provide for free and open communication between the Committee and the Company's directors, independent auditors, internal auditors and management.

Both the Company's internal auditors and independent auditor are ultimately accountable to the Board of Directors and the Audit Committee as representatives of the Company's shareholders.

The Audit Committee has authority to retain special legal, accounting or other consultants to advise the Audit Committee. The Audit Committee may request any officer or employee of the Company or the Company's legal counsel or independent auditor to attend committee meetings or to meet with any members of, or consultants to, the Audit Committee.

The Audit Committee shall make regular reports to the Board.

Responsibilities

1.

Review and assess the adequacy of the Audit Committee charter annually and submit it to the Board for approval with any recommended changes.

2.

Recommend to the Board the appointment of the independent auditors to audit the financial statements of the Company and its divisions and subsidiaries.

3.

Review written statements from the independent auditors delineating all non-audit relationships between the independent auditors and the Company, review with the independent auditors the effect of any disclosed relationships or services on objectivity and independence of the independent auditors, and recommend to the Board appropriate action to ensure the independent auditors' independence.

4.

Discuss with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit. The Committee Chairman may represent the full committee for purposes of this review.

E–1

5.

Meet with the independent auditors and financial management of the Company to review the scope of the proposed audit for the upcoming year and the audit procedures to be used, and at the conclusion of the year review such audit, including any comments or recommendations of the independent auditors.

6.

Review with the Company's independent auditors, internal auditors, and financial and accounting personnel, the adequacy and effectiveness of the internal controls of the Company, and elicit any recommendations for the improvement of such internal control procedures or particular areas where new or more detailed controls or procedures are desirable.

7.

Review the internal audit function of the Company, including its organizational structure, independence of reporting obligations, qualification of personnel and the proposed audit plans for the coming year, and the coordination of such plans with the outside auditors.

8.

Receive a summary of significant findings from completed internal audits, together with management's response, and periodic progress reports, with explanation for any deviations from the original plan.

9.

Review the audited financial statements prior to their filing or distribution to shareholders with management and the independent auditors regarding (i) accounting principles, practices and judgments, (ii) whether the independent auditors are satisfied with the disclosure and content of the financial statements to be presented to the shareholders, and (iii) any changes in accounting principles.

10.

Provide sufficient opportunity for the internal auditor and independent auditors to meet with the members of the Committee without members of management present, such meetings to occur at least twice a year. Among the items to be considered for discussion in these meetings are the auditors' evaluation of the Company's financial, accounting, and auditing personnel, the auditors' judgments about the Company's accounting principles as applied to its financial reporting; and the level of management cooperation that the outside auditors received during the course of the audit.

11.

Review the human resources and succession planning of the accounting and financial operations within the Company.

12.

Report on significant matters discussed at each Committee meeting to the Board.

13.

Investigate any matter brought to its attention within the scope of its duties, with the power to retain outside counsel or a second independent accountant, at the expense of the Company, for this purpose if, in its judgment, that is appropriate.

14.

Prepare a report to shareholders to be included in the Company's annual proxy statement as required by the Securities and Exchange Commission.

15.

Perform any other activities consistent with this Charter, the Company's by-laws, and governing law, as the Committee or Board deems necessary or appropriate.

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditor or to assure compliance with laws and regulations and the Company's Code of Conduct.

E–2

The undersigned hereby appoints DAVID P. STORCH and HOWARD A. PULSIFER, or either of them, with full power of substitution, as Proxies, and hereby authorizes them to represent the undersigned at the 2001 Annual Meeting of Stockholders of AAR CORP. to be held on October 10, 2001, or any adjournment thereof, and to vote all shares of AAR CORP. Common Stock which the undersigned would be entitled to vote if personally present.

1.

Election of two Class II directors; nominees: Edgar D. Jannotta and A. Robert Abboud (see reverse side);

2.

Approval of an amendment to the AAR CORP. Stock Benefit Plan ("Plan") to provide a maximum number of shares of Common Stock that may be granted under the Plan to any grantee during any calendar year;

3.

Approval of restricted stock performance goals established under the Long-Term Incentive Plan for the Company's Chief Executive Officer.

AS TO EACH ITEM SET FORTH ON THE REVERSE HEREOF, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED ON THE REVERSE SIDE AND, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR ITEMS 1, 2, AND 3.

(Continued and to be dated and signed on reverse side.)

Dear Stockholder:

We encourage you to submit your proxy for the voting of your shares electronically this year either by telephone or via the Internet. This will eliminate the need to return your proxy card. You will need your proxy card and Social Security Number (where applicable) when voting your shares electronically. The Voter Control Number that appears above, just below the perforation, must be used in order to submit your proxy vote by telephone or via the Internet.

The EquiServe Vote by Telephone and Vote by Internet systems can be accessed 24 hours a day, seven days a week up until the day prior to the meeting.

THANK YOU FOR VOTING YOUR SHARES
YOUR VOTE IS IMPORTANT!

Do not return this Proxy Card if you are submitting your proxy by telephone or the Internet

AAR...

...meeting the needs of the aviation/aerospace industry around the world