While he declines to specify pricing, Weinberg says LLPs cost 85-95% of pro-rated list, or PRL. For example, if the catalog list price for a hypothetical life-limited engine component is $100,000, and it is limited to 30,000 cycles, divide $100,000 by 30,000. The result is $3.30 per cycle. Thus, if an LLP has 10,000 cycles remaining, the pro-rated list price would be $33,000. Such is the elemental math of parts pricing for powerplant LLPs.
The parameters of aftermarket arithmetic depends on the operator. While Weinberg says, “[While] many people do not want to overbuild an engine . . . there's a significant segment of the market that will always want to build them strong.” He says that segment comprises carriers with larger fleets—airlines that want to keep their engines on-wing 10-15 years, and wring a couple of more shop visits out of them. “They're going to the [original equipment manufacturer] and buying brand-new LLPs, and possibly brand-new HPT” parts says IAA's president.
Other operators assiduously seek out the aftermarket, willing to purchase half-life-remaining LLPs that they are going to have overhauled. They might then run them for the next 5-7 years. The cost of those overhauled LLPs, Weinberg says, is between 75-95% of pro-rated list. A low-pressure turbine (LPT) part ranges 55-65% of PRL, while an overhauled HPT first-stage blade “is 50-75% of the catalog price of the OEM.”
As for a part provider's return on investment (ROI), Avery says CFM56 and V2500 numbers “are very similar.” In very good condition one might cost $4 million. Typically, an engine shop would invest another million for tear down and refurbishment. Do that and “You'd probably get your money back in 9-12 months. That's an average,” he says.
The AJ Walter executive says a 737-700 airframe costs $5-7-million, depending on configuration. A company could easily spend another $250,000 parting it out, dismantling it and disposing of the leftover aluminum. Add to that yet another $1 million to refurbish the parts mined from the aircraft. Avery says ROI on such an airframe is about three years. The returns “aren't as quick,” as on engine parts.
AJ Walter Aviation and IAA see comparatively fresher aircraft and powerplants rolling in for part-out than was once the case. The dance partners are getting younger all the time. “We're looking at relatively new airplanes,” says Avery. “They haven't even gotten into their teens.” Such are the realities of gold mining circa 2013 in the commercial aviation industry. “You're looking at the 80/20 rule,” says Weinberg. “Twenty percent of the parts are worth 80% of the value.”
That value shows scant sign of diminishing.