Aftermarket Parts Market Consolidation Likely To Increase

By Henry Canaday
Source: Aviation Week & Space Technology

The new company will deal in used rotables, including managing their repairs, and in new consumable parts. Mihailov says the breakdown will be roughly even between rotables and consumables. The firm will support a variety of models, including MD-80s; Boeing 737 Classics, 767s and 747s; Airbus A320s; and Embraer ERJ 145s. The DASI executive will not estimate revenue but is sure the combination will be one of the top players in surplus parts.

Mihailov sees consolidation as a long-term trend in used parts since Boeing bought Aviall. He judges that part dealers generally need around $20 million in annual revenue to be efficient in the business and to penetrate major markets. “Airlines have multiple types in their fleets now, and it is hard to sell to them if you only support 10% of their fleet.” But there are exceptions to any rules of thumb. “There are firms that only sell $15 million a year and have a 40% margin,” Mihailov notes.

Mihailov is extremely confident his e-commerce platform will be essential to at least some sales. “It makes no sense to spend a half hour on the phone negotiating over a $50 consumable.”

For the future, DASI sees plenty of tear-down work ahead. With Boeing and Airbus cranking out narrowbodies at a fast pace, Mihailov predicts overcapacity and the grounding of significant portions of older fleets. “Our goal is to have the most efficient platform to liquidate those aircraft.” He expects it will take about three months to get the old Aero Inventory and DASI working together smoothly.

Working together may be the key. As aftermarket entrepreneurs have learned before, it is not just a matter of putting the right parts together, but of keeping the combination profitable amidst the wild swings in aviation markers.

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