Two-way partnerships with OEMs exemplify one way in which surplus parts specialists have changed to meet growing demand. Moabery suggests the increased capabilities of companies like his has as much to do with an increase in mid-life aircraft part-outs as any macro decrease in the traditional 25-year useful life. “It's not the availability of those aircraft at a younger age that we should be focusing on,” he notes. “It's really the capability of companies like us and others that have developed sophisticated business models.”
Some of the sophistication has come via organic growth. Two former Collins Avionics employees founded Cedar Rapids, Iowa-based Intertrade in 1969. For a quarter of a century, the family-run business specialized in secondhand avionics made by cross-town neighbor Rockwell Collins. In the mid-1990s, Intertrade expanded, adding warehouse space and parting out a Boeing 737-300 to help fill it. In 1999, Rockwell Collins bought Intertrade. Today, the company's inventory is just as likely to feature harvested parts from a 15-year-old 737-700 (MSN 28437, purchased a year ago) as it is refurbished components made by its parent.
Diversification also gives companies more options as markets shift. At conglomerates such as GE and Rockwell Collins, the synergies of an OEM unit, a large aftermarket services network, surplus-parts specialist and (in GE's case) leasing arm are self-evident. Smaller companies such as GA Telesis are playing the diversification game, too. The company leases out about 120 aircraft and engines, giving it perspective into the aircraft-demand market.
When the company evaluated the prospects of a recently purchased 12-year-old 737-300 (MSN 30723) and a 1999-vintage 777-200ER (MSN 28418), it saw more value in parting them out to support the existing fleet than keeping them in the fleet. Put simply, the present value of the part-out's revenue potential over, say three years, was greater than the potential lease returns plus the residual value.
“We could've put them back in service,” Moabery says. “But economically, it makes more sense for us to part out the aircraft and put those parts into the aftermarket today.”
Ten years ago, few surplus-parts dealers could extract enough value from a middle-aged, in-demand airliner to make such a call. Five years ago, 54% of surplus-dealer stock came directly from part-outs, ICF SH&E calculates. Last year, the figure was 82%.
“The suppliers are becoming more sophisticated, both technically and financially,” Moabery says.