Parts pooling and parts de-stocking are here to stay. Industry observers are less sure about the present surge in part-outs. While agreeing that there are “more part-outs of newer equipment,” Adam Pilarski, Avitas' senior vice president, is not sure if the phenomenon is a trend or an aberration. The current crop of statistics supports the migration to newer aircraft. But the notion this is a long-term trend awaits compelling confirmation.
While there are substantial statistics as to how many commercial aircraft are being retired per se, the evidence as to how many newer aircraft are actually being parted out is largely anecdotal. Marcontell says, “We know for certain the number of retirements per year are at the highest point they've ever been.” He says in the mid-2000s, 220 to 230 airliners per year were leaving the fleet. Now it's in the 400 per year range.
Again, anecdotally, William Whelan, Avitas' senior director of technical service, envisions two to three 737-600s being parted out per year, a like number of 737-700s and a couple of 737-800s. Next year, the Avitas executive estimates perhaps five 747-400s will meet the same fate. Air New Zealand already has parted out one of its -400s according to the airline's Brigitte Ransom.
A tidal wave? No. But once again the issue is whether it presages an emerging trend, says Pilarski. He asserts we won't know until about 2014 or so. TeamSAI's take is “This is more of a temporary phenomenon, rather than a long-term change,” says Marcontell.
It is enough that this part-out migration is already affecting parts availability and prices. The phenomenon is fully entrenched in the classic A320 ranks. “At some point, there's going to be a flood of parts” on the market, asserts Marcontell. That glut could further drive down the aftermarket price for spares, perhaps beyond the current 10-20% range.
While he doesn't see 737NGs succumbing to parting-out at the same rate as older A320s, he does contend the practice will affect some of the earliest CRJ700s and -900s.
Underpinning increasing part-outs is the looming introduction of the 737 MAX and the A320NEO, to which airlines are flocking in an effort to contain fuel costs. The ability of airlines to finance new airplanes “is fairly easy” asserts Pilarski. “Financing older equipment is much more difficult.” He says the Export-Import Bank of the United States is not going to finance used airplanes, nor will the Europeans. “As a result, there's not a marketplace for used aircraft the way there used to be.” And that means many of these craft are worth more in parts than as flying machines. Pilarski cites the case of an A319 sold to a parts dealer for $14 million. The best offer from a carrier or lessor was $12 million.
ROI reigns. If an owner can realize $2 million more by parting out the airplane, no matter how young it is, that is the rational route to take, “This whole thing is being driven by economics,” says Whelan.
IAA's Weinberg sees new aircraft and powerplant parting-out as a further “driver of inventory reduction” among both engine shops and airlines. The reason is straightforward. Carriers and shops “know there's more supply out there.”