The profession of ‘aircraft wreckage’ was crowned in the Covid-19 era

Even when the airline industry is still in a slump because of the pandemic, the head of the US commercial aerospace company GA Telesis said five airlines contacted the company and offered to use it. aircraft dismantling services.

“As companies that store, dismantle and buy and sell used aircraft parts see a business opportunity, a sudden increase in supply risks a drop in component prices. This business is still worth an estimated $ 3 billion a year, despite the need to find ways to reduce maintenance costs from airlines, “said Abdol Moabery, CEO of GA Telesis.

On the other side of the border, Canadian aircraft decomposition and recycling services company Aerocycle is bidding for the first time to buy ground planes for dismantling and resale to parts, rather than just recycling. aircraft under consignment from the airlines, the CEO added.

Forecast of a promising market

The profession of aircraft wreckage was crowned in the Covid 19 era | Internet

It can be said that the fate of the group of aircraft sitting on the ground around the world is being closely watched by the “players” in the used aviation materials market. And a report from consultant Oliver Wyman predicts that “a tsunami of demand” for such parts is imminent, as airlines continue to look for ways to reduce costs amid the pandemic. .

Because used materials can compete with new parts and reduce the immediate need for “after sales” spending – referring to the maintenance, repair and overhaul sectors – is now underway. Consultancy firm Naveo Consultancy is estimated at about $ 50 billion.

That is why an executive in the aviation industry said he has avoided buying parts at present, assuming that prices will drop if too many planes are dismantled in the near term.

“I think we’ll see prices drop quickly”, the executive director said on condition of anonymity.

According to the Cirium data company, the number of aircraft dismantled for parts or scrap could double to 1,000 annually by 2023. This number will increase from about 400 to 500 aircraft per year. as of 2016, according to the Cirium data company.

Naveo estimates that only 60% of the global fleet of passenger and cargo aircraft is currently in flight. And by 2020, Naveo expects 2,000 jets to retire, or park and become inactive, up from about 680 in 2019.

“But those planes will not be dismantled immediately, as some airlines will wait for the market to improve again.” Richard Brown, CEO of Naveo Consultancy, said.

Indeed, UK-based Air Salvage International, which typically dismantles between 40 and 50 planes a year, has had to take in more aircraft with no parts buyers since. outbreak of the Covid-19 pandemic. Founder Mark Gregory expects and predicts that they will eventually be dismantled. Prior to the pandemic, the machines delivered to the Air Salvage International parking lot were ordered by customers, reflecting a huge demand for high-demand aircraft parts such as engines.

The airlines also look for viable used parts from retired aircraft to equip their younger aircraft under maintenance. That allows airlines to avoid costly repairs and keep their jets running smoothly.

“GA Telesis has seen airlines use spare parts from decommissioned aircraft to delay repair operations”, Mr. Abdol Moabery said.

The profession of aircraft wreckage was crowned in the Covid 19 era | Internet

The pandemic, which is expected to reduce passenger numbers by 55% by 2020, has caused old planes to retire early, including British Airways B747 jets. Some of them belong to Air Salvage.

However, having fewer two aisle planes on international flights means less demand for their parts, except for some aircraft used to carry cargo.

Mr. Gregory said Air Salvage was approached by an aircraft leasing company to carry out the dismantlement of some A380s, but only about 5% of the jets were still operating under Naveo, so demand was with parts they are very small. Airlines are looking for parts for narrow body aircraft, as about 64% of these single aisle aircraft are in operation, flying domestic routes.

James Benfield, a partner of Baird Capital, a private equity investment firm, expects demand for disassembly services for the single-aisle B737 and A320 aircraft to increase. This is also the reason why this company just acquired a disassembly company in August.

And while the maintenance companies and the manufacturer of new engines also trade in used materials, the spare part surplus can hurt their sales. The General Electric CEO said during the earnings press conference in July that the company is “well-positioned to enter” into the industry, thanks to its trend towards usable materials. The group’s subsidiary, GE Aviation, makes engines, but also uses used parts.

The “hunting season” of second hand dealers

The profession of aircraft wreckage was crowned in the Covid 19 era | Internet

Aerocycle saw the opportunity in the early retirement of the planes. The small aircraft recycling company has hired a new business development manager to boost demand while looking to buy more planes.

“It’s a calculated risk”CEO Ron Haber said. “We know what kind of aircraft will fly and remain in high demand.”

Airlines have avoided selling planes at a loss, despite pressure from some hunters for cheap goods.

“There are lots of price squeezing deals going on“, Mr. Moabery said. “But those offers have yet to be accepted.”

Companies such as the Florida-based International Aircraft Association (IAA) are monitoring cases where airlines and lessors will cut losses by the end of the year and split their parked planes to take. parts.

“If they do that, that’s when people like us are ready to get in,” IAA President Mitch Weinberg said.

Refer Reuters

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