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An interesting "not-too-long-to read" feature at AviationWeek.com
Parting Out
May 13, 2010
By Jerome Greer Chandler
In the aircraft disassembly and parting out business, this is both the best of times and perhaps the most challenging. “Parked aircraft are at historic levels,” says Steve Connolly, president and CEO of GE Capital Aviation Services’ Asset Management Services division. “There are about 2,900 aircraft that are currently parked worldwide,” echoes Tom Stewart, president and CEO of Stewart Industries.
Historically, Stewart says about 80% of aircraft that enter a storage program never emerge whole again. “They’re parted out and eventually scrapped.”
We don’t know how many desert darlings will ever take wing again. It’s still too early to tell. What we can say is commercial aircraft are being taken apart at what could be record rates.
Stewart Industries has contracts to dismantle and part out 50 aircraft over the next 12 months. In mid-March, it had 125 airplanes under its control. GECAS’ Asset Management Services will part out “30 to 35” aircraft this year,” says Connolly.
And Angela Hancock, director of contracts and business development for Southern California Aviation in Victorville, Calif., says, “When I started in 2006, we had approximately 130 aircraft on the ground...now we’re staying pretty consistent at 240.”
Over the ensuing 20 years, “8,000-10,000 commercial aircraft will be dismantled and recycled…depending on the value of aluminum scrap and the spot markets,” says Martin Fraissignes, general manager in charge of strategy and development for the Airport of Chateauroux-Center south of Paris.
This influx of idle aluminum, specifically the things salvaged from it, is affecting the price of aviation parts, both OEM (Original Equipment Manufacturer, original parts) and overhauled. “You’re seeing a little bit of a collapse [in OEM parts] pricing,” contends Connolly. And that’s “forcing us to probably take prices down a bit, further than we would normally operate.”
“To some extent” prices are being depressed, agrees Fraissignes. “There is a huge number of parts available on the market…But the one that you want never corresponds to the one you’re looking for.”
Thus, as in the case of re-conditioned carbon brakes, some components command a premium. “In general, the market is so-so. But that doesn’t preclude the fact certain parts may be expensive.”
Today, 737-300s, MD-11s, 767-300s, Airbus A340s and even a smattering of seven-year-old A318s are showing up on tear-down ramps.
One reason younger planes are popping up: “There have been a lot of lease returns,” says Stewart. “[Airline] capacity hasn’t returned as quickly as everybody thought, and you’re seeing some of the newer iterations of aircraft—including some of the regional aircraft—being parked.”
While the aircraft are incrementally newer, the in-demand components that emanate from these eviscerations aren’t that much of a surprise. “Many investors seek to get an immediate return on the whole airplane by selling the engines,”
At the onset of the new century, it was ubiquitous JT8s that people plucked from parked airplanes. “We haven’t sold a JT8 in probably the last three to four years,” he says. Now, “the earlier model CFM56 engines are reaching the point the JT8s used to [occupy] five years ago.”
High-bypass engines, in whole or in part, are in demand, especially “any kind of internal parts for the CFM56 or CF6,” says Stewart. So red-hot are the hot sections of those powerplants that “There are people scavenging overhaul shops around the world to compete in that market and looking for spare parts to support their overhaul processes,” he says.
Harkening back to Fraissignes’ comment that certain components will always command higher prices, those carbon brakes he alluded to list for about $300,000 new. “An overhauled carbon brake would probably run for around $120,000,” says Avocet’s Arellano.
“Wheels and brakes are always in great demand, mainly because they’re the [components] that get used most often.” Other hot items include flight management computers, weather radar, landing gear and lots of line-replaceable units.
The price break? “The rule of thumb is about 60% of list price,” says GECAS Asset Management Services’ Connolly—at least as far as serviceable, repaired parts are concerned.
Parted-out components are appearing in places, like China, that until recently were all but verboten. There, “the paradigm has always been ‘OEM, new’ as far as parts are concerned,” says Connolly. That’s changing, and the economy has much to do with it.
Parting Out
May 13, 2010
By Jerome Greer Chandler
In the aircraft disassembly and parting out business, this is both the best of times and perhaps the most challenging. “Parked aircraft are at historic levels,” says Steve Connolly, president and CEO of GE Capital Aviation Services’ Asset Management Services division. “There are about 2,900 aircraft that are currently parked worldwide,” echoes Tom Stewart, president and CEO of Stewart Industries.
Historically, Stewart says about 80% of aircraft that enter a storage program never emerge whole again. “They’re parted out and eventually scrapped.”
We don’t know how many desert darlings will ever take wing again. It’s still too early to tell. What we can say is commercial aircraft are being taken apart at what could be record rates.
Stewart Industries has contracts to dismantle and part out 50 aircraft over the next 12 months. In mid-March, it had 125 airplanes under its control. GECAS’ Asset Management Services will part out “30 to 35” aircraft this year,” says Connolly.
And Angela Hancock, director of contracts and business development for Southern California Aviation in Victorville, Calif., says, “When I started in 2006, we had approximately 130 aircraft on the ground...now we’re staying pretty consistent at 240.”
Over the ensuing 20 years, “8,000-10,000 commercial aircraft will be dismantled and recycled…depending on the value of aluminum scrap and the spot markets,” says Martin Fraissignes, general manager in charge of strategy and development for the Airport of Chateauroux-Center south of Paris.
This influx of idle aluminum, specifically the things salvaged from it, is affecting the price of aviation parts, both OEM (Original Equipment Manufacturer, original parts) and overhauled. “You’re seeing a little bit of a collapse [in OEM parts] pricing,” contends Connolly. And that’s “forcing us to probably take prices down a bit, further than we would normally operate.”
“To some extent” prices are being depressed, agrees Fraissignes. “There is a huge number of parts available on the market…But the one that you want never corresponds to the one you’re looking for.”
Thus, as in the case of re-conditioned carbon brakes, some components command a premium. “In general, the market is so-so. But that doesn’t preclude the fact certain parts may be expensive.”
Today, 737-300s, MD-11s, 767-300s, Airbus A340s and even a smattering of seven-year-old A318s are showing up on tear-down ramps.
One reason younger planes are popping up: “There have been a lot of lease returns,” says Stewart. “[Airline] capacity hasn’t returned as quickly as everybody thought, and you’re seeing some of the newer iterations of aircraft—including some of the regional aircraft—being parked.”
While the aircraft are incrementally newer, the in-demand components that emanate from these eviscerations aren’t that much of a surprise. “Many investors seek to get an immediate return on the whole airplane by selling the engines,”
At the onset of the new century, it was ubiquitous JT8s that people plucked from parked airplanes. “We haven’t sold a JT8 in probably the last three to four years,” he says. Now, “the earlier model CFM56 engines are reaching the point the JT8s used to [occupy] five years ago.”
High-bypass engines, in whole or in part, are in demand, especially “any kind of internal parts for the CFM56 or CF6,” says Stewart. So red-hot are the hot sections of those powerplants that “There are people scavenging overhaul shops around the world to compete in that market and looking for spare parts to support their overhaul processes,” he says.
Harkening back to Fraissignes’ comment that certain components will always command higher prices, those carbon brakes he alluded to list for about $300,000 new. “An overhauled carbon brake would probably run for around $120,000,” says Avocet’s Arellano.
“Wheels and brakes are always in great demand, mainly because they’re the [components] that get used most often.” Other hot items include flight management computers, weather radar, landing gear and lots of line-replaceable units.
The price break? “The rule of thumb is about 60% of list price,” says GECAS Asset Management Services’ Connolly—at least as far as serviceable, repaired parts are concerned.
Parted-out components are appearing in places, like China, that until recently were all but verboten. There, “the paradigm has always been ‘OEM, new’ as far as parts are concerned,” says Connolly. That’s changing, and the economy has much to do with it.