Used Parts Demand On The Rise

A growing acceptance and availability of used parts is helping to drive down overhaul costs, say leading engine maintenance specialists. However, the leasing sector is less receptive to the concept, due to concerns over asset values. Alain Berube, who is SVP Asset Management and Operations at aftermarket spares specialist Volvo Aero Services (VAS), told delegates at Aviation Week’s Engine MRO forum in Munich on Nov. 30-Dec. 1 that the use of used material in engine overhauls is five or 10 times greater than 10 years ago. “This is because of cost constraints, availability and operator demand,” he says. Berube says that while around 10% of the 2,000 airliners currently in storage are expected to return, the bulk are being parted out and creating a good supply of used spares. “The acceptance has changed tremendously. Used material is good as long as the commercial trace documentation is good – i.e. who operated the engine, non-incident statement and life-limited part (LLP) information etc is very important.” VAS is very active in the market for used spares for the older technology engines such as the CFM56-3, and General Electric CF6-80C2 and CF34-3A/3B, says Berube. “Those are engines that will last for another two, five, or 10 years and where it makes sense for an operator to buy used material.” Berube says that during 2010 VAS will part out over 60 engines for spares material, and will probably double that figure in 2011. “There is also a lot of surplus new spares which is available and discounted,” he says. “We can look at an MRO provider’s surplus material and have an agreement to sell that to other MROs.” Kate Schaefer, who is SVP of Business Development & Marketing at spares specialist HEICO Aerospace, says there has been a major shift in the industry’s attitude to the use of patented “PMA” parts, which offer significant cost savings over spares supplied from the OEMs. “It’s not considered controversial anymore. PMA is mainstream and supported by the world’s major airlines,” she says. Schaefer quotes data from analysts AeroStrategy that shows PMA parts account for 2% of the global MRO business. However she adds that at specific maintenance shops which support PMA parts like Lufthansa Technik or Delta TechOps, the PMA penetration is closer to 20% on certain engines. “In 1996, PMA and ‘DER’ repairs provided $50,000 in savings for a heavy shop visit on a CF6-80C2 engine. Today, if you include Chromalloy DER repairs and the HEICO PMAs, the saving is $600,000,” Schaefer says. “This is growing faster than some people imagine.” However the PMA sector is facing obstacles to its expansion due to opposition in some quarters, particularly among the engine leasing companies. “For the foreseeable future I don’t see an increased appetite from the lessors,” says Julian Rees, Lease Manager at engine lease specialist TES Aviation Group. “Their key considerations are the asset’s value and its lease ability. There would be concern that if the next lessee is an airline that didn’t accept PMA, then they’d be stuck with an asset that could take an extra three or four months to place.” Rees says that another issue is that lessors don’t always benefit from any maintenance cost savings that PMA can deliver. “The drivers are different between lessors and airlines. The costs savings are there for the airlines because they are paying the bill. From the lessor’s side, if it is the lessee paying the bill it doesn’t have that direct an impact to offset the asset value risk,” he says.