A glut in narrowbody aircraft will change maintenance, repair and overhaul for mature markets over the next decade. ATE&M takes a look at how Honeywell Aerospace Trading (HAT) hopes to capitalise on these developments with further expansion into the pre-owned parts market.
America’s position as a continent sized country with a developed aviation manufacturing sector has shaped the global aviation market. Low-cost carriers, codeshares and the hub system are among the innovations to originate in America. With a mature market come mature problems. The aviation industry faces a challenge that originates in its own relentless innovation: too many aircraft.
As airlines compete to find quieter, larger and more efficient aircraft a surplus has emerged. Narrowbody aircraft – the mainstay for regional airlines across the US – are the most acute problem in the ageing aircraft market. Honeywell estimates that narrow-bodies sent for dismantlement has increased by 40% over the past three years, the bulk being 737 models from 1-9 and A320s/A321s. As Neo and Max aircraft come into service the discarded numbers are likely to increase.
“The number of aircraft in boneyards is quite astonishing. Some sites have up to 300 aircraft in storage, and at most only 20% will fly again,” says Steven Horder, Director at HAT. Business Financials also push airlines to abandon aircraft earlier and earlier, adds Horder. It can be difficult for airlines to find finance for aircraft over 15 years old. The most extreme case was a seven-year-old aircraft that was broken up for parts, he adds. Australia is to host the first aircraft boneyard outside the US to deal with demand for space to mothball aircraft. Once a practical solution for surplus aircraft, the boneyards have become wasteful.
Redundant, but not useless
Although dubbed “ageing aircraft” most discarded models are far from completely exhausted. Most contain serviceable parts that could be used to service similar models. Some aircraft are retired after less than ten years’ service. Increased aircraft production and lower lease rates have challenged established longer service lifecycles.
Engine MRO represents the second-largest financial outgoing for the operators of the 25,000 strong global air transport fleet. It’s one area that is sometimes overlooked when it comes to cutting costs with debate often concentrating on issues around Parts Manufacturer Approval (PMA). The market for pre-owned parts has been always been small, only 10% of all MRO in 2001. Growth over the past decade has brought that figure to 20%, but there’s understandable caution in an industry where safety is a vital factor. Even if pre-owned parts are as almost new there’s a prestige issue.
Second life with Honeywell
HAT aims to turn the ageing aircraft problem into a practical means for airlines to cut MRO costs. The company has established a global network for pre-owned parts, featuring both Honeywell and non-Honeywell equipment. “We maintain two primary warehouses – one in Europe and one in North America however Honeywell has an excellent network of global locations and robust logistics network to quickly get a part where it is needed,” says Lee Reed, sales support specialist at HAT. While America might be generating the pre-owned parts there’s global potential for the MRO sector, which HAT accommodates through a multilingual team on standby 24/7.
The intention is to provide a comprehensive service across the globe. Products covered include avionics, lighting, APUs, engines, wheels and brakes. HAT parts are surplus or reconditioned. “Maintaining stocks of Overhauled and Serviceable material offers a choice to our customers who may be looking for an alternative to new for lead time or budgetary reasons. We can also offer exchanges to our airline and MRO customers,” adds Reed.
Quality is an important factor. Honeywell is among the most well established Original Equipment Manufacturers (OEMs) in the industry. After all, it built the first autopilot back in 1914. Each part that is processed goes through a rigorous OEM-certification process. “HAT repairs parts through the Honeywell network of repair facilities and utilises other OEM and licensed MROs offering a warranty on all repaired and overhauled parts,” says Reed.
Opening a new market is a challenge for HAT, “Having the right stock available when the customer needs it can be a challenge, we like to work as closely as we can with our customers to understand their business and try to forecast in advance but any help our customers can provide is always greatly appreciated; we work closely with our market forecast team to predict the demand and availability of equipment,” says Reed. With regional offices in Geneva, Phoenix, Prague and Shanghai HAT are well-placed to serve customers from across the globe.
Power for Piedmont
An Auxiliary Power Unit (APU) is an aircraft’s hidden engine, it’s the workhorse that keeps an aircraft moving on the ground and also powers cabin comforts like air conditioning and lighting. Piedmont Aviation has maintained aircraft for 60 years from a base near Greensboro, North Carolina. Honeywell APUs have been a long-standing element in Piedmont’s work, especially for the business jet market. The company services aircraft that range from Dassault Falcons and Cessna Citations to Gulfstreams.
The economic downturn hit the business jet market hard, and Piedmont resolved to deliver better economy for customers, especially on APUs. Refurbished and reconditioned parts are an ideal way to meet this challenge. The importance for Piedmont lay in ensuring that parts retained quality levels.
There were several ways HAT met Piedmont’s specifications. HAT could guarantee parts went through the AS9100 process that ensured each part met the highest standards for quality and operation. Each product features Federal Aviation Administration (FAA) documentation, Civil Aviation Administration of China (CAAC) airworthiness approval tags and compliance with ASA-100 certification requirements. HAT could also lay hands on out-of-production parts. Further reassurance for the company came from HAT’s offer to buy back surplus parts, which provides an added economy measure.
Todd Schwartz, Piedmont’s CEO, says, “There is a huge market for reconditioned equipment and we pride ourselves on listening to our customers and figuring out how best we can meet their needs. Honeywell Aerospace Trading provides us with access to a huge inventory of the very best components available, together with the peace of mind that they have all been rigorously tested and approved for service. Our relationship with Honeywell stretches back more 20 years and our work with Honeywell Aerospace Trading has been a vital part of our business in recent years. In today’s highly competitive world customers want the very best quality at a great price. It is testament to the quality of Honeywell’s products that, so long as the reconditioning work is carried out to the requisite quality with the appropriate testing and verification, our customers know that the components are essentially as good as new, with years of service ahead.”
“We talk to our customers regularly and ask for feedback on our service; we strive to respond as quickly as we can. We quote customers based on our market knowledge and product awareness so that delivery times are achievable and we work hard as a team to make sure On Time To Requirement (OTTR) is not only met but exceeded,” adds Reed.
There are three elements to HAT’s collaboration with Piedmont. First is HAT’s world-class reputation and accumulated skill, which reassures Piedmont that the equipment is reliable. Second, the knowledge that HAT’s equipment is good as new. Third, Piedmont can be sure that HAT’s parts are competitively priced.
“Clearly it’s been a tough few years for many of our customers, for whom keeping their aircraft in the air is absolutely essential to their business. This is a great example of how to respond to customers and to really contribute to their success,” adds Schwartz.
HAT’s approach to the glut in the ageing aircraft market trades on an established brand name and relationships, which are vital in the quality conscious MRO community. This allows HAT to access global markets that would otherwise remain – if not completely closed – much less accessible. At the moment the ageing aircraft question is one that concentrates on the narrowbody sector, and that isn’t a situation HAT expects to change soon. “In our experience the wide body sector moves differently to narrow bodies due to the operation type with wide body retirements being lower and driven primarily by fleet changes rather than individual aircraft replacement. However there will always be opportunities for overhauled and serviceable materials to support both fleet types,” says Reed.
Whatever changes in the market during the next few years HAT is well positioned to take a lead in developing the trade in spares and second hand parts. This might even be the beginning of the end for desert boneyards.