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End of the part-out party

The returns from aircraft part-out can be conservative and hard to predict, a number of industry figures agreed during a conference today (September 24).

Speaking at the International Society of Transport Aircraft Trading, Gerry Butler, director at Apollo Aviation, said that his company can sometimes now earn more from resale than part-out.

He explained that over the last 12 months, the time between receiving an aircraft and putting it back on lease has lessened, proving that the resale market is strong.

The supply of aircraft for part-out has also been constrained by a wave of operators extending leases on aircraft that might previously have been removed from service.

"We've found it difficult to keep up with demand, particularly on the engines side. Tracking data for the CFM we see that 2014 seems to represent a very contracted market in the availability of aircraft for part-out that we are interested in," said Christopher Whiteside, president of spares supplier AJ Walter.

According to Whiteside, his company earns only a quarter of its profits from part-out, and other speakers confirmed that the days of easy money may be over.

"The market had an idea that there were exponential returns. That may have been the case [but not any longer]," said Butler.

A growing risk from part-out is unpredictable returns. David Veal, CEO of KV Aviation said while one of its recent aircraft went to the SAS for training and a healthy sum, another was "made into coke cans."

Nonetheless, operators are still clamouring for affordable used parts, if Allegiant Air’s experience is anything to go by.

"OEM prices change every year and this is a big problem for operators taking an aircraft to the end of its life,” said the airline’s SVP of planning, Jude Bricker.

"We have torn down 100 JT8s and used the parts to maintain our fleet. We overhaul a JT8 for $500,000, if we had to buy all the parts including LLPs it would be $2.5m."

 

Additional reporting by Mary-Anne Baldwin

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