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New Entrants Attracted To Aircraft Dismantling Arena

With 9,900 aircraft forecast to retire in the next decade, nontraditional players are chasing the disassembly market.

As the market prepares for 21,000 new aircraft to enter service over the next decade, Aviation Week forecasts that more than 9,900 aircraft will be retired. This is attracting new entrants into the disassembly market in search of used material opportunities.

Karl Trowbridge, AeroTurbine’s senior vice president and managing director of international sales, says over the past two years he has noticed “nontraditional players trying to enter the dismantlement space.” They fall into three categories. First are those that disassemble assets for internal consumption—as British Airways is doing with its retiring Boeing 747s. The second category includes companies that break down aircraft for internal or external consumption. However, he cautions, “Internal stakeholder objectives don’t always align with external customer behavior.” The third group are those who disassemble without a clear strategy—and usually approach the market on a project-by-project basis, as opposed to a fully thought-out strategy. “Materials tend to build up, are overpriced and can be underutilized,” says Trowbridge, speaking at Aviation Week’s MRO Asia-Pacific Conference.

“People must have a strategy of how to monetize retiring assets,” including having good parts records to ensure traceability, he says. Without such record-keeping and a clear strategy, companies are left with too many parts after the prime ones are sold-—and an unhappy chief financial officer, he says. AeroTurbine has disassembled 429 engines and 188 airframes since 2006.

GA Telesis entered the teardown market in China with a clear strategy—to be the first integrated aircraft trader/teardown company. It accomplished this by forming a 50/50 joint venture with Air China, GA Innovation China (GAIC), in 2013 and disassembling an aircraft and redistributing the parts in China that same year. 

The aircraft was an Air China Boeing 747-400 torn down by Ameco—the parts were warehoused and sold from a GAIC warehouse in Beijing and the engines exported to the U.S.

During its first two years of operation, GAIC focused on tearing down aircraft registered in China, but in July, it imported its first aircraft—a Boeing 767-300—for disassembly.  Haite High Tech Co. in Tianjin completed the disassembly for GAIC.

Working from five local facilities in China, GAIC can tear down aircraft in a tax-free zone, which allows it to sell parts directly in China and avoid duty and tax charges, says Lynda Cheng, vice president of Asia business development for GA Telesis. She adds that breaking down aircraft within China can save $100,000 in ferry costs.

While disassembling aircraft locally has its advantages, Trowbridge cautions that companies must first consider taxes and duty costs, which can negate any savings on ferrying. For instance, for companies that don’t operate out of their own brick-and-mortar facility in Europe, VAT charges can make it cost-prohibitive to tear down aircraft there. “That’s why we usually move them back to [our] Goodyear [Arizona]” facility, he says.

Brian Kough, Aviation Week Intelligence Network director of forecasts and analysis, says 1,330 aircraft will retire from China and the Asia-Pacific region over the next decade—with only 305 expected to retire from Chinese operators. The largest fleet type retiring from that region are 737s, largely due to the age and sheer volume of the type in operation now.

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