SINGAPORE—Aviation Week forecasts that more than 9,900 aircraft will retire over the next decade as airlines take delivery of new types.
This is attracting new entrants into the disassembly market who are chasing the opportunities.
Karl Trowbridge, AeroTurbine’s senior vice president and managing director of international sales, said that over the past two years, he has noticed “non-traditional players trying to enter the dismantlement space.” They fall into three categories: The first is those that disassemble assets for internal consumption, such as what British Airways is doing with its retiring Boeing 747s. The second category includes companies that disassemble assets for internal or external consumption, however, he cautions that “Internal stakeholder objectives don’t always align with external customer behavior.” The third group encompasses entities that disassemble assets without a clear strategy—and usually approach the market on a project basis, as opposed to a fully thought-out strategy. “Materials tend to build up, are over-priced and can be under-utilized,” Trowbridge said.
“People must have a strategy of how to monetize retiring assets,” including having good-parts records to ensure traceability, Trowbridge added. Without this and a clear strategy, companies are left with many parts after the prime ones are sold and an unhappy CFO, he said.
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 in 2013—GA Innovation China (GAIC)—and disassembling an aircraft and redistributing the parts in China that 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 were exported to the U.S.
During the 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. Tianjin HAITE High Tech Co. completed the teardown for GAIC.
The company works from five local facilities in China, and can tear down aircraft in a tax-free zone, which allows it to sell parts directly in China and avoid duty and tax charges, said Lynda Cheng, vice president of Asia business development for GA Telesis.
She says tearing down aircraft within China can save $100,000 in ferry costs.
While disassembling aircraft locally can have advantages, Trowbridge cautioned that companies must first consider taxes and duty costs, which can negate saved ferrying costs. 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 said.
Speaking at Aviation Week’s MRO Asia-Pacific Conference, Brian Kough, director of forecasts and analysis, said 1,330 aircraft will retire from China and the Asia-Pacific—with only 305 expected to retire from China operators. The largest fleet type retiring from that region are Boeing 737s, largely due to sheer volume and age.