P1030516.jpg Sean Broderick/Aviation Week

Used Parts Market Growing, Yet Stand-alone Traders Face Pressure

Demand for integrated services, OEM involvement changing used-parts landscape.

MIAMI BEACH — Used serviceable material (USM) remains a significant—and growing—business for aftermarket service providers, yet those that don't expand beyond only trading parts risk finding themselves marginalized as the marketplace matures.

"With OEMs playing a bigger role, it's going to get more difficult for smaller companies to make it," Abdol Moabery, CEO of GA Telesis (GAT) said at Aviation Week's Airline Engineering & Maintenance North America conference here Oct. 18. "It's a tough and competitive business. The differentiator for a large company is the breadth of services that you offer, rather than just selling parts."

Once known primarily for its part-out prowess, GAT has expanded its services in recent years. The company still dismantles aircraft and engines, Moabery notes. But the harvested parts now mostly support the company's own engine and component MRO shops or long-term service agreements. GAT also has expanded into leasing, inventory management, and even financing large spares pools.

"USM is a smaller part of our overall business than it has ever been," he says. "At this point, it's just under one-third."

The shift at GAT is not a reflection of declining USM demand. ICF International sees the market growing at an average annual rate of 5.2% through 2026, out-pacing MRO as a whole. In dollar terms, USM will generate $7.7 billion in 2026 sales, ICF says.

USM's value proposition is simple: it offers a cheaper alternative to new parts. But changing airline strategies are helping boost demand as well.

"Airlines are embracing the cannibalization of their own aircraft, then using the rotables to reduce the cost of future maintenance, or the engine parts to lower overhaul costs," says Richard Brown, ICF principal. 

Add in broader acceptance in regions like Asia—and China in particular—long resistant to non-OEM parts, and USM still has tremendous growth potential. 

"It's a slower boil, but there is greater acceptance in China for used material," Brown says.

The shift is linked to a familiar theme—airlines are pushing the cost-reduction envelope. This is driving providers to find cheaper ways to deliver equivalent levels of service. Engine OEMs, still the primary consumers of used parts, have mastered this, and others—from airframe and component OEMs [http://www.mro-network.com/components/utcs-used-serviceable-material-play] to traditional MRO providers—are following their lead.

USM "is a large part of AAR's strategy," says Carl Glover, VP of marketing and sales for AAR Corp., which has been aggressively expanding its long-term-agreement support business to complement traditional MRO work. "It's ideal for getting equipment fast and at an economical price."

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