Before too long, China will likely be the largest aviation market in the world. It already has a robust maintenance infrastructure and has begun producing its own regional aircraft. But for quite a while to come, it must still import parts for its mainline fleets from abroad.
The major challenge for Chinese airlines in procuring these parts has been getting on-time and on-quality delivery from suppliers, says Yongdong Hu, head of Satair sales and support in China. He attributes these challenges to a number of difficulties: no stocks or long lead times, geographic distances, different time zones and complicated logistics and communication with suppliers located outside of China.
In addition, a new challenge over the last six months has been the increased purchase cost from U.S.-based suppliers due to the U.S.-China trade conflict. “Raw material and import tariffs on aircraft parts have increased, form 10% to 30%, depending on part category,” Yongdong says. “European suppliers are preferred by some Chinese customers if there is an option.”
Satair continues to improve timeliness and quality of deliveries by increasing stock availability in China. This speeds delivery and reduces transportation costs. The Airbus subsidiary is also expanding its local supporting team for better communication. “Same time zone, language and culture,” Yongdong stresses. And it is deploying a digital service platform, connecting with customer purchasing portals for ease of doing business and efficiency.
The Satair exec says Chinese airlines are familiar with the flight-hour support concept, but only a limited number accept it and then only for selected aircraft such as Airbus A350s and A330s and Boeing 787s. “For legacy platforms like A320s and 737s, airlines still prefer in-house capabilities or the traditional transaction model.” But there is a trend among some start-ups to outsource component management to third parties.
Yongdong says used parts have been a critical subject at most Chinese airlines, but acceptance of used parts is still low. “The driver of used-part acceptance is not cost but availability, in other words the customers need it urgently and there are no alternatives.” And Chinese airlines accept used parts mostly for cabin interiors or other none-critical items, where safety concerns are lessened.
Nevertheless, Yongdong predicts increased acceptance of used parts in China in coming years due to aging aircraft and dismantling of these planes, both Airbus and Boeing models.
The situation for PMA parts is similar, with no big market yet in China. “Customers are taking a cautious approach towards PMA parts in general,” Yongdong says. But Chinese PMA providers are becoming much more active in developing PMAs approved by Civil Aviation Administration of China.
For the future, Yongdong predicts more efficient part purchasing. “Most Chinese airlines have developed their own part portals where the suppliers are invited for bid. Purchasing is becoming digital and more efficient.”
He also sees more outsourcing. Chinese airlines are looking for low cost of ownership and will outsource part supply to streamline supply chains. “Very high inventory holdings accumulated over the years have become a serious financial burden for most airlines, especially state-owned operators. The government has urged all state-owned companies to reduce inventory, which is one key performance indicator for airlines.”