“This is as good as it gets,” says Tom Vincent, managing director of Asia Pacific Aircraft Storage, referring to the strong growth in Asia-Pacific aviation. “Still, I think aviation remains cyclical,” he observes.
That means a downturn will come someday. And although a downturn in Asia will more likely be a slowdown in growth than a decrease in traffic, it could prompt airlines to park older aircraft temporarily, before returning them to service when things pick up again.
Vincent argues he has the ideal storage place, in Alice Springs, a desert city in northern Australian with average humidity of 25%, low rainfall, and low-lying vegetation that suppresses dust. “It’s the only hot, dry storage facility in Asia-Pacific,” Vincent notes. “Operators do not have to fly across the Pacific to the American desert. We’re only five hours from Singapore.”
There are other storage option. For example, in 2014, China Aircraft Leasing Group Holdings opened a storage and part-out facility in Harbin, in northeast China, close to the center of all that rapid growth. But Harbin is also known for the coldest weather and longest winters among major Chinese cities. That’s a harsh environment for both planes and anyone who does work on them.
Vincent says the storage business is slow now, due to the traffic boom, but may pick up if fuel prices stay high. “We are already seeing some signs of pickup due to fuel prices and overcapacity.” He notes there is softness in the market for Boeing 747s, with Qantas due to shed all its 747s by 2021. The market for 777-200s is also weak, and this may spill over to 777-300s. Older Airbus A330s and A320s could also be grounded.
Meanwhile, APAS has other businesses. The company does MRO under certifications from Australia, the U.S., Europe, Bermuda and Singapore. Most of Asia-Pacific, outside India, is well furnished with MRO facilities, Vincent acknowledges. But fast growth has meant, “lessors sometimes struggle to find slots.”
And APAS also parts out aircraft, having recently disassembled two Boeing 737s. The company is serious about the part-out business and has built its own IT platform that ties together maintenance and marketing of parts from disassembly. “Buyers can log in and see photos of the removed parts immediately,” Vincent says.
APAS hopes to ramp up to parting out one aircraft per month. Vincent says older aircraft yield marketable parts in engines, APUs, avionics, actuators and landing gear with enough green time left. “For newer aircraft, customers might take a thousand line items.”
And when traffic growth eases up, APAS’s hot, dry parking lots will be ready. “Goldilocks growth does not last forever,” Vincent predicts.