28322242960_8c6505ed4f_k.jpg Nigel Howarth/Aviation Week

Surplus Shift

In the used-parts world, the smart money is on rapid shifts.

In the short-cycle world of used parts, what a difference a quarter can make.

As the 2016 calendar closed out, Rockwell Collins wasn’t seeing much upside in its Intertrade used serviceable material (USM) business. The company’s fiscal year first quarter, which ended Dec. 31, saw the business decline some—quite a contrast to its usual double-digit-growth returns. 

The near-term didn’t look much better. Rockwell Collins President and CEO Kelly Ortberg said in February that he wasn’t seeing much potential for growth in the business in 2017.

By mid-April, however, his view had changed. 

"I think I'm going to be wrong on that. I think that we are going to see a stronger Intertrade,” Ortberg told analysts during the company’s fiscal Q2 earnings call. "As I look, there are a lot more opportunities than what we saw when we entered into the year."

Speaking with MRO-Network.com on the sidelines of a recent media event, Ortberg elaborated on the shift. While there isn’t enough data to label the change a trend, he said that all of the new opportunities tempting Intertrade are in narrowbodies—both aircraft and engines.

"The supply and demand has to get matched,” he said. "I have a philosophy that I will not buy an aircraft and tear it down unless we have a good portion of that aircraft sold before we buy it.”

The used-parts market has its share of speculators, but Ortberg's approach means Intertrade won’t ever be among them. It also has its share of bargain-hunters, which—like Intertrade—will pounce on a sensible deal when they see one.

At the recent MRO Americas show, Southwest Airlines confirmed that it is keeping an eye on the used 737NG parts market as the next-generation MAXes begin to arrive [http://aviationweek.com/awincommercial/southwest-eying-used-737ng-parts-market-price-drops]. While the U.S. carrier is set for parts now, it could be enticed to make a large purchase for the right price, as its 737NGs aren’t going away anytime soon.

Analysts at Canaccord Genuity note that Southwest is hardly alone. 

"We believe airlines and MROs are looking to used material more frequently as this market has matured,” Canaccord said in a late April research note,  "and we believe this will continue to be a headwind for many component suppliers.”

Having Intertrade means Rockwell Collins can worry less about USM than most of its counterparts. Getting parts at the right price, however, will always be a concern.

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