Print headline: Parts Playbook
When sourcing aircraft and engine components, MROs and airlines have evolved their strategies over the past few years in the face of industry-spanning changes. These include the aftermarket supply chain becoming increasingly squeezed as OEMs increase their presence in the segment. Specific types of used serviceable material (USM) are also in high demand, a scenario brought about with the slowing of aircraft teardowns as operators take advantage of lower fuel prices by keeping their assets in service longer.
The slower retirement rate for aircraft is set to continue in 2019, according to Aviation Week’s Fleet & MRO Forecast, which projects 44 aircraft retirements this year, gradually increasing before hitting a high in 2023.
Nevertheless, USM offerings are becoming increasingly lucrative for component specialists, and market entrants are increasing. For example, Delta TechOps and Liebherr Aerospace have both created their own specialist USM businesses in the past year.
Among the established players in the USM segment is U.S.-based parts company AAR. One of its USM strategies is the procurement of aircraft for part-outs to support its USM availability alongside OEM purchases, leasing and trading. To date, it is still seeing a healthy flow of demand for USM.
“New fleet introductions have naturally caused an increase in demand for components that are unique to the latest aircraft variants,” says Carl Glover, vice president of sales and marketing for the Americas at Rockford, Illinois-headquartered AAR. “Buying practices have changed with more outsourced solutions, pools, power-by-the-hour or hybrid solutions being offered. Airlines have become more sophisticated in their buying methods for inventory optimization.”
Jorg Sulser, head of technical purchasing and supply chain at Swiss International Airlines, says parts-pooling coverage from its MRO partners (which include SR Technics and Lufthansa Technik) has largely negated the effects of any USM shortfalls on most of its fleet. However, he adds that “larger problems do exist on peculiar materials where nearly no USM is available and where manufacturers often don’t react fast enough to cover airline demand.”
Sulser also believes the parts-pooling concept will inevitably develop, considering changes in operations, technology or the supply chain. For the latter, he sees MRO mirroring practices adopted in the consumer industry, in “the easy and fast” delivery and online tracking of pool components to the customer, as well as return shipments of unserviceable items to the pool provider. These should become standard procedure to increase speed and transparency. He predicts an emerging technology could make an impact in components-pooling traceability. “Blockchain technology could be applied to capture all component history of pool components and make it easily available to the relevant stakeholders,” he says.
Another airline not seeing any USM shortages is Southwest Airlines. However, it has experienced supply chain issues around OEM new-part lead-time increases and shortages for its still predominantly Boeing 737-700 and -800 fleet, according to Peter Requa, senior director of technical operations for supply chain management. “This has resulted in some noteworthy component repair delays impacting line maintenance allocations,” he says.
“We have also seen some occasional minor delays at heavy checks due to material delivery delays.”
Benjamin Moreau, senior vice president for components at AFI-KLM E&M, sees USM as a key leverage factor in securing its supply chain and says it has only seen shortages for specific part numbers where the supply chain is tighter. “Operators look for competitive component support, and this means acquiring components with the right cost,” he says. “Also, the lead time and availability of new parts is not always the best; it’s one leverage [point] of our industry to improve total supply chain sustainability.”
Increasingly capturing the attention of airlines like Swiss and Southwest are parts manufacturer approval (PMA) parts, an alternative to OEM parts. The segment has been buoyed by carriers increasingly looking to streamline their costs in areas such as engine components—typically the highest-value parts. Some PMA figures illustrate the cost advantages: Delta Air Lines is reported to save around $20 million annually through PMA use, a figure amounting to nearly 1% of its MRO spending and double that of its MRO material costs.
“I expect PMA development to increase if supply chain pressures continue to impact spare-part deliveries and OEM consolidation provides more commercial opportunities,” says Requa, who cites “availability, product improvements and cost benefits” as the main advantages of using PMA parts. Swiss is also seeing the potential of PMA parts in its operation despite acknowledging that barriers still exist to their adoption. Sulser says PMA suppliers have been able to more effectively address customer needs in the past few years.
AFI-KLM E&M’s Moreau says the attention from maintenance providers for PMA parts will continue if the end-cost of new parts for operators remains too high. “If OEMs would secure low selling prices, low escalations, avoidance of obsolescence, to name but a few, then we would not even talk about [PMA],” he says.