The delicate equation of parting out a mid-life aircraft versus keeping it in service can change with a slight movement of lease rates and the filling of parts warehouses—situations that seem to have dampened the gutting of Boeing 737NGs in recent months, several aftermarket specialists say.
Air Salvage International (ASI) has parted out a total of eight Boeing 737-600s and -700s in the past two years, says Commercial Director Bradley Gregory. The earliest jobs, which came when fewer models had been parted out, yielded about 2,000 useful parts per aircraft, Gregory told attendees at MRO Europe on Sept. 26.
But as warehouses filled and some of the low-demand, low-wear parts became readily available, that figure declined. The latest jobs yielded about 750 parts that ASI expects to re-sell, he says. In each case, the expected return-on-investment window is 12-24 months, he notes.
“On the first couple of NGs we parted out, the thrust reversers were fetching more than market value for a new part,” Gregory says. The long lead-time for a new reverser drove the demand for serviceable used units, and the parts were sold before the aircraft landed. Today, those same parts are worth only about 25% of the new list price.
Flight controls are another example of parts that have seen a demand shift. ASI has about half a dozen full sets for the 737NG, and may end up scrapping some, Gregory says.
Such changes in spares availability can keep planes flying longer—as can shifting economics. IBA Group President Phil Seymour relates a story of a 12-year-old Jet Airways Boeing 737-800 coming off lease in 2011 as an example of the latter.
The plane, which IBA was re-marketing for a bank, had about $7 million in maintenance reserves with it and carried a value of around $14 million, Seymour explains. The aircraft’s note was about $23 million.
The bank’s choice: sell the asset and take a slight loss, or put it back into the lease market. It opted for the latter, agreeing to lease the aircraft to Jet for four more years.
“We could have seen an 11- or 12-year-old 737 being parted out,” Seymour says. “Lease rates have improved a bit in the 737-800 market. Not brilliantly, but they have improved. That situation has created lease extensions.”
The mid-life widebody twin market is a bit more complex, Seymour says. Parts brokers point to aircraft like the Boeing 777 and Airbus A330 as being in-demand for tear-downs. But unlike 737NGS or A320s, which compete against vintages of themselves, many of the older widebody twins are playing valuable roles by supplanting less-efficient aircraft of a similar age, like Boeing 747-400s and Airbus A340s.
“It does come down to the economic situation,” Seymour says. “If lessors and airlines are happy with their 777s and will keep them going, I don’t know where those donor aircraft are going to come from.”
