In recent years, the aviation industry has been above and beyond a very turbulent sky, facing headwinds from the COVID-19 pandemic, geopolitical struggles, and supply chain disruptions. However, there’s a silver lining amidst these challenges, as the global aviation sector is looking forward to a true comeback which is both long anticipated, as well as forecasted for at least a couple of years.
Sustainability plays a vital role in this comeback, as the industry is recognizing the need to prioritize it to rebuild and thrive in the post-pandemic era. Airlines are investing in more fuel-efficient aircraft, adopting eco-friendly practices, and exploring alternative fuels to reduce their carbon footprint. This shift towards sustainability not only aligns with growing consumer demand for environmentally conscious travel options but also ensures a greener future for the aviation industry.
Together with the aviation industry’s broader commitment to sustainability, the rise of the aviation aftermarket has emerged as a crucial player in the quest for environmental responsibility. As airlines invest in future technologies to harness related challenges, the aftermarket sector is witnessing a surge in demand for sustainable aviation solutions.
This includes the development and integration of aftermarket modifications and upgrades aimed at enhancing the fuel efficiency and overall eco-performance of existing aircraft fleets. The collaboration between airlines and the aviation aftermarket not only addresses the imperative for sustainability but also underscores the industry’s collective effort to embrace innovative solutions, ensuring a greener and more resilient future for air travel.
Never-ending Supply Chain Challenges?
With countless variables affecting the current state of aviation’s supply chain, and while many uncertainties still linger, the industry is poised for a robust recovery. Of course, it is not the only industry that finds itself grappling with a series of supply chain obstacles that have been magnified by the pandemic’s impact. However, aviation is already hit more obvious than any other sector as staff shortages, scarcity of raw materials, rising inventory and labor costs, and extended lead times are among the primary bottlenecks.
The aftermath of the pandemic has caused a backlog of aircraft orders, leading to delays in deliveries. That’s how the Airbus A321neo became the most backlogged aircraft model in the world, with 5,461 orders and followed only by the infamous Boeing 737 MAX, with 3,061 orders.
Inflation has driven up the costs of materials and labor, adding to the strain on the supply chain. Data from various sources suggests that the global aviation industry is expected to spend over $2 trillion on materials and components in 2023.
Complexities of Local Sourcing: A Shift Towards Global Solutions
In response to these escalating challenges, the aviation industry is adopting strategic measures to navigate the complexities of the current economic landscape. Faced with rising costs of materials and labor due to inflationary pressures, industry leaders are proactively seeking solutions to optimize their supply chains. As part of this adaptive approach, a recent study by McKinsey & Company highlights a noteworthy trend – the aviation sector is increasingly turning to global sourcing to address the complex web of supply chain disruptions.
Sourcing materials locally has become increasingly complex, pushing the industry toward global sourcing. A recent study by McKinsey & Company found that the aviation industry is increasingly sourcing materials from outside of its home markets. The study found that the share of materials sourced from outside of the home market is expected to increase from 50% to 70% by 2030.
Being already around for decades, global sourcing allows manufacturers to access a wider range of suppliers and potentially lower costs, but it also introduces additional challenges such as longer lead times and increased transportation costs. Furthermore, the pandemic has further disrupted aviation supply chains, with lockdowns and restrictions impacting production and distribution worldwide.
Rising Stars in the Aftermarket
Global disruptions, including strikes and geopolitical conflicts, have impeded the smooth flow of goods and services. Strikes by aviation staff and pilots in Europe have led to flight cancellations, while geopolitical tensions, such as Russia’s invasion of Ukraine and COVID-19 lockdowns in China, have impacted the availability and pricing of raw materials, leading to stress in finding alternative sources.
A standout trend in the aviation industry is the steady growth of the Used Serviceable Material (USM) Market. This upward trajectory is fueled by the need for cost-effective solutions and reduced maintenance costs. The North American market, especially the United States, plays a pivotal role in the global USM market.
The U.S. is investing in infrastructure to support both commercial and defense applications, further driving this market. Despite challenges posed by long lead times in the MRO sector, companies are actively dedicating resources to acquiring assets and expanding their inventory to meet market demand. Experts predict a surge in the retirement of older aircraft in the coming years, creating fresh opportunities in the USM market.
A Sustainable Approach: Aircraft Teardowns and the Supply Chain
Despite the challenges of aviation supply chains, there are promising signs of recovery in the aviation industry. Increased production rates and growing travel demand are encouraging indicators. However, the journey back to pre-pandemic levels remains uncertain, with factors like macroeconomic conditions, inflation, geopolitical situations, and labor issues influencing the pace of recovery. While these challenges may persist for the next year or two, the industry’s resilience shines through as it seizes opportunities to support its recovery.
During these turbulent times, there’s a glimmer of sustainability and innovation in the aviation industry, particularly through aircraft teardowns. This practice provides a constant and valuable source of high-quality, cost-effective spare parts for the aviation supply chains. It’s not just recycling; it’s about reducing, reusing, and recycling.
The average commercial aircraft contains over 5 million individual parts. Of these, approximately 70% can be salvaged and reused through aircraft teardowns. The teardown process involves harvesting and monetizing recycled assets, with the primary goal of reintroducing aircraft components and parts into the aviation supply chains to maximize their value. High-value parts are targeted for reuse as spare parts for operational aircraft, maximizing revenue for sellers. For example, a single Airbus A320 aircraft can be worth up to $10 million in spare parts after it is retired from service.
Environmental Gains and Sustainability Commitment
Once parts are removed from retired aircraft, they are inspected and cataloged. Their condition is assessed for serviceability and potential resale value. If suitable, these parts undergo overhauls in dedicated facilities and are offered to the aftermarket for resale, lease, or exchange going further through aviation supply chains.
Part-out, a specific subset of the teardown process, focuses on market demand for essential parts. Teardown, on the other hand, caters to a broader spectrum of spare parts, often making it more profitable due to the diversity of items involved.
The global pandemic has led to an increase in aircraft being sent for teardown. However, labor shortages, part availability, and logistical challenges have contributed to slow Turnaround Times (TATs). The delayed delivery of new aircraft has kept older planes operational longer, resulting in a growing demand for used serviceable material (USM) and increased component pricing.
Who Benefits from Teardowns
Aircraft teardowns not only offer economic benefits but also environmental advantages. This process is a win-win for all involved, reducing waste, conserving resources, and contributing to a more sustainable aerospace industry. The industry’s commitment to sustainability is exemplified by actions like the AJW Group’s dedication to the United Nations Global Compact (UNGC) and its sustainable development goals.
The positive impact of aircraft teardowns extends to various sectors, including MRO facilities, part traders, lessors, aircraft manufacturers, and the local economy. The teardown process involves multiple stages, from initial assessment to hazardous material management, ensuring efficiency and environmental protection.
The aviation industry has proven its mettle in the face of substantial challenges, and with a focus on sustainability and innovation, it’s poised for recovery and growth. Aircraft teardowns and the associated supply chain play a pivotal role in this transformation, offering not just economic benefits but also environmental advantages. Therefore, cooperation between stakeholders, government support, and proactive measures will be instrumental in ensuring a thriving aviation sector in the years to come. Every day offers an opportunity to strengthen and support this resilient industry, making aviation a more sustainable and promising sector for the future.
