ISTAT Jetrader - Autumn 2021 - 30

rebounded somewhat - not
necessarily to pre-pandemic
heights, but to a more balanced
supply and demand situation.
❯ The driver for taking this
path would be to avoid the
invariable deterioration in
technical condition and
associated value of leaving
an aircraft parked on an
airfield apron for 12 months
or more. The value could
be better protected by
keeping the components in
a warehouse.
* Consign the aircraft to a parts
distribution player to try to
maximize the return from the
project over the following two to
three years.
❯ A challenge to be considered
for asset owners with
minimal previous experience
of consignment concepts
is that their organizations
are typically not resourced
to manage the process
and may need to engage
external help to audit the
consignment performance
on a periodic basis.
30 * THE OF F I C I AL PUBL I CAT I ON OF ISTAT
❯ Care needs to be taken
with the commercial
arrangements to ensure
that the consignee has
appropriate incentive to
sell the inventory, both in
terms of the slower moving
stock and relative to other
components they may hold.
* Adopt a hybrid approach
between an outright sale and a
consignment arrangement, in
which an asset owner agrees
to receive an upfront portion
of the forecast part-out value
of the aircraft to allow a level
of liquidation and defray some
of the risk associated with a
traditional consignment project.
The remainder of the value
would be released on more
typical consignment terms.
❯ This approach creates
a better alignment of
consignor and consignee
interests.
Lower aircraft utilization resulting
in reduced aircraft maintenance has
led to a dramatic reduction in demand
for used serviceable material and
has had a stark effect on the rate of
aircraft disassembly projects. Fewer
aircraft were disassembled in 2020
than 2019, and statistics for the first
half of 2021 show that the rate had
slowed further: Only 139 single- and
twin-aisle aircraft were retired from
January 2021 through June 2021, one
of the lowest six-month numbers since
before the global financial crisis.
The short-term effect on the
tertiary market has not been dissimilar
to other parts of the industry, with
major decisions required as to how
to manage the lower demand while
not compromising capability to
respond to the upturn when it comes.
However, one unusual characteristic
of the aircraft disassembly market,
which, in my experience, is unlike
the rest of the aviation industry,
is that the demand behaves like a
financial market, rapidly changing
from bear to bull conditions and back
again in a very short time frame.
This isn't necessarily an issue for
a trading business, but it creates
serious management challenges in
a " shop " environment such as an
aircraft disassembly business - in
particular, deciding the right size of
company overheads for the short term
ISTAT Jetrader - Autumn 2021

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