Mike Stengel, Senior Associate at AeroDynamic Advisory
The COVID-19 pandemic has upended the global demand for air travel, and consequently has thrown fleets into disarray. Now that most forecasts appear to converge on a four-year recovery period, one of the new questions is: how will the crisis impact the used & serviceable material (USM) market? The likely outcome is a double whammy of surplus waves, each driven by different events and with different implications.
First, a little context. Prior to the pandemic, the air transport aftermarket was facing scarcity on multiple fronts, including materials. Due to robust air travel demand, the 737MAX grounding, and teething problems on certain new generation platforms, airlines needed as much lift as possible and were keeping older aircraft around longer than expected. As a result, aircraft retirements were stubbornly low, which meant low availability of surplus parts.
In the wake of COVID-19, scarcity has been substituted by excess and the first “initial shock” wave was already underway. The characteristics of this phase include the immediate cash-conservation measures, leading to ultra-low MRO demand. To avoid costly shop visits, airlines that have the capability and bandwidth will make the most of greentime on their engines and large components by parking fleets or swapping units. Operators will also make the most of their existing inventory to substitute for new parts purchases and repairs.
