As aircraft continue to remain in service for longer, the aviation aftermarket is facing a growing need for smarter inventory strategies, reliable Used Serviceable Material (USM) and data-driven asset decisions. With aircraft retirements still below pre-Covid levels, the availability of quality used parts remains critical for airlines and MRO providers seeking to control maintenance costs and minimise downtime. In this exclusive Q&A with our Editor, Lee Carey, Chief Investment Officer, EirTrade Aviation, discusses how demand forecasting, granular component-level data, digital analytics and disciplined asset underwriting are reshaping the USM market. He also shares EirTrade’s outlook on aircraft retirements, emerging technology platforms and the evolving role of USM in building a more resilient aftermarket.
Q – The aviation aftermarket continues to face challenges around parts availability, supply-chain disruption and long lead times. From EirTrade Aviation’s perspective, how has the approach to inventory management changed over the past few years?
Ans – While lead times at component repair shops have improved in the past 12-24 months those lead times remain significantly longer than pre-covid. As a result, it has been increasingly important for USM companies, like EirTrade, to identify the components from an engine or aircraft for which there will be demand and prioritise the repair of those components so that units can be in stock and made available to customers when the need arises.
Q – EirTrade typically routes all components for repair which are forecast to be sold during the course of a disassembly program on day one. This ensures that the parts are all back in stock as soon as reasonably possible and available for sale. We have found this to be more effective than the alternative approach of routing components from an asset for repair in tranches throughout the course of the project.
Ans – There does need to be consideration given to stock level of some of the lower demand components when this is being done, but this should have already been considered in the underwriting of the project.
Q – How important is accurate demand forecasting when determining whether an aircraft, engine or component should be maintained, stored, parted out or returned to service?
Ans – In the case of an engine, this decision is made based on any remaining greentime, or the additional investment which is required to make the engine serviceable. EirTrade sees that there is strong demand across almost all engine platforms currently, so that decision purely comes down to the economics of reinvesting in the engine and the timing versus a part out scenario.
In the case of a component, the decision is captured within our underwriting for a project which accounts for the fair market value, forecast investment in repair, forecast scrap rate, and the time which the unit is expected to sit on the shelf prior to being sold.
Q – With aircraft remaining in service for longer periods, how do you see the role of USM (Used Serviceable Material) evolving as airlines and MRO providers look for cost-effective alternatives to new parts?
Ans – In 2020 prior to covid there were approximately 850 aircraft retired and since then the average rate of retirements annually has been trending at 25% – 35% less than that amount. The rate of aircraft being retired is slowly increasing but is still lagging behind pre-Covid levels. This is as a result of aircraft operating for extended periods of time before retirement to offset the delay of new aircraft being delivered and ongoing reliability issues of newer aircraft.
In summary, the reduced rate of retirements leads to a lack of supply of USM material to support the operating fleet, which is paramount to controlling maintenance costs, particularly on older aircraft. There has been an upward trend in the number of aircraft being retired in the past two years, but we predict it will be a while before we get back to pre-Covid levels.
Q – EirTrade Aviation has extensive experience in asset management, teardown and storage. How does greater visibility of the market help owners and operators make more informed decisions about the value, and therefore the future utilisation, of aircraft and components?
Ans – Having an in-depth understanding of the value of an aircraft at a component level is vital to being able to more accurately forecast the future value of aircraft, particularly mid to end-of-life aircraft. Larger USM companies generally have the data to do this more accurately as they understand the market of each individual part and can conduct a thorough bottom-up analysis of an aircraft. Unless a company is trading in the USM market every day and possess that granular level of data, it is impossible to do this to the same extent.
This knowledge and data can then be applied to an aircraft when it is being retired to ensure that the value of that aircraft is maximised. Unfortunately, the residual value of newer aircraft is often used simply as a means to justify the underwriting of an asset at a particular purchase price and does not always reflect the reality of the future value. There will always be macro-economic factors which effect aircraft values, and while nobody has a crystal ball to predict these macro events, having a disciplined underwriting process is hugely beneficial in the longer term.
Q – How are digital tools, data analytics and predictive technologies changing the way aviation assets and inventories are valued, monitored and managed?
Ans – Leveraging the advancement in technology and software tools is hugely important and at the forefront of EirTrade’s data management and analytics. It is one thing to have the data and information available to you, it is another to have the ability to analyse the full data set available and leverage to make informed decisions across the business.
These tools are not only leveraged when it comes to underwriting and the decision-making process, but also to ensure a proactive approach to managing an expansive inventory and factoring in the market conditions for each individual component.
Q – From an investment and asset-management perspective, what are the key indicators that determine whether an aircraft or engine remains economically viable in the aftermarket?
Ans – EirTrade predominately trades in current and new technology commercial aircraft and in the context of these platforms there is significant demand for USM material & greentime engines. The economic viability of disassembling an underlying asset to supply USM to the aftermarket relies predominately on the economics of the underwriting and book value or acquisition price of the aircraft, as outlined in the answers above.
Q – As aircraft fleets continue to grow globally, what impact do you expect this to have on the availability and value of USM over the next five years?
Ans – As new aircraft continue to deliver at an improved rate, EirTrade expects the annual rate of aircraft being retired to steadily increase to a normalised rate that we had prior to Covid. This is expected to happen at a gradual rate, and we do not expect a significant price correction across the fleet. However, there are some new technology aircraft, such as the B737 MAX and A220 platforms, which will be parted out in the coming years, and there will be a downward trajectory on some of those platforms after the initial wave of those aircraft retirements.
Q – EirTrade Aviation has recently secured new international maintenance authorisations from 2-REG, CAACI and BCAA. How do these approvals strengthen the company’s capabilities in supporting aircraft transitions, storage, asset management and the wider aftermarket?
Ans – EirTrade Aviation Maintenance is located at Ireland West Airport (IATA Code: NOC) where we have line maintenance approvals which cover a wide range of aircraft types including the A320 CEO/NEO, A330 CEO/NEO and B737 NG/MAX. The approvals allow EirTrade to provide crucial services to asset owners following end of lease, or retirement from commercial service. Specifically, the addition of 2-REG, CAACI and BCAA approvals provide more optionality to our customers for the re-registration of aircraft. We are dedicated to further expansion of our maintenance approvals at the facility, in addition to further development in the infrastructure including the development of a new aircraft hangar at the facility.
Q – Looking ahead, what do you believe will be the biggest challenge for airlines, lessors and MRO providers when it comes to balancing inventory availability, cost optimisation and supply-chain resilience?
Ans – USM is going to continue to be a critical component for asset owners maintaining their assets, ensuring they continue to fly and minimising the downtime while managing costs. It can be very expensive for operators to maintain a significant pool of USM components to support their active fleet, and key partnerships with companies such as EirTrade is important to ensure they continue to have access to the highest quality and high demand components as requirements arise. EirTrade continuously ensures that high demand material is readily available on the shelf in a serviceable condition, especially for AOG requirements and provides 24/7 support to airlines when these critical requirements for components arise.
