It was predictable: the increasing costs and consequently lack of raw materials and components for technological goods are affecting the aviation market as well. Due to that, for example, a common piston engine oil filter became priceless and almost unobtainable, to date.
Another interesting element to consider is the number of pre-owned aircraft currently on the market for sale.
The incredible Business Aviation recovery, which has now overtaken the 2019 levels by number of flights, which is positive.
Current difficulties in the production of both aircraft and components, due to apparent lack of raw materials and subcomponents.
The last few months’ events led European manufacturing companies to unprecedentedly high production costs, as electricity increased its impact on the final products from a miserable 10% to an incredible 600%, compared with just few years ago. Increases in energy costs are leading manufacturing companies to take drastic decisions, such as shutting down some selected production lines. At the end of the supply chain, the final user faces difficulties in sourcing a simple oil filter, or buying an aluminum sheet for structural repair.
There could be additional discussions about the real issues that are destroying our Aerospace Industry; nevertheless, this is not the place to engage in polemics. According to our code of ethics we remain outside of controversies and politics, which are clearly demonstrating to achieve no results.
In the early 2000s, the concept of components shortages did not really exist, as it was an absurdity, to think that a printer would double its value in less than one year instead of naturally losing value. I agree, there were other problems, probably easier to solve; now we hear about manufacturers shutting down production lines because of the fluctuations of energy cost, so what if we need aluminium sheets, components, spare parts, etc.?
Truth: there is no shortage of raw materials to produce aluminum sheets, just as there is no shortage of gas or oil in the world, and consequently no shortage of electricity. The problem lies with who manages these assets.
We believe, the only option an aircraft operator can evaluate for now is to stock spare parts. It means, to temporarily forget the just-in-time philosophy, implemented in the last decade as the best solution to reduce costs and increase margins.
The large spare parts availability led to poor stock level management: it is likely that the same now hard-to-find parts are stored in some operator's or MROs old warehouse, and that they possibly forgot them, or managed as a problem instead of a profitable asset.
The continuous dismantling for parts of young airframes partially helps the industry to compensate this difficult situation: dismantling a 15-year-old Airbus A319 for parts could appear as a huge waste, when we consider that DC3s will still be flying for decades. Economically, on the other hand, it is a good solution, as this avoids to have an aircraft out for sale that won’t sell due to the demanding price, while the parts will continuously rotate, ensuring years of safe operations to the flying fleet and bringing cash to the ownership.
In few words, who wants to stay one step beyond the competitors, must do a step backward in terms of basic market and management principles: downgrade to upgrade, and finally adapt.
We always ask Clients to analyze their inventory: assets are often hidden and it’s up to their management to discover them and play the ace in the hole relying on a trusted partner like Horix, to evaluate and monetize obsolete or surplus parts.