IATA is in the process of preparing a web-based tool to help airlines and aftermarket players evaluate used spare parts in an effort to make pricing for such material more transparent.
IATA is in the process of preparing a web-based tool to help airlines and aftermarket players evaluate used spare parts in an effort to make pricing for such material more transparent.
Airlines and MRO providers routinely purchase used serviceable material (USM) from traders. But the transactions are typically negotiated on an individual basis between buyer and seller – and pricing is highly dependent on demand and supply for a particular part at the time of the transaction.
No formal mechanism exists to assess the value of used parts today, IATA’s head of operational cost management Chris Markou noted during a panel discussion at the MRO Europe conference in London on 16 October.
Indeed, the price for a used component can exceed that of a new part from the equipment’s manufacturer if the part in question is in high demand, said Lufthansa Technik head of group purchasing Fabrizio La Banca during the same event.
He reports that the German MRO provider has been in “crazy” situations where customer airlines have offered to sell LHT parts that were required to resolve AOG incidents in their own fleets.
La Banca describes the USM market as non-transparent and says it is “pretty difficult” for buyers to assess the value of parts.
EasyJet head of supply chain engineering and technical contracts Elentinus Margeirsson likewise sees a “true lack of transparency” in the market and points out that acquisition of USM requires substantial staff resources as purchasers have to go back and forth to negotiate prices with sellers.
The situation is being aggravated by what Margeirsson describes as “ghosting material” – parts that are being offered but are not available for delivery.
He reports that EasyJet has come across USM originating from aircraft that had been earmarked for disassembly but not actually been parted out.
To improve visibility, IATA has made an effort to gather anonymised cost information for part transactions and, on that basis, develop a pricing model.
The cost of a component does not necessarily depend only on sourcing that material but may involve additional expenditure for checking or repairing the equipment.
IATA is drawing on its “neutral” standing as an organisation that is not affiliated with an OEM or individual operators, Markou explains.
Dubbed “MRO SmartHub”, the platform is intended to provide users real-time access to “fair” market values for aircraft parts, taking into account availability and delivery times for equipment, says IATA.
The airline association estimates that airlines and MRO providers could generate material cost savings of 10-15% using the service.
In addition to an “evaluator” functionality to assess equipment prices and availability, the platform will include a “connector” functionality to facilitate procurement transactions for buyers, IATA’s website indicates.
LHT is a launch customer for the MRO SmartHub and will provide data of its USM activity to the service.
La Banca says that after LHT historically purchased spare parts mainly from OEMs, the MRO provider started employing USM around 2011 as a result of customer demand for lower-cost solutions.
The change was “very difficult” given the market’s opaqueness and because LHT did not disassemble aircraft from its parent group at the time and had no experience in the part-out market.
As a solution, the MRO group established an information system based on available in-house data, including spare-part and material prices, shop-visit details, and mean time between repairs.
The maintenance provider also acquired data from external sources to complement its information system, and started to disassemble aircraft, which, La Banca notes, provided much more insight in the workings of the USM market.
Today, LHT parts out aircraft from its parent’s fleet and third-party customers at multiple locations and purchases USM from external sources.
USM accounts for 30-40% of spare parts handled by LHT today, La Banca estimates.
While EasyJet manages an own stock of rotable components – rather than using pooled equipment with other operators – Margeirsson says the budget carrier employs USM alongside OEM spares to support its fleet.
He says that EasyJet would be “the first one” to a platform that provides “transparency” on what material is available and at what cost.
“If we have transparency… it will lift the market,” he says.
