**London**: The aviation industry is grappling with significant shortages of aircraft, engines, and parts, impacting operations as major airlines adjust schedules. This crisis is exacerbated by demand for midlife fleet operation, significant component price surges, and a shift in investor behaviour towards midlife trading opportunities.
As the aviation industry approaches 2025, it faces significant operational challenges primarily driven by a considerable shortage of serviceable aircraft, engines, and parts. Various airlines report struggling with grounded fleets due to supply constraints, further complicating their operational capabilities. British Airways has notably adjusted its flight schedules amidst a shortage of serviceable Rolls-Royce Trent 1000 engines, essential for its 787 fleet. Additionally, Pakistan International Airlines has seen approximately half of its fleet, including 777 and A320 aircraft, rendered inoperable due to parts shortages. This trend indicates a deepening crisis that may persist and potentially worsen in the near future.
The ongoing difficulties are largely attributable to discrepancies across different subcategories and product lines. For instance, the challenges associated with the Trent 1000 engines stem from delays in new engine production, limitations within maintenance, repair, and overhaul (MRO) capacities, as well as shortages of critical components like high-pressure turbine blades. The lack of used serviceable material (USM) reinforces these difficulties, with an inadequate inventory preventing a significant impact on supply dynamics.
The situation with aircraft such as the Boeing 787 further exemplifies the broader market shortages. The restricted availability of USM, generally favoured as a cost-effective alternative to original equipment manufacturer (OEM) new parts, highlights the market’s crises. There is a current uptick in demand for significant components such as landing gears, auxiliary power units (APUs), nacelles, and thrust reversers. As a result, prices for USM have surged between 20% to 40% over the past year, driven by various factors including product line, maintenance condition, and quality of technical records.
Looking ahead, 2025 may present further challenges, particularly regarding aircraft retirements. The delays in new aircraft deliveries, combined with airlines opting to extend the operational lifespan of midlife fleets, suggest a tightening market. In recent weeks, numerous airlines have chosen to prolong the operation of their midlife aircraft by substantial durations of four to six years instead of the traditional one or two years. Consequently, operators face stringent decisions: whether to commit to longer lease periods or purchase aircraft outright, a decision influenced by uncertainties surrounding supply and operational capability.
This decision-making trend indicates a palpable lack of confidence in the immediate resolution of these issues. Airlines are unlikely to divest their fleets or diminish operational capacity, squeezing the market further. This scenario amplifies the demand for essential assets, placing significant pressure on companies like AerFin to secure necessary components for operators.
The parts shortage has subsequently influenced investor behaviours, leading to an influx of capital into midlife trading and part-out activities. While some investors continue to favour the stability associated with new or midlife on-lease aircraft, there is a notable shift towards innovative investment opportunities within midlife assets. This trend has emerged partly due to intense competition in the new-technology sale-leaseback market, where equity returns have faced considerable pressure.
As the evolution of the aviation aftermarket unfolds, collaboration among airlines, lessors, investors, and aftermarket specialists is anticipated to be critical. Such cooperation will be essential in navigating the prevailing hurdles and ensuring the aviation sector remains resilient in an era marked by unprecedented changes.
In response to these challenges, AerFin is proactive in addressing the situation and tapping into opportunities within the midlife trading sector. Their approach involves recruiting and developing top talent to drive innovation and enhance service delivery. By establishing new global locations, AerFin aims to enhance responsiveness and tailor services to client requirements. Furthermore, they are expanding their product range to align with market trends arising from the low new aircraft delivery rates and fewer retirements of current fleets.
Significant acquisitions have already taken place at AerFin, including purchases of Scoot A320s, Hong Kong Airlines A330s, and a JAL 777. These developments underscore their ability to maintain a steady supply in a constrained market, solidifying their status as a reliable partner in the aviation aftermarket.
Simon Goodson, the Chief Executive Officer of AerFin, highlights the company’s strategic vision, asserting their commitment to addressing the industry’s challenges collaboratively and innovatively.
Source: Noah Wire Services
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