The parts industry is fragmenting, as more and more players enter the market. And
they’re all competing for the same slice of business. MRO Global talks to Kellstrom’s
Dennis Zalupski about how his firm intends to retain its share
THE PARTS MARKET
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advantage we offer them is we already have the infrastructure in place and the relationships with the airline custom-ers and MRO facilities around the world to effectively market their products for them – often better than they could do on their own. We also assume the inventory and credit risk for the OEM, something that has always been somewhat of a barrier to success for OEMs in the after-market. This type of relationship works especially well for us, with manufacturers such as Ametek Aerospace, which is an important partner of ours in the Com-mercial channel, and Honeywell, who we are very strong with on the military side of our business.”
“Where we don’t have an aftermarket distribution relationship with an impor-tant OEM, we still make every effort to work with and support it when we can. For example, when we have surplus material receptive to the concept of used,
recondi-tioned and PMA parts, due to concerns over asset values. However this view appears too be subsiding as new les-sors enter the market with a more open mind regarding their use. But on the other hand, the OEMs are gradually taking control of the market through increased aftermarket agreements at point of order, which in turn is leading to parts specialists having to join forces with the OEMs in much the same way as the MROs. “There is no question that the big OEMs, whether they are airframers, engine companies or systems providers, have woken up and are trying to protect their very profitable new parts stream into the aftermarket,” says Zalupski. “In some cases, we join forces with them by using our ongoing access to the global customer base to sell and distribute their new products into the aftermarket. The of options to choose from to suit their
clients, from new original equipment manufacturers’ parts through to PMA, approved repairs and reconditioned used parts. The great number of options open to airlines has had an effect on the mar-ket Zalupski of Kellstrom Industries is on the front line in the parts market and he is seeing the movements in the global market first-hand. “On the commercial aviation side of the business, we are see-ing continued price pressure on both surplus airframe and engine parts. This is really a direct result of the number of older aircraft that have been removed from service and disassembled over the past few years. Generally, it has been the older Boeing and Airbus models along with the associated engine types. Pricing on newer generation equipment, if you can find it, continues to be quite strong.”
The leasing sector is generally less
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THE PARTS MARKET
that needs to be repaired or overhauled, we will make a concerted effort to send it to the OEM, assuming it is competitive in price and turn time. This in turn helps us sell the products to our customers, most of whom are as quality-conscious as we are,” says Zalupski.
Parts demand, both from a quantity as well as platform type, changes on a daily basis. Longer-term trends in demand follow the fleets. Today, almost any part from the new-generation airframes and associated engine types, such as the newer versions of the A320 along with platforms such as the 737NG, 777 and A330, always have more demand than supply. As these fleets continue to grow and the OEMs continue to raise prices for new parts, that demand is set to become even greater.
The industry has changed greatly over the past decade and as it contin-ues to evolve, so too will companies such as Kellstrom. The lifecycle of an aircraft is getting shorter, from 25–30 years to something more in the 20-year range. Based on the number of new air-craft Boeing, Airbus and the others are projecting to build over the next two decades, it seems there will be a race to see if the industry can grow fast enough on a global basis to absorb all of the new and used aircraft. If the global economic situation were to cause a Japan-style decade-long recession, then we could be faced with massive aircraft retirements, which will be parted out.
The future focus of the industry will be on Asia in general, and China in par-ticular, which is clearly a growth market.
A combination of routes is driving growth – long haul between continents, long haul within Asia and short haul within the regions and/or within China.
“When you combine this with the young, vibrant and growing population, as well as lower wage scales, it is little wonder Asia and China have quickly become a force in the global MRO business. Back in the mid-2000s, we anticipated this would happen and opened our Asian regional office in Singapore,” says Zal-upski. “Today, in addition to the office in Singapore, we have an operation in Aus-tralia, as well as a network of exclusive agents who help us service the region.
This is clearly our fastest growing region on the commercial side.”
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