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End of the road

With a number of new entrants, aircraft recycling is becoming an ever more attractive business but despite this, there is always a need for an airfield and storage. Ian Harbison reports

The Aircraft Fleet Recycling Association (AFRA) estimates that in the next 20 years some 12,000 aircraft will be retired. Most of these will simply have reached the end of their useful life cycle. However, there is another market driver that has resulted in younger aircraft being scrapped: the value of recovered components, especially engines, exceeding the residual value of the aircraft. By virtue of the size of the overall fleet, the leading types are the Airbus A320 Family and Boeing 737 Classic and NG, with the younger types that have been parted out generally being from the less successful models in each range.


MRO Management spoke to two well established companies – Aircraft End-of-Life Solutions (AELS) and Air Salvage International (ASI) – as well as a relative newcomer – eCube Solutions – to get their view of the market, current activity and future plans. A review of announcements over the recent months also provides a useful indicator of trends, as well as the breadth of companies involved. AJW Aviation and Werner Aero have handled Airbus A319s, while EirTrade Aviation Ireland has dismantled an A320 and two Boeing 737-500s this year. GA Telesis has purchased a 737-700, but has also worked on a 757-200, a 767-200ER and two 777-200ERs, while Marana Aerospace Solutions has dealt with two 757s. Leasing companies have also become involved with GECAS (777-200) and Aviation Capital Group (767-200).


The deal with GECAS and Aviation Capital Group involved a consignment agreement with AJW Aviation, which has also signed a three-year contract with the Engine Lease Finance Corporation (ELFC) to cover end-of- lease engines that will be consigned to AJW to be torn down for parts. This is just one of several very recent moves in the industry by leasing companies and MROs that view the engine market as financially attractive. Willis Lease Finance Corporation, a specialist engine leasing company, as said vertical integration at aviation leasing firms, combining aftermarket sales and trading of engine material, is becoming commonplace. It is an opportunity to better manage the full lifecycle of assets and enhance the returns on the engine portfolio. Willis Lease noted that, historically, the company paid third parties 20-25% of the remaining value of an engine for disassembly and to sell the parts. Willis Lease has now set up Willis Aeronautical Services Inc (WASI), a wholly-owned subsidiary formed through the acquisition of JT-Power. It will initially focus on CFM International, General Electric, International Aero Engines, Pratt & Whitney and Rolls-Royce engines. Lufthansa Technik is taking a 15% stake in AeroTurbine, a subsidiary of International Lease Finance Corporation (ILFC). Under the terms of the agreement AeroTurbine will supply Lufthansa Technik with aircraft and engine components, while Lufthansa Technik will provide technical services for aircraft components of AeroTurbine and additionally supply the Miami-based company with surplus material for resale. Finally, WingStar is a 50/50 joint venture between ST Aerospace Resources and Wings Capital Partners Holdings which, from early 2014, will build up a portfolio of midlife and end-of-life aircraft assets, initially to include A320 and 737NG families.


Of course, setting up in business is fine, but the facilities and processes required are highly specialised, as the experts can explain:



It has been a busy year for AELS. Apart from moving to a much bigger warehouse and office building, it has also signed a letter of intent with the Business Park Aviolanda at Woensdrecht Airport, in the Netherlands, to develop a new 3,000m² teardown facility. It can already handle two narrowbodies simultaneously but this will add a widebody capability. It also provides opportunities for storage contracts, with assistance from Fokker Services, for care and maintenance as well as heavy checks.


The company also became the first to have all three elements of its processes accredited to industry standards. AFRA approved both its aircraft disassembly and dismantling services and its aerospace materials recycling services, while its component management service now holds Aviation Suppliers Association ASA-100 and FAA AC 00-56A accreditations.


Derk-Jan van Heerden, Director and founder of AELS, says the Aviolanda move is in anticipation of increased demand in the future as retirement rates pick up. At the moment, in 90% of cases, the aircraft has switched owners before dismantling (although the last operating airline is often the first customer for the spares) and so they are flown to where the new owner wants it to be broken up. That means many aircraft are going to the US, as that is where most of the buyers are located. He adds that the $/€ exchange rate is not helping either, but there are European customers who still want the components to be retrieved in their locality. In 2012, AELS dismantled seven aircraft, but the situation is more competitive this year, with the fifth aircraft only arriving in November.


Part of the reason for this is the residual value of the older A320 Family and 737 Classic aircraft being driven down as the fleet reduces – fewer aircraft mean less flying, hence less spares consumption. Van Heerden has also noted increased interest from the engine OEMs in using parting out as a source of inventory and this is keeping the prices ‘pretty solid’ on newer models of those aircraft. He says the decision to dismantle is taken on an aircraft-by-aircraft basis, depending on history, any accidents, the state of the interior, status of the engines and maintenance records. In the case of engines with poorly maintained records, he adds that the loss of value for the recovered components is such that it is often better to keep them flying to the end of their life.


One other important event this year was the arrival in Woensdrecht back in January of an ex-LOT Polish Airlines 737-500. The aircraft was bought by AELS from lessor Orix Aviation in partnership with engine company Contrail Aviation Support. This is the way of the future, says van Heerden, as the company moves to owning and remarketing the recovered components. He is convinced the industry is demanding quality on disposing of aircraft, both in terms of the removal techniques and in relation to the environment and their corporate social responsibility policy. In the first case, this depends on the skill levels of the personnel involved and the company culture. In the second, he says requests for proposals often make reference to the AFRA guidelines. In both, he is confident AELS can meet those requirements.



Bradley Gregory, Commercial Director, says ASI, based at Cotswold Airport in Gloucestershire, UK, has dismantled over 540 commercial aircraft at airports worldwide in its 19 years of trading. The UK facility offers EASA/FAA 145 approved line maintenance services, CAMO, part-tracking/re-certification, secure engine and bulk component storage, as well as a climate-controlled avionics depot. There are six hangars on site totalling 12,650m², including the newest, which at 3,500m² can take aircraft up to 757 size.


Last year, work was dominated by the 737 with 16 Classics, as well as some 737NGs, being processed at Cotswold Airport. This year, it has been the turn of A320 Family, with six aircraft less than 12 years old, while 737 Classics have dropped to just four so far. The average age for disassembly by ASI has stayed at a constant 17-years-old for two consecutive years. >>

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