Parting Out Young Ones: Useful Life Shift, Or Just Smarter Business?

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GA Telesis is hard at work parting out a 12-year-old Boeing 737-700 and a 14-year-old 777-200ER, and has another 777-200ER in the wings. More evidence of the much-publicized decline in aircraft useful lives, right?

Not so fast, says the company's man in charge.

Not long ago, parting out aircraft was a simple and somewhat unsophisticated business, says GA Telesis President and CEO Abdol Moabery. Suppliers took whatever parts they could salvage and sold them--mostly ad hoc--to operators in need. Rather than complementing or competing with OEMs, serviceable parts suppliers were considered second-tier.

The game, he says, is much different now.

"It's not the availability of those aircraft at a younger age that we should be focusing on," Moabery tells Aviation Week. "It's really the capability of companies like us and others that have developed sophisticated business models."

In the case of the ex-Gol 737 (MSN 30273) and ex-Malaysia 777 (MSN 28418), it's not as if the planes aren't appealing. 

"We could've put them back in service," he says, "but economically, it makes more sense for us to part out the aircraft and put those parts into the aftermarket today."

A decade or so ago, few companies could extract enough value of out a middle-aged, in-demand airliner to make such a call. Today, companies like GA Telesis--which also leases aircraft and engines--can time the market to capitalize on what's hot and avoid being stuck with depressed residual values, for parts pools as well as entire airframes, when demand for certain models cools.

Is this all happening in the midst of a macro downward shift in useful lives? Perhaps. 

What's certain is that parts suppliers are getting smarter.

One ramification?

When looking at a seemingly useful, middle-aged whole, they sometimes see less than the sum of its parts.

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