Spares Demand Heading North

Peddlers of commercial aircraft spare parts should be smiling--if not now, soon.

Indications from aftermarket service providers and parts suppliers are that demand for spares--both new and re-purposed--is solid, and should only improve as aircraft utilization rates continue to climb.

"Our view is that spares market remains fundamentally healthy and is expected to pick up over the next several months," AAR Chairman and CEO David Storch told analysts recently.

Under United Technologies' mega-umbrella, both Pratt & Whitney and UTC Aerospace Systems (UTAS) reported notable upticks in second quarter commercial spares demand.

Counting the contributions from engine maker IAE, which became part of UTC in June 2012, large commercial (LC) engine spares sales rose 65%, UTC CFO Greg Hayes reported on an earnings call. The big gainers were PW4000 spares, up more than 15%, and V2500 sales, up nearly 15%.

UTAS, which absorbed Goodrich a year ago, reported a 4% gain in commercial spares when counting Goodrich for both years, with the aftermarket's 10% gain partially offset by a 10% dip in provisioning. (One sure way to hurt the provisioning game: stop delivering airplanes.) Full-year projections have UTAS spares growth at about 7% compared to 2012, Hayes said.

Growth will be curtailed by the continued flow of serviceable parts into the market. Rockwell Collins outgoing CEO Clay Jones,who retired July 31, noted late last month that demand on the "traditional MRO" side of his company's commercial aftermarket business is lagging as more--and newer--aircraft are scrapped. It's a situation that is expected to continue "for some time into the future," he said.

Stagnant lease rates are helping feed the secondary parts market as well.

Aircastle CEO Ron Wainshal said on a recent earnings call that a "strong" demand for spares--both engines and current-technology parts--has his company moving more of its mid-life aircraft to parts brokers. In "several" recent cases, airframes were sold but engines with considerable service life left found new homes on other Aircastle aircraft.

The demand is emboldening some.

Turbine Engine Resources (TER) is diving head-first into the PW4000 spares market after it agreed to buy and arrange the parting out of a PW4056-powered Boeing 747-400 (MSN 24062). One of the engines may end up going out on lease as a complete unit, TER VP-Sales Ron Habermas said, but the other parts should be on the market by mid-fall.

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