Almost 20 years into the program, many Boeing 777 parts are still scarce and expensive in aftermarket trading. This may be what the future looks like for other new models that rely on OEMs and long-term agreements for future support.

A majority of 777 parts are in short supply, according to Zilvinas Sadauskas, CEO of “Only 20% of 777 inventories may be found on the open market,” Sadauskas notes. Airframe, component and engine OEMs have maintained tight control of the market. Some engine OEMs buy old engines to secure their position in spares.

OEM control affects pricing and availability. Some OEMs maintain aircraft-on-ground (AOG) warehouses around the world, but Boeing's AOG stock is more concentrated. Sadauskas argues this imposes heavy downtime costs on some operators. Parts that are available from non-OEMs tend to be non-critical, not much of a help with AOGs.

Sadauskas sees no end to scarcity. Of more than 1,000 777s delivered, he says only five have been scrapped or written off. Aviation Week data show 1,090 777s are in service, with three in storage. Youth of the fleet and high aircraft values should keep parts rare and expensive for quite a while.

John Avery, director of supply chain services at A J Walter Aviation, distinguishes between 777-200s, for which materials are available but expensive, and -300s, for which materials are very tight and available only from OEMs, selling at manufacturer's list price (MLP) or catalogue price. For -200s, avionics, wheels and brakes, landing gear and line replaceable units (LRU) for engines are costly, “and material lead times from OEMs are not great, but for -300s there are genuine shortages with extended lead times.” With -200s just starting to be parted out, Avery expects more materials to become available in 2013, but sees shortages persisting for -300s for “two or three years.”

Spirit AeroSystems supplies nacelle parts such as thrust reversers, cowls and inlets to the 777 aftermarket. Jeff Tomei, director of aftermarket business development, notes aftermarket demands compete with production of new 777s. On nacelles at least, -200s and -300s are in essentially the same position. “There is some extension in lead times that can create shortages in the aftermarket.”

Tomei notes 777s are newer and much less plentiful than 737s, and its nacelles are much more expensive, so “people do not put 777 parts on the shelf as much.” Especially on 777s powered by GE90s, Spirit thus has pricing power and sells at catalogue prices.

Lead times depend on circumstances. If an item is in Spirit's inventory, there is no problem. But new builds can take 6-12 months. If it is an AOG, the aftermarket unit will try to pull it from production for new jets, and is sometimes successful, sometimes not. Tomei says tight markets usually last until a new derivative arrives. He expects Boeing to announce a new 777 in 2-3 years.

Parts are short in traditional aftermarket trading, but OEMs and power-by-hour providers have limited-access pools, says Scott Holdman, vice president of parts trading with AAR Allen Asset Management. Airlines also hold stock, but tend to be supported by OEM programs. Holdman sees possible shortages in high-mean-time-between-repair items such as avionics and starters and expensive assets such as auxiliary power units, landing gear and nacelles.

Prices are close to MLP and lead times are affected, as production goes first for new aircraft. Holdman sees some inventory from scrapped Varig and Air India 777s. AeroTurbine just finished tearing down a former Singapore Airlines' airframe. Holdman foresees parts common to several 777 types becoming more available in the next three years as early 777s are parted out.

Roscoe Musselwhite, president/CEO of Kellstrom Materials (formerly AirLiance Materials), notes that more than half of the 1,074 777s flying in March 2013 were operated in the Middle East, Far East and China. These carriers tend to purchase spares from OEMs because they are distant from U.S. suppliers and are financially strong enough to buy new, not used.

Musselwhite says the 777, nearing 20 years in service, will need spares for heavy checks, thus there is demand for air conditioning, electric power, fuel and hydraulic systems and engine parts.

Moreover, many subsystems on 777s are not compatible with other airframes, so parts have always sold for a high fraction of MLP. Many LRUs are supplied by pools, loans and exchanges, and many repairs must be done by OEMs. Musselwhite sees a “lucrative business” in 777 parts for those that understand the importance of exchanges and pooling.

Engine Manufacturers for 777
Aircraft Total Market Share
General Electric 712 64%
Pratt & Whitney 171 15%
Rolls-Royce 224 20%
Total 1,107
Source: Aviation Week Intelligence Network Fleets
Boeing 777s by Region
200 200ER 200F/LR 200LR 300
Africa 1 11 2 7
Australia 8
Canada 6
Central America 4
Europe 5 110 13 5
Far East 58 134 15 11 43
Middle East 3 39 16 21 12
South America 4
U.S. 19 112 27 10
Total 86 418 77 55 60
Source: Aviation Week Intelligence Network Fleets