Extended transitions for ex-Spirit Airlines aircraft have weighed on the results of aftermarket provider AerSale, which had hired extra staff at its Goodyear, Arizona, facility in anticipation of heavy checks that have not yet materialized.
Unusually for a company operating in an aviation aftermarket that is enjoying surging demand, AerSale swung to a $4.3 million adjusted net loss in the second quarter from a $9.4 million profit in the year-ago period as revenue dropped and costs climbed.
This was mostly due to zero flight equipment sales in the recent quarter, but the company’s profitability was also hit by the impact of scaling up operations at its maintenance facilities in Goodyear and Millington, Tennessee.
However, on an earnings call, management said that anticipated heavy maintenance work following the Spirit Airlines shutdown “has been slower to develop than expected,” adding that its Goodyear facility is operating at less than 20% of capacity.
Still, CEO Nicolas Finazzo is optimistic that work will accelerate as its storage facility in Goodyear fills up, with 84 ex-Spirit aircraft now parked there.
“They all will need some level of maintenance as they come out,” he said, adding: “I would expect most of them will return to service rather than being parted out.”
However, AerSale has already parted out several Airbus A320neos younger than five years, and almost all of the others have had their engines removed, so they will not return to service—and hence need predelivery maintenance—until new ones are found.
Finazzo said he expects replacement engines to arrive for all the A320neos within a year, adding: “Our expectation is that as lessors find customers, our bays will fill up.”
Another wrinkle in AerSale’s results was a drop in used serviceable material (USM) sales, as the company’s investment in feedstock material fell to $5.6 million in the quarter versus $27.1 million a year earlier.
This seems to be indicative of ongoing tight supply from teardowns and part-outs, with management explaining that AerSale did not want to pay over the odds in a “hyper-competitive acquisition market.”
AerSale also used some of its USM inventory to build up flight equipment for sale in the second half of this year, noting higher margins for these products rather than for piece-part USM sales.
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