Storage Versus Part-Out In Europe

Anywhere from 2,500 to 3,500 existing aircraft will not be needed by airlines over the next three years, industry experts predict.
Credit: AELS

European airlines, like others around the world, are caught between a hope for rapid recovery of traffic and an increasing worry about a very slow recovery. That can mean the choices between parking, storing, converting or tearing down excess aircraft look different from day to day, from airline to airline and lessor to lessor. 

The same kind of uncertainty also affects providers of services, from tear-down experts to storage companies. Right now, it looks like storage of one kind or another dominates, but final decisions on aircraft, including tear downs, are coming nearer.

Derk Jan van Heerden, CEO of Aircraft End-of-Life Solutions, once thought airlines would start making decisions on which aircraft to scrap by the end of May. “I now think it will take a bit longer,” he says. “The impact of Covid-19 is gigantic, and scrapping an aircraft is something you can only decide once.”

Van Heerden also notes that current restrictions pose challenges to tear downs such as making it difficult to get pilots back home after flying an aircraft or getting a team in to do a boroscope inspection.

AELS is seeing some interest in its tear-down capabilities, but nothing significant. “My feeling is most fleet departments are still trying to figure out what to do,” van Heerden says. AELS typically buys aircraft and less frequently does tear downs for third parties, although it is now open to third-party work now. “So we might not get the questions.”

On prospects for tear downs in 2020, van Heerden only speculates, “more than last year.” He argues some aircraft destined for part-out will be parked for a while because there are no buyer offers that the aircraft owner likes. “In this case, an aircraft owner may park aircraft and speculate that prices for the aircraft will increase in a few months.”

AELS is seeing interest in long-term storage options for European fleets. “We have received some requests,” van Heerden says. “If airlines decide which aircraft to park long-term they seem to be looking at all locations possible.”

Ireland’s Eirtrade Aviation has no doubt more tear downs are coming. The company disassembles aircraft, sells materials, supports lease transitions and does training, explains CEO Ken Fitzgibbon. “This year, I’m calling myself Father Fitzgibbon because I bury aircraft,” he says. 

The Eirtade CEO says he is getting plenty of enquiries about tear downs now. “I just got a call about an A330.” EirTrade’s Nock facility has torn down ATRs and 757s and now has an A380 awaiting disassembly. “We may have another A380 coming in too.”

Airlines are failing, and Fitzgibbon says one or two lessors are in difficulties as well with A330s. “They can’t get their people into the field for repossession since they have to go into quarantine for 14 days when they arrive.” 

So Eirtrade is building up its pipeline for disassembly, and Fitzgibbon says he would like to do two to three per month. 

One advantage the company has is its location in Ireland, as many lessors are located in the country and lessors like to keep their eyes on their assets, whether the assets are in one piece or many. “In Arizona, they can’t see their assets,” Fitzgibbon notes. “And Ireland is very tax-efficient.”
And Nock airport is quiet, handling about 800,000 passengers a year, yet is close to major European traffic centers.

Meanwhile, another tear-down company, Tarmac Aerosave, is concentrating on storage rather than disassembly. Tarmac is the biggest aircraft storage company in Europe with room for storing 90 aircraft at Tarbes and 25 in Toulouse, both in southern France, and 115 aircraft in Teruel in eastern Spain. 

These three locations were usually able to accommodate 230 aircraft and 80 engines, but in response to increased demand in early April some aircraft recycling was delayed to increase parking capacity by 25%, explains spokesperson Pascale Nizet.

Demand has been strong throughout the spring. Tarmac had been storing 150 aircraft at the end of December 2019. In April, the count rose to 170, and it is expected to rise to 230-240 aircraft in June. The facilities will then be at 90% of expanded capacity.

Tarmac is now preparing to receive more aircraft from lessors and is developing new sites that it hopes will be ready by June 2021.

Tarmac defines parking an aircraft as maintaining it in flight-ready conditions for up to three months, with return to service requiring only a week. Beyond three months, aircraft go into long-term storage.
Nizet says it is likely that half of the approximately 100 aircraft received since the crisis began will remain in storage for a year or longer.

Tarmac is now expecting many aircraft transitions between operators and lessors. It has the staff to do light and heavy checks on most commercial airframes and can dismantle and repair CFM56 engines.