DASI Forges Ahead Under New Ownership

John Dziuba, co-CEO and founder of aircraft inventory support specialist DASI, spoke with Managing Editor Lindsay Bjerregaard on the sidelines of MRO Americas about the company’s new ownership and its technology and buying strategies this year.

Marubeni Corp. acquired a 100% ownership stake in DASI in early April. Could you tell me a bit about how this relationship has grown and what this new ownership will mean for the business? We’ve known Marubeni for 12 years. We started talking to them ages ago about collaborating, and the time was just never right. Then three years ago, we were looking to start moving some equity and sold the first piece [50% equity stake] to Marubeni. They took out our previous partner, Fortress, which had 25%, and 25% of my equity. So that relationship has been great for the business. It’s given us additional capital at favorable rates, and cash is the lifeblood of this kind of capital-intensive business.

They are a great partner that is pretty much hands-off. Their investment thesis is mainly around existing management and the existing expertise of the business. They are not the kind of acquirer that is looking to put a bunch of companies together and sell them in a traditional private equity scenario. So that enables continuity for the business and for us to do what we do with more access to capital and better connections through their network.

I don’t think we’re going to see a dramatic shift in our strategy or the regions that we’re operating in. Given where they are in Japan and their relationships in the region, I think we might see some additional business come out of the Asia-Pacific, both on the buying side and on the selling side.

In March, DASI acquired Mesa Airlines' MHI RJ Aviation CRJ-700 and -900 inventories as the airline transitions to Embraer E-Jets. What are your plans for these parts, and what are some of the other recent inventory purchases you have made? We’re generally agnostic as to the platforms we get into. We’re well diversified through every platform out there. We’re constantly buying inventories on all Western platforms. So it was an opportunity. We’re opportunistic buyers—we’re always looking for fleet transitions or bankruptcies or large pools of inventory that become available. Often, logistics and manpower are the limiting factors on how large an inventory an airline can process or a bank can process in a bankruptcy scenario. We have our own in-house logistics teams that we deploy at these airlines and at different vendors to help them process and digest these giant inventories.

Atlas [Air] was a big deal for us last year. We bought a very large inventory of rotables from them as part of the rightsizing of their stock. Also JetBlue transitioned from their [Embraer] 190 fleet, so we bought everything—-rotables, expendables and tooling that JetBlue used to support the E190 fleet. We’re still taking delivery of that material today.

What other kinds of inventory are you targeting this year, and where are you seeing the highest demand for parts? I wouldn’t say a particular area stands out, like, “I wish we could get more of that material.” It’s hard, because with Mesa, when the CRJ material finally came in, there was this bow wave of sales that comes at the front end of the deal, and you always want to get more of that stuff, but we see that with pretty much every platform we buy. And then there’s the obvious stuff, like, sure, we’d like to see more [Airbus] A350 or [Boeing] 737 MAX material, but that’s a no-brainer. That’s the shiny new toy. If you are fortunate enough to get a nice A350 inventory, where are you going to get the next one? It’s very hard to build and maintain a customer base when you’re dealing with [used serviceable material] or surplus in general on those newer platforms because it’s just simply not available.

For us, our best margin and our best customer base is really at that second-tier airline level—so the mid-generation aircraft, the Boeing 737-800s and 777-300s and the E-Jets and Boeing 767s.

What trends are you seeing right now in the parts market? We’ve been innovative in designing our channel partner program. We’re selling third-party material through our digital platform, and we kind of modeled it after Amazon. Tongue in cheek, we say we’re the Amazon of aviation—that we’re bringing OEMs and consumers together in a more efficient digital space. I think that’s the trend that we’re really hoping to see continue. We’ve made tremendous progress with that platform over the last 10 years, and part of it is simple demographics. The buyers [of] the material are constantly being refreshed with younger and younger people.

The Gen Zers who are now coming in as the buyers don’t know what a fax machine is. They’re used to doing everything online. Whereas 10-15 years ago, when we started promoting our online store, it was very hard to change the behavior of the buyers because they weren’t accustomed to it. So demographics have caught up with the business, and we kind of perfected our channel partner program and our digital platform to the point where I think that’s really where we’re going to see the most growth over the next decade. Nearly 40% of all our transactions are done online now, and probably 30% are third-party fulfilled. A lot of the rest is automated.

Are you investigating any other technologies or platforms for uses such as parts data analysis? There’s some use for it there. But I also think that the term AI [artificial intelligence] is overused a bit, because a lot of it is just simple data processing and algorithms. Something that is algorithm-based isn’t really AI. Everybody wants to use the term AI because that’s what you want in the boardroom. But a lot of it is just good old-fashioned algorithmic manipulating of your data. A true AI would be a digital salesperson or a chatbot that’s replacing or doing the job of an inside salesperson.

Maybe I’m old-fashioned, but I think that a human touch is always going to be [necessary]. A lot of aviation knowledge about parts and trends is very hard to teach. It’s so experience-based. It’s constantly a challenge, like: “How do we train somebody to recognize part number structures?” I think there’s an opportunity to have an assist. I don’t think it’s much of an opportunity to have it replace [humans]. I think we’re a ways away from being able to really use chatbots for sales or generative AI to set dynamic pricing. That’s probably the first place that you would see it, dynamic pricing. But I think there’s a lot you can do with traditional intelligence. There’s a lot of refinement we can do in our business with traditional intelligence before we really get into AI.

Are you experiencing any workforce or supply chain headaches, particularly as the industry faces labor shortages and geopolitical factors, such as the conflict in the Middle East? The manpower challenges we have are more regional [due to being] based in Miami. The fact that there are literally thousands of aviation businesses within a couple hundred miles of us [means] that we’re competing with every repair station, airline, parts company, distributor and broker for the same people. South Florida is a very small pool, and it’s a very expensive place to live. It’s one of the highest cost of living places in the U.S., and it’s getting more crowded and expensive to live there, so maintaining staff there is getting more and more expensive.

We have a couple of deals that are in limbo in the [Middle East]—inventories that we’re purchasing—but it’s not going to move the needle. It’s an inconvenience at this point. By having this very large stock of surplus material, it’s kind of stored energy, right? It’s like a battery of inventory that the market can tap into when needed when there are shortages, and we have that surplus option. One of our roles is to be that backstop.

I think that some supply chain issues specifically related to the Middle East may arise in time, probably having more to do with chemicals or petroleum by-products that would traditionally be coming out of [there], or raw materials going into China, which then is a knock-on effect that’s going to take some time to show up in the market. By the time that it does, there’s probably going to be a solution there. I think it’s going to be a short-term thing unless this [conflict in the Middle East] drags on and the Strait of Hormuz is closed for a year.

What is on DASI's road map for the near future? You’ll probably see our stock of inventory go up. Our business is really designed to excel during diffi-cult periods in the industry. The post-COVID-19 boom for us was a bit challenging, and yes, sales were great, but it was very hard for us to replenish with feedstock. When airlines are making a lot of money, when demand is super high and their supply gets constrained, very little surplus is released into the market. When the market is under stress, when airlines are grounding fleets for whatever reason (fuel prices or lack of demand) and when there are challenges to the macro market, that’s when our company does its best, because that’s when we’re able to really stock up.

That’s when we’re able to make creative deals with airlines and MROs that are willing to listen more, to say, “How can we monetize some of this inventory that’s trapped on our balance sheet?” When they have to start tightening their belts, that’s the best time for this company. And so that’s really what we’re looking forward to over the next couple of years, as we come out of the other side of this business cycle here. I think we’re going see a lot of growth in DASI during that period.