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Explainer: Why demand for aircraft spares is rising in Nigeria

Explainer: Why demand for aircraft spares is rising in Nigeria

The demand for aircraft spare parts has continued to rise in Nigeria and globally as airlines seek ways to cushion the effect of COVID-19 on their operations.

Experts globally are saying the aircraft spare market is growing following the inability of airlines to buy new planes as a result of COVID-19 impacts, thereby forcing operators to rather opt for more spares and maintain their old aircraft.

Airlines who see the future in the spare parts market are already keying into it as they commence construction of Maintenance and Repair Overhaul (MRO) facilities in a bid to reduce capital flight.

For instance, Air Peace and United Airlines have concluded plans to set up MROs in Anambra and Enugu states, respectively.

Air Peace is partnering with the Anambra State government to get Embraer of Brazil, the world’s fourth-largest civilian aircraft manufacturer, to locate an MRO service centre for Africa in the state.

The Nigerian Civil Aviation Authority (NCAA) has granted a licence to 7Star Global Hangar Limited, an Aircraft Maintenance Organisation (AMO) to operate an all-inclusive MRO facility.

Experts estimate that it costs West African airlines an estimated $1 billion annually in ferrying aircraft offshore on different types of aircraft checks.

Seyi Adewale, CEO, Mainstream Cargo Limited, told BusinessDay that in the last six months, the value of imported aircraft spares by domestic airlines, which he has assisted in applying for waivers, ranged between N1 billion and N4 billion.

Adewale said technically, it would be double this amount or more annually as spares needing constant change or replacement include brakes, tyres, aircraft engine on repair and return, Integrated Drive Generator (IDG), APU, lifesaving appliance, fire extinguisher, nose landing gear, ELT and bottle ASSY, among others.

Read also: Airlines to save N4.9bn yearly on spare parts waiver

One of the key reasons why the spare parts market looks set to skyrocket is pure economics. Airlines are cash-strapped. They don’t want to buy any new aircraft. Investigations show that orders for new planes from Boeing and Airbus have fallen significantly.

Instead, airlines want to ensure that their existing airframes keep on flying. To do this, they need parts and MRO services to keep the engines humming and the aircraft in good condition.

The cheapest form of spare parts is from existing aircraft from defunct carriers or carriers looking to downscale. An example of this would be Virgin Australia’s recent decision to sell off its Boeing 777-300ER fleet.

“Flights will resume, but revenue starved airlines will be desperate to conserve what cash they have left. Many airlines will eschew expensive factory fresh products for less expensive, well maintained used planes and parts,” Andrew Curran at Simple Flying said.

Airlines can snap up these second-hand planes at reasonable prices, and strip them for required assets.

However, there are only so many planes in the market that are kept in good enough shape to be useful, and as soon as aircraft start flying again, the market will turn upside down. There will not be enough spare parts to keep every aircraft in the sky, and any airline still holding onto aircraft in good enough condition will find themselves in a buyers’ market.

“MRO providers face disruption in the used serviceable materials (USM) market, as the inventory of sidelined and retired aircraft are stripped for parts,” Aviation Analysis firm Oliver Wyman said.

The bottom line is that MRO firms looking to prepare for a return to service need to first secure their line of spare parts, especially from older grounded aircraft.

“This is an opportunity for MROs to work with airlines to effectively utilise the pool of surplus material they are sitting on,” David Doyle from Lufthansa Technik’s to Flight Global said.

Airlines are likely to keep older aircraft running for longer, requiring both the services of MRO and access to increasingly valuable spare parts.

The pandemic left no options for aircraft manufacturers but to curtail their key aircraft production rates.

For instance, Airbus announced it would curtail its production by a third for 2020 with the revised rate of 40 A320s per month, six A350s per month, and two A330s per month, owing to a sudden collapse in air passenger traffic in the wake of a complete travel ban imposed by several advanced and emerging economies.

The short-term outlook of the commercial aircraft market seems struggling on the account of prolonged grounding of B737 Max by some countries, temporary curtailed production rates of key aircraft programmes such as A320, A330, B787, and A350 XWB, and continued delays in the entries of upcoming aircraft programmes such as B777X and C919.

However, experts anticipate a quick rebound in the demand for turned parts, especially from the narrow-body segment, positing a recovery cycle of about three years, the quickest among all the aircraft segments.