What was new at ISTAT Americas?

The industry is optimistic and there’s a huge appetite for used serviceable material. But as we move into the industry’s busiest time of year in the skies, we’re seeing more distressed airlines in the USA. In Europe, the situation feels steadier.

The optimism in Austin comes from sustained passenger levels. Customers are continuing to travel at a rate not seen since before the pandemic. After years of sub-optimal demand and severe challenges for the industry, the renewed need for capacity and destinations is a huge positive. Most of the people we spoke to were confident this growing market would be sustained, although the pace may vary.

This means airlines and lessors are putting in orders for new aircraft. Their confident outlook has continued over from ISTAT Dublin. We can see this in the reports from Airbus, that in 2023 they took more orders for A320s and A350s than ever before.

All very positive, but there are issues with the supply chain. The pandemic compounded the issues in this area, but we are now seeing challenges with technical and delivery problems too. Reuters reported[1] that companies can be experiencing lead times of 2 to 5 times longer than compared with pre-2020 for some items.

Prices for used serviced materials have also risen. Parts companies are understandably guarded about what they are being paid, but right now, it’s no exaggeration to say that prices for some of these parts have surged by up to 30%.. This is down to aircraft remaining in service for longer. With fewer aircraft being decommissioned, there are fewer parts available to go back into the ecosystem. We see this as an immediate, but not a long term challenge for the sector.

To manage these effects, many companies are looking to expand their own spares capacity. We had one customer wanting to acquire forty aircraft in a financial year to create an internal parts pool. Airlines want to develop their resilience to price surges and delays in the delivery chain. The challenge, of course, is to find the aircraft to provide the parts for the ones they want to keep flying while newer craft come on stream.

The news out of ISTAT is that these are ongoing issues for the industry. We’re hoping some of them will ease in the coming year. We’re already expecting more widebodies in 2024 and have seen an uptick in regional jet enquiries, including CRJ and ERJ 145s.

There was talk in Austin about distressed airlines too. In January, authorities in the USA blocked the merger of Spirit Airlines and Jet Blue. This was not such a hot topic in Dublin at the beginning of the year. But in the US, the analyst house TD Cowen noted that there was too much capacity in the US domestic market in the second half of 2023, which has put pressure on various airlines.

If this trend continues, one upside could be an uptick in available parts, but there’s always the option for airlines to continue to run older aircraft. We’re seeing some of this with more returns to the second tier. The release of narrowbody aircraft for disassembly would also ease the pressure on transition and maintenance.

Despite the shortages and distressed companies, our takeaway from Austin is generally positive. The industry is steadily climbing upwards, out of the pandemic. Passenger numbers are rising and airlines are making money again. Now we just need the supply side to catch up.

We’d love to discuss this with you and hear about your needs. Come and see us at MRO Americas in April.

[1] Supply chain strains set to weigh on aviation industry bounce-back | Reuters