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Even during the pandemic, AJW believed in expansion, signed new contracts, undertook a variety of aircraft for teardown to stock the spare, and offered cost-effective solutions to customers. Due to this astute precision, today AJW stands a cut above the rest. In a candid chat with MRO Business Today, Conrad Vandersluis, SVP Strategic Material & Asset Management, spoke openly about the current teardown market, the challenges faced, and how AJW handled these challenges alongside robust expansion plans.

 

Q. Many airlines are retiring their aircraft earlier than anticipated due to pandemic woes and reduced passenger traffic. Do you think it has affected the teardown market and how?

 

A: Since the onset of the pandemic, the number of aircraft considered ‘end of life’ assets has increased. Significant numbers of aircraft and engines are coming to the sale for both narrow and wide body which has flooded the teardown market and in turn, increased availability for USM. Except for aircraft that are eligible and economical for the passenger to freighter conversion and narrow bodies, mainly Boeing 737-800 and A321 aircraft along with wide-body aircraft which include both A330 and Boeing 777-300ER, but we are still seeing aircraft of this type going for teardown depending on the price offered on sale/purchase.

 

Q: Going ahead, in the post-pandemic market recovery for aircraft teardown and USM, what are the risks and challenges involved?

 

A: The USM market is based on demand and aircraft application, the increase in aircraft available for teardown will depress the valuation of USM; the challenge is to match inventory to forecasted future demand.

 

Q: How do you plan to tackle the above challenges?

 

A: The need to be reactive, adaptable, and flexible to meet our customers' changing needs will remain for the foreseeable future as well as offering cost-effective solutions to help operators keep their costs under control as they manage their pandemic-induced debts. Utilising our extensive analytics for applicability and demand profiles, we have, and will continue, to invest significantly in both high demand and current production components which allows us to offer the cost-effective support our customer base requires.

 

Q: Just last month you signed a deal with Honeywell for the global sale of ADIRU, for all Boeing 737 MAX aircraft. Can you throw some more light on this deal?

 

A: Last month we signed a sole distributorship agreement with Honeywell for the Boeing 737 MAX ADIRU, this is in addition to agreements signed last year for the A320NEO ADIRU and a suite of Boeing 787 components. We saw the opportunity to invest and support the products covered by offering the availability to operators of 'factory new' stock for both Initial Provisioning demands and stock increase requirements. In addition, we offer support with items available on exchange and loan, and our 24/7/365 AOG service for all airlines and integrated support providers. It has also allowed us to increasingly develop our in-house MRO capabilities at our state-of-the-art MRO facility, AJW Technique in Montreal, on the repair cycle. The Honeywell product lines are current production aircraft types that are being delivered with a significant backlog of deliveries going forward which will require the support that the AJW Group can offer.

 

Q: Even during and early post-pandemic time, AJW continued to buy engines for teardown to expand the inventory, the latest was the purchase of a CFM56-5B engine. Did you predict that with the re-opening of the market the demand for spares will rise?

 

A: The CFM56-5B engine will be in operation for the foreseeable future, along with the CFM56-7B which we also have and are invested heavily in; and will continue to do so as opportunities arise. We expect an increase in shop visits for these engines as green time assets dwindle and a continuation of demand for the required LLPs and core engine material.

 

Q: From your point-of-view how does the immediate future of MRO aftermarket look like?

 

A: With the changes in fleet, the predicted gradual growth, and the elevated number of aircraft being returned to service we believe that we are going to enter a period of MRO growth that will directly impact the component maintenance market as a whole. It is now forecast that by 2024 MRO demand should reach pre-pandemic levels but at varying rates around the world. For instance in China, the MRO demand has already surpassed pre-pandemic figures, whereas western Europe is not expected to see a full recovery until 2025.

 

Due to our major contracts, for AJW Group and our MRO facilities in Montreal (AJW Technique), MRO has been and continues to be extremely busy throughout the pandemic, as even when aircraft weren’t flying there were still significant shop visits due to maintenance checks and calendar life components.

 

Last year, in response to the demands of our local European customers, we expanded our global MRO footprint with the opening of AJW Technique Europe, which operates as a 'centre of excellence' for aircraft batteries and will expand its capabilities forthwith to complement the repair services offered at AJW Technique in Canada. We also added AJW Technique Interiors product lines to our capability list, helping airlines who need to refit cabins and replace seat coverings and carpets by reducing costs and supplying a superior alternative.

 

Q: What can you say about the narrow-body aircraft gaining popularity in the post-pandemic recovery? Due to their improved range capability and attractive seat mile efficiency making the narrowbodies choice of aircraft for LCCs. How will it impact the teardown market?

 

A: Industry data cites that domestic air travel and the associated narrow-body aircraft fleets are expected to reach pre-pandemic levels this year, as more aircraft come out of storage or are delivered new by the manufacturers. However, the slow business and international travel recovery will have an impact on growth and profitability of airlines and the demand for wide-body aircraft.

 

Some of the older narrow-body assets may transfer into this demand but a high proportion of aircraft being inducted will be newer assets or new build NG and MAX aircraft.

 

Q: In the COVID-19 recovery, USM is going to play a huge part in helping operators manage their cash flow more effectively. Your comments?

 

A: Airlines are laser focused on lower material costs. AJW offers USM for sale as well as exchange or loan, negating the need for airlines to increase or invest in additional inventory. As a result, USM has become an increasingly acceptable lower-cost alternative to new OEM parts.