Removed parts prove a goldmine for operators

 - May 2, 2007, 5:28 AM

The U.S. Army called them scroungers; the aviation industry gives them a more professional name: acquisition specialists. Whatever you call them, the industry variation travels from airport to airport poking around, asking questions and finding treasures in the form of used parts.

The subject of used aircraft parts evokes strong feelings, both pro and con. One FAA flight standards inspector said, “General aviation is eating its own dead. The FAA isn’t concerned about it, but the truth is it’s prolonging the life of aircraft that would otherwise no longer be flying. But it’s the law of diminishing return: once you start parting out a given model aircraft it won’t be long before none will be left to sell parts to.”

The FAA does have a related concern, however–traceability. “Any part of unknown origin is not permitted,” the inspector said. “And you can bet if the part was military it’s not likely to have a TC [type certificate], and it’s the TC that guarantees a maintenance standard.”

Wilson Shuptrine, owner of Jet Components of Ovilla, Texas, said traceability is at the forefront of his mind when he buys used windshields. “We get the original documentation when we buy a windshield,” he told AIN. “I buy windshields from any source I can find: Trade-A-Plane, Web sites, ads in various publications, you name it. I’m constantly searching all aspects of the corporate aviation market, but in every case traceability is the upfront key issue. I get the total time, the aircraft tail number it came off, everything.”

Shuptrine said it always surprises him that an operator will have an aircraft go in for an inspection, replace the windshield and put the old one in a back room of the hangar and forget about it. “Then one day they’ll see my ad, call me, I’ll take a look at it and realize it’s totally serviceable,” he said. “They don’t want it and will happily sell it for maybe $2,500. I’ll take it to Perkins Aircraft Services here in Fort Worth, they’ll do the necessary repairs, hang an FAA Form 8130-3 on it and I sell it. I may spend another $1,000 on the repair but will still usually double my money.”

Shuptrine said it’s common for the operator not to realize a windshield can be repaired. “I tell them it’s serviceable if it really is,” he said. “But once it’s been sitting there a long time, they’ve just developed a mindset and they’re happy to sell it. The real issue is that the shop that swapped it out during the inspection didn’t give them the option to repair it in the first place. There’s a much bigger mark-up selling them a new one.”

Jason Perkins, former sales and marketing representative for the military, rotorcraft and OEM division of Perkins Aircraft Services of Fort Worth, Texas, knows Shuptrine well. “We repair windshields for him all the time,” he said. “We also have customers for whom we repair a windshield then market it for them and some that want it back, put it on a shelf and keep it as a spare.”

He agreed that many customers don’t realize that delaminated and crazed windshields often can be repaired. “They’re surprised when we give them the option. Some operators just want a new windshield and tell us they don’t care what we do with the old one, so we’ll repair and sell it.”

Perkins said customers often say they don’t want to wait to have a windshield repaired because they mistakenly believe the process takes six weeks or more. “You’d think with the price of a windshield in the $20,000 range they’d be asking about alternatives,” he said. “They have this look of amazement when I tell them we can do a windshield in three to seven days.”

Frank McKnight, president of Aircraft Belts of Houston, said he repairs and returns used restraint systems to service all the time but emphasizes they must be labeled properly to be considered a candidate.

“We get used restraint systems here regularly and many of them are serviceable, but they must have a legible TSO label on the belt,” he said. “We transfer the information off the original label to a label on the new belt.” According to McKnight, the data on the label refers to the complete restraint assembly and contains information about who manufactured it, the date of manufacture, part number and TSO applicability.

“We strip off the old webbing, reweb it and replace defective components,” he said. “I’d say about 90 percent of the problems relate to the webbing and not the hardware. Webbing in aircraft left outdoors will dry out and get brittle, causing the stitching to weaken. Buying a repaired, used system will save the operator about 50 percent of the cost of a new one.”

The Importance of Traceability

John Goglia, past NTSB Board member and AIN columnist, emphasized the importance of traceability and having confidence in the seller of the used part.
“Many operators don’t understand there are a lot of bogus parts floating around out there,” Goglia said. Just having a part number or even serial number on a part doesn’t guarantee it’s safe or even legal.

“I’ve been selling parts since the early 1980s,” said Bruce Ruddell, owner of OK Aircraft Parts in Hollister, Calif. “We buy airplanes that are damaged, derelict or that no one wants any more because they need an expensive engine overhaul they don’t want to do. We’ll buy a whole airplane and dismantle and part it out, but we get all the logs and paperwork with the aircraft. We are mindful of traceability. We have a certificate of conformance that specifies the traceability of the part, its condition and so on.

“We sell our parts ‘as removed’ from a specific aircraft N number and serial number. We also specify that the part was not incident related to the cause of the aircraft’s being grounded or unairworthy such as its involvement in a major engine failure, accident or fire,” he noted.

Ruddell emphasized that it is his policy never to state the part is serviceable. “That’s always the decision of the mechanic or shop that buys it,” he said. “But I’m not going to sell it and stick them with a part they can’t use. The way we do it is if they’re not happy with the part they can return it. We guarantee every part we sell; if it doesn’t work out for them we refund the money or we’ll pay for the cost to repair it.”

Ruddell’s rule of thumb for pricing used parts is 50 percent of the list price of a new one. “It’s only a rule of thumb, though; a lot of what goes into pricing is situational,” he said. “If I’ve got 10 of the same $100 part I’m going to be a lot more negotiable on price to get them off the shelf, but in any event the buyer is getting a good deal.”

A Booming Market for Used Parts
“This is becoming more and more of a viable industry because many of the OEMs have stopped producing parts for aircraft that are still in service,” Ruddell said. “For example, the Jet Commander 1121 is a dead airplane; there are a few still flying but not many. I sell parts to 1121 operators all the time.

“But even operators of newer aircraft come to me because everyone likes to save a buck. If you’re looking at a $4,000 part and you can buy a perfectly good used one for half that price, what are you going to do?”

Modern technology has given the used parts business a real boost. Scott James, marketing director for Atlanta, Ga.-based Precision Heliparts, said eBay is changing the way he does business. “I buy a lot of aircraft parts off eBay these days,” James said. “I just bought a Beechjet evaporator blower assembly for $15. It’s a serviceable part. I can have it overhauled, sell it for a fraction of the cost of a new one and still make a good profit on the deal.”

James said the availability of used parts is less a conscious effort and more the result of inertia. “A company has a jet and a mechanic,” he said. “Over the years they accumulate stuff that collects in the hangar. One day they trade the company Citation for a Falcon, and there’s this pile of parts sitting there that has become useless to them. This is going on everywhere, and there are people who make a living driving around airports looking for just such targets of opportunity.”

Everyone interviewed agreed there’s an entire subculture that finds out who has what by religiously reading Trade-A-Plane, monitoring various Web sites and poking around airports. The parts business is a lucrative, financially liquid market.

“I’ve known guys who’ve made hundreds of thousands and even millions of dollars buying and selling parts that way, but you have to know what you’re doing,” James cautioned. “You focus on accessory type items that can be inspected, rebuilt/repaired and put back in service relatively easily. You wouldn’t do this with things such as landing gear, where you won’t know if there’s a problem until the airplane is skidding down the runway on its belly.”

Another aspect of the parts trade relates to U.S. operators with deep pockets. Often a flight department buys a new, improved version of a part when it becomes available even though there’s no problem with the old part. While the demand for the old-configuration part may be minimal in the U.S., the highly cost-conscious overseas market for the part will remain strong.

But the used parts market isn’t limited to small shops, single aircraft operators and overseas clients. “Used parts are big business for us,” said Ted Miller, former manager of parts support services at Duncan Aviation in Lincoln, Neb. “I have been buying avionics equipment on the secondary market for Duncan Aviation for more than 16 years and for a number of reasons.”

Miller has one major issue with the parts business. “My biggest concern is for customers who want something such as an accessory overhauled. They will tell me another company can do it for less money. The problem is that in many cases that company will end up tacking on an additional charge over the original quote. We call it backfill.”

Miller explained that backfill is when a company quotes a price for a component overhaul, then calls the customer and says it has found something it doesn’t cover in the overhaul rate. “It’s really like a bait-and-switch,” he said. “The customer always gets an additional bill for something unseen or unexpected. At Duncan, we do it for a flat rate. Admittedly, it may be somewhat higher than some of our competitors’ prices, but unless there’s some really serious problem with it, we stick to our price.”

The exception might occur if a unit turns out to be beyond economical repair (BER). “We take into account all the normally anticipated kinds of wear and tear when we set our prices. Sometimes we take a loss, but those are the breaks of the game.

“However, if a unit is BER, that’s outside normally anticipated wear and tear. In that case we try to give the customer choices. We tell them up front that we expect them to be giving us a serviceable unit, and our quote covers all the foreseeable possibilities, but if we get a unit that’s BER they know that we will be negotiating the final cost with them.”

Miller explained why the used parts business is so significant to an operation as large as Duncan. “The majority of business jets are located on the East Coast, so how do you convince them to deal with someone in Nebraska?  You offer customers a lot of appealing options. We have the largest avionics shop in the world, and that’s not only due to our expertise but because we have so many options to offer our customers and a great depth of spares.”