How does an airplane go from this to this?
After flying around the world for decades, many
planes end up here, stripped for parts and
crushed for scrap.
Airlines retire hundreds of planes every year.
Some are put to rest because of a sudden drop in
travel demand. Others are replaced by newer and more
fuel efficient aircrafts.
Many of them are just too old and costly to maintain.
We view aircraft being retired around 27 years.
We think that's the useful life of an aircraft.
So when we think about the park fleet, 40% of it is
over 20 years of age.
So we think that 40% is likely a good candidate for
retirement.
Many of these permanently retired jets meet their ends
here in the Arizona desert.
Specialists remove hundreds of parts, from giant engines
to critical sensors, oxygen masks to the pilot seats.
We could virtually find anything.
It's just a matter of lead time.
Together, the parts are worth millions of dollars on
the secondhand market.
One of the first things we'll do is we'll obviously
take off the engines. They're the most valuable
part of the aircraft operating out there,
provided they're not also run out of time.
Coming out of the pandemic, they're in high demand.
Some parts are used to train new generations of
pilots. Others are recycled, becoming furniture
and even keychains.
What's left gets crushed into scrap metal.
CNBC traveled to Arizona to see what happens to
airplanes after they land for the last time.
Brand new Boeing and Airbus planes can go for around $90
million to more than $330 million.
After flying them for decades, airlines replaced
them with more efficient models that require less
fuel, which along with labor, are airlines' biggest
expenses.
An aircraft could have 3 to 4 owners over its lifetime.
So it depends what's more valuable to it, what
resources an airline has of course.
For instance, Delta, with its Delta TechOps business,
that's about 4 billion of revenues that focuses on
servicing engines.
That might make them more susceptible to keeping older
aircraft because they have the capability to do that
in-house. And they have a competitive edge there.
Older jets also cost more to maintain.
And even though airplanes can change hands several
times, sometimes there aren't any buyers.
So those planes end up here, where their parts are
removed, fixed up and sold.
It's a small part of global spending on aircraft
maintenance, repair and overhaul, which is expected
to total $94 billion this year.
But demand is growing.
Boeing and Airbus are behind schedule in
delivering new planes, hurting airlines' ability to
grow just as travel demand is picking up.
So that's driving new business for the sector.
We have three customers at any one time, really: the
airline, the lessor or the parts company, airlines and
lessors delivering us aircraft and parts companies
consuming the parts from the aircraft.
It's a global trend.
The world has realized the value of what they call
serviceable used material.
The used planes that airlines have deemed
unworthy of continuing to fly end up in places like
Ecube's facility here in Coolidge, Arizona.
We specialize in the disassembly of aircraft at
the end of their usable life. That means we receive
aircraft into our facilities in either Spain,
the U.K.
or Arizona in America.
Companies like Ecube and its customers choose arid desert
climates to store aircraft because they're less exposed
to potentially corrosive humidity and weather.
They fly in where we keep them maintained as
serviceable aircrafts.
So if they're traded, they can fly out again.
But if they don't fly out again, they then move into
our disassembly process where we take the parts that
are valuable to the customer out and package
them up and send them to overhaul shops for refresh
work. And then with what remains of the aircraft, we
either upcycle it or we recycle it and make sure
it's disposed in a responsible way.
In nearly all cases, the most valuable parts are the
engines. Engines retain their value over a much
longer period than an airframe does.
After the engines, ot's generally the landing gear,
but it's worth remembering all parts on an aircraft are
expensive. It's just how expensive?
Narrow body engines can rent for more than $100,000 a
month. The cost to lease used planes has been on the
rise because airlines are holding on to their
aircrafts longer. But travel demand continues to
rise.
One of the first things we'll do is we'll obviously
take off the engines. Then we'll work with our
customers. And some tear downs could be as little as
200 or 300 parts.
If it's a type aircraft that has a very high demand of
parts in the network because there's a shortage
of them, we'll take off up to 2000 parts on a wide
body.
Inventory lists can include hundreds of items like
expensive avionics, flight attendant handsets, food and
beverage carts, windshields and wing flaps.
If you think of some of the small things that make up a
cockpit that the pilot has to look at, we regularly
remove those parts to supply back into the supply
chain. The cockpit is a skeleton, generally, by the
time we leave it.
Once the parts are removed, they're inspected if they're
going to fly again.
A lot of the parts that come off just because they're
being removed from an aircraft that was operating
recently doesn't necessarily mean that they
can be returned, just sold to an airline and be put on
another airplane right away.
They typically have to go through some level of
inspection or functionality testing.
So a lot of the aftermarket suppliers will take these
parts off and then hold them until they have a
potential buyer.
Almost all of the aircraft is recycled.
We recycle about 95% of the aircraft total through
recycling parts and recycling the metal.
Then the aircraft goes to the crush pad.
We then contract with a firm that comes in and removes
all the nonmetallic parts, separates that out for
different either recycling programs or for the small
percentage that may go into a landfill.
And then they'll crush the remaining hull and they sell
that to a smelter at a mixed metal rate.
The ones that aren't crushed remain in the desert with
their fuselages and tails visible from miles away.
Airplane parts harvested from older jets are becoming
more important as the average age of the world's
fleet is rising.
Airlines are holding on to planes longer because it's
hard to get new ones.
Boeing and Airbus are sold out of narrow-bodies through
the latter part of this decade. The average
retirement age of narrow-body planes, which
make up the bulk of the world's commercial fleet,
last year was 24.5 years old, up from 22 years old a
year earlier. That's putting pressure on aircraft
owners to maintain older planes, in some cases with
used but still usable parts.
We've seen the aftermarket really accelerate above OE
levels. And part of that is the aircraft fleet is
getting older. Jefferies forecast that the aircraft
fleet of aircrafts older than six years of age, and
that's important because six years is when an
aircraft needs maintenance, is going to be 17,000
aircrafts by the end of this year.
That's up from 14,000 in 2019 or up 19% versus 2019
levels. So that is growing much greater than the
current existing fleet of newly built aircrafts.
Part of that is being driven by supply chain
shortages. We're not seeing new aircrafts coming into
the market. Older planes are flying more.
Therefore, used parts are more valuable because we're
seeing a push out of retirements because airlines
are not getting their aircrafts on time.
Our priority continues to be execution, stability.
And while we still see some disruptions in the factory
and the supply chain, we're hard at work with our
partners to address these issues and ultimately
focused on meeting our customer commitments.
But with airlines holding on to planes longer, that means
there aren't as many aircrafts to strip for
parts. Some parts won't find new homes flying again.
They might be too old or not make airlines' cut to
put on board with passengers. Some of the
companies are trying to find other ways to reuse
them, like having them turned into furniture.
It's really interesting where these seats can go in
second life use. We've spoke to companies who
operate ferries and need rollover seats such as
aircraft seats going onto ferries.
And in our boardroom is a good example.
We have premium class seats from a national airline that
we use as board chairs, and that's becoming a product
that we sell on as well to many of our customers and
suppliers.
Recyclers are now facing a new challenge, reusing and
disposing of modern aircraft.
Fuselages on the state-of-the-art jetliners,
like the Boeing 787 Dreamliner and Airbus A350,
are made of carbon fiber, not the aluminum of past
decades. The material is lighter and helps aircraft
fly more efficiently using less fuel, but it could make
it more complicated to recycle. Companies like
Ecube and Ascent could soon be flooded with retired jets
as deliveries of new planes pick up, especially if fuel
prices rise, forcing airlines to further tamp
down costs, such as by using more fuel-efficient
engines.
That park fleet peaked out at 65% in April 2020 and has
steadily declined and has kind of flattened out at
this 18% level over the past 12 months or so.
So some say that we could be in for a flood of
retirements over the next few years as obviously that
18% is going to normalize down to single digits.
That will increase pressure on companies to figure out
how to recycle aircraft as those planes reach the end
of their lives.
The number keeps rising on what we think we can recycle
as an industry. And obviously the only
acceptable number in the end is 100%.
We have to strive for 100% recycled, but we're not
quite there yet.