Lee McConnellogue, CEO of ecube.
Lee McConnellogue, CEO of Ecube, which specializes in aircraft disassembly, recycling and end-of-life services, discusses future demand in the aircraft disassembly market and how the company is working toward sustainability goals.
How was Ecube impacted by the COVID-19 pandemic?
Airlines, lessors and part-out companies were all hit very early on by the pandemic. For ecube as a business, the first and very obvious stage was a rapid rise in the demand for aircraft parking, which wasn’t typically our core focus. At that time, some lessors came to us and wanted to book slots with us for parking their aircraft. Some of our leasing customers had the aircraft because the airlines had handed them back and they didn’t know what to do with them.
So, at that time we had to be creative. We created the parking slots and ensured we had the maintenance crews on site to be there for those customers. The second stage, which we describe as ‘the long wait,’ was and still is a case of pausing for decisions. But we can’t confuse a long wait with less activity; there is a lot of activity happening. However, many asset owners are waiting to decide what to do with their assets.
In some cases, in our facilities, we have had aircraft in storage for a lot longer than we would typically expect. We are also starting to reactivate quite a few aircraft, which is not Ecube’s normal business either, but we are doing that quite a bit now. That is because airlines are struggling to get the lifts from the OEMs; they are bringing their older aircraft back. Another thing we are starting to see are quick decisions to disassemble the aircraft.
Has Ecube seen an impact from industry supply chain challenges and, if so, how have you navigated this issue?
OEMs, MROs and airlines are struggling badly with new parts supplies. OEM output rates all seem to be constrained; some are constrained by raw materials and skill shortage, some have regulatory issues and some have an inability to fund what they need to do to keep the supply chain working. With those constraints going all the way through to airlines and MROs, we've had an opportunity to step in and provide solutions to bridge that gap.
Traditionally, and before all these problems presented themselves, we had a simpler relationship where we provide the used serviceable materials (USM) to the parts traders, which they then distribute around the industry. But increasingly we are finding our place in the industry as a bridge between the owners of assets and OEMs and MROs. That is a place we wouldn’t have been two years ago.
Nowadays, parts companies have stock that they just can’t get through to shops, and in the repair facilities they have inventory that is essentially stuck. So, they are now looking back to us and challenging us. They want very quick turnaround times on their disassembly because the quicker it’s done, the quicker the cash comes to them. Currently we are running at a capacity of seven aircraft or above across our network so that we can take new customers and aircraft.
The aviation industry is becoming more sustainable and cost-effective, so how is Ecube addressing that?
We are taking it seriously and we have recently appointed a vice president of sustainability and business development in our leadership team. That role is there specifically to push and challenge the industry on how end-of-life plays its part in sustainability.
We are very involved with the Aircraft Fleet Recycling Association, which is the leading global organization for promoting and developing a safe and sustainable management system in and around the circular economy, specifically at the end-of-life. We need to push and challenge the industry because what the International Air Transport Association is doing for their net-zero pledge by 2050 is great. It is focused on the end of the ecosystem, sustainable aviation fuels, air service navigation providers, new technology from OEMs and better infrastructure at airports. But we are missing a trick on what to do at the back end. What about the circular economy and what about the basic principles: reuse, recycle and repurpose?
We have to get there as an industry on services. If you re-use the material then you are sustainable and if you can’t reuse it then repurpose it. We are at more than 90% on our recycling and all our customers want that, too. The lessor community is on an [environmental, social and governance] journey and they have all started appointing people to lead that in their companies.
From your perspective, how do market trends and demand look in the future?
During 2019-20, people were saying that the tsunami of aircraft retirements was coming and the industry wouldn’t be able to cope with that. Approximately 3.5% of the global active fleet retires every year and the average over that last 20 years was about 2.5%. Last year we saw only 1.5% retired, which probably the worst performing year in that range. I believe that 2022 will not be massively different to that. However, Q4 of this year is getting stronger, but I don’t think that it would be materially different to that. It is causing a huge number of assets to be parked. Currently, more than 7,000 aircraft are parked, which is 20% of the global fleet. However, some of the aircraft are going to be coming back and we can see that happening now, but we would estimate more than 2000 of those aircraft will never come back.
We can see the trend of aircraft parking, but they are not making it to disassembly. I believe that there are a couple of reasons for that. First, OEMs are not performing well because they are all under delivery. So, once that delivery comes back online, that will help the aircraft disassembly market. Second, the other trend that is bound to happen is the economic argument for USM. Another undesirable thing is that we are going to see some airlines disappear. All these three things are happening now and that means more and more aircraft will become parked, but it will start to push more toward disassembly.
What future market challenges do you anticipate?
The COVID-19 pandemic, Russia-Ukraine war and a significant reduction in economic performance are all going to cause a lot of decision making to be held up, which will cause a backlog, and this will become an issue for the future. We will sadly be in a place where the demand will exceed the network capacity. Induction slots will be at a premium and hence it will become a problem. Some of our customers have recognized this and they are looking way ahead and trying to book slots. I would say in the near future market, we will see a capacity and demand problem.
We are also starting to see a challenge on how we recycle carbon composites. However, it is not a macroeconomic problem; there are technical solutions around us that will get us past the problem. We have got to turn those technical solutions into good business cases for our customers.
I believe that we can bring an offering to the market that makes recycling of carbon composites nearly as normal as recycling aluminium. Boeing 787 and Airbus A350 aircraft have made the industry realize it has a problem that needs to be fixed. I am convinced that we can resolve this challenge with collaboration. It is becoming clear that we have to collaborate with other industries to take composites from the aviation industry that have been recycled and push them back into those industries that perhaps have fewer stresses and strains.
Lee McConnellogue will be speaking at Aviation Week's MRO Europe conference in London, which runs from Oct. 18-20.
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