Aircraft Part Prices During Pandemic Paint A Complicated Picture

How has the pandemic traffic slump hit aircraft part prices? There’s no simple answer, according to one well-placed observer.

“There has been quite a bit of movement in pricing,” observes Erkki Brakmann, CEO of aftermarket procurement platform SkySelect. “For example, parts under $500 have seen an average reduction of 16% or more.”

But with higher dollar-value parts—those over $25,000—Brakmann says the situation is more interesting. Pricing remained relatively flat from 2019 to mid-2020 for these higher-priced assets, then prices dropped by nearly 45% by the end of 2020. Then a correction occurred in 2021, with part prices exceeding 2019 levels, “probably in an attempt to recapture lost revenues,” suggests Brakmann, but prices for these high-value parts have recently stabilized back at 2019 levels. Brakmann believes price variations have increased because suppliers disagree on what the market price should actually be.

The wild swings in prices reflect the last 18 months of pandemic reactions. “At the height of the crisis, airlines scaled purchasing back to bare minimum…suppliers saw inventories build up, and OEMs scaled down production,” says Brakmann. “Now, a lot of surplus is available, which allows cost savings, but on the other hand, some parts have long lead times since production was scaled down.”

Meanwhile, part demand differs by region. Big domestic markets are showing strong demand and the Americas generally are strong. International markets in Europe and Asia remain weak due to constant changes in travel regulations and restrictions.

Brakmann says a good indicator of demand coming back is that aircraft acquisitions are starting to increase, such as United Airlines’ deal for 270 aircraft. “In addition,” he notes, “we are seeing airline merger and acquisition activity and financially strong suppliers acquiring surplus stock.”

And those stocks are mounting. “While airlines are currently buying less, the amount of readily available inventory that is in-stock or deliverable within seven days has increased from 50% pre-COVID to close to 80% today,” Brakmann estimates. “The proportion of parts with greater lead times has dropped to only 20% of available supply.”

These trends are good news for airlines, says Brakmann. “Now they can stock less and save more, and, in some cases deliver the part even quicker than transferring it internally,” he says. “Even for routine demand, 60% of the material is readily available in the market. A great opportunity exists for airlines to drive savings through better deals.”