Retirements continuing at a pace

Retirements have been increasing among the major airlines since the onset of the pandemic – particularly in regards to wide-body planes.

In 2020, Virgin Air retired the last of its A340s, Air France said adieu to its final A380 and British Airways bid cheerio to the last of its 747s – as did KLM a year later. And that was only the beginning.

Qatar Airways plans to retire its fleet of Airbus A380 superjumbos, which it considers a massive gas guzzler, over the next few years. All 10 were grounded in 2020, but eight have since been reactivated.

Qantas has confirmed it will scrap the last of its 12 A380s in 2032. Since the onset of the pandemic, it has already deactivated two of them – a logical move as constraints with maintenance, repairs and overhaul services dramatically slowed down their reactivation.

Emirates, which retired five of its 120 iconic A380s in 2021, has also said all of them will be deactivated by 2032. Its course of action was mostly spurred by Airbus ceasing production in 2021 due to insufficient demand. But a recent $2 billion retrofit might have changed its tune: now it thinks some of the A380s could continue into the 2040s.

And the same trend can be seen with wide-body cargo planes. Just this June, FedEx confirmed it is retiring nine MD-11 freighters from its fleet – with another 20 to follow over the course of the next year. It expects all 46 of its MD-11s to be phased out by 2027 or 2028.

Disassembling, dismantling and recycling also increasing

Certainly, all of this poses some pressing questions regarding the effect on the emerging USM (used serviceable material) market.

The commercial aircraft disassembling, dismantling and recycling market is expected to grow at a CAGR of 7.85 percent until 2032, according to a 2023 industry report – a significant hike on the CAGR of 4.80 percent forecast for the same period just 12 months earlier.

According to the Commercial Aircraft Disassembly, Dismantling and Recycling Market Report 2023-2033, the value of the market, which stood at $5.95 billion in 2021, will grow to $14.35 billion by 2032. Its resurgence followed a 12.13 percent decline in 2020.

The figures reflect how the pandemic has accelerated the decommissioning of planes (50 percent narrow body, 28 percent wide body).

In many cases, the decommissioning of planes has been the next logical step following their deactivation due to the corona-fuelled lack of demand. Disassembling, dismantling and recycling the parts of the planes are a perfect fit for the increased focus of the industry on greener and cost-effective solutions.

It’s a welcome development for Used Serviceable Material (USM) suppliers, which are making use of recent advancements in machine learning and robotics to strip the aircraft of nearly 80 percent of its components.

The boom in USM is having a positive impact in a number of areas:

Better repair/refurbishment of rotable components
Improving overall inventory management
Increased focus on recycling and storage operations

USM as a flourishing market

At this year's MRO Europe, where representatives of major stakeholders will gather in Amsterdam from October 17-19, the discussion concerning the increase in aircraft retirements will continue. It’s generally agreed the quick rate of retirements will present some real opportunities for the USM market – but they won’t come without a few challenges.

The USM market continues to position itself as one of the fastest-growing MRO segments. With the host of projected retirements feeding this market, there are tremendous opportunities that will bolster the health of the MRO industry, because USM has the potential to reduce material costs across the board.

When asked whether they saw increased interest in USM from their customers, Carrie Kendrick, VP Aftermarket Services at Honeywell, had this to say:

"Absolutely. What is funny is that it's also a little incongruous, as customers who are buying new aircraft for the appeal of new technology are also requesting USM solutions. This is leading to a trend in which 45 percent of the new aircraft are actually going to be replacement aircraft. In addition, if you look at some of the data provided by McKinsey, it reveals that available seat miles are projected to go up 7 percent over the next decade. But at the same time, the demand – the actual butts-in-seats – will only go up 4 percent. So that is a divergence, which indicates there is probably going to be more aircraft retirements than proposed. And much of that product and used material still has a lot of useful life left."

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Will aircraft retirements create a potential USM goldmine?