End of the Line: Bizjets to Beer Cans?
With the Federal Aviation Administration mandate for ADS-B equipage (updated/NextGen aircraft systems) looming at the beginning of 2020, there is debate within the industry as to whether this added expense will precipitate a major retirement of elderly business aircraft, those whose diminished value and use would scarcely justify the cost of the upgrade. Some believe the cost of equipage could drop so much by the deadline that many owners of such aircraft will indeed make the upgrades, especially since many of these airplanes remain perfectly capable of flight despite their age.
Indeed, the longevity displayed by most business aircraft is surprising many in the industry. “They’re living longer than we ever expected them to,” industry analyst Rolland Vincent told BJT sister publication Aviation International News. “We updated our so-called survivor curve for the industry, meaning how long an aircraft stays in operation. The curve goes to zero just beyond 50 years, and that’s unheard of.”
Yet, in the back of every owner’s mind is the fact that someday their aircraft will take its final flight, and for many, that end destination is an aircraft dismantler.
Currently in the U.S., there are four major general aviation salvage yards: Alliance Air Parts, White Industries, MTW Aerospace, and Dodson International Aircraft Parts (see sidebar below). It’s a tightly knit industry where everyone seems to know everyone else, or in some cases, are even related.
Terry White, owner of Missouri-based White Industries, is considered by many to be the elder statesman of the industry. At 80 years old, he has been in the airplane salvage business since the mid-1960s, having established one of the country’s largest foreign auto parts salvage yards before that. Many of the executives at other aircraft parts recovery companies have passed through his firm at Harry S. Truman Regional Airport (which is owned by the company) in Bates City. He estimates his business has taken in approximately 2,800 aircraft, including 1,000 jets and turboprops.
White noted the industry has changed over the past four decades. “Most everything that we purchase now is an undamaged airplane, flown in, that we dismantle for parts,” he told BJT sister publication Aviation International News. He said most of those jets and turboprops find their way to his facility because of the decline in values. “The two steps of decline were the continuing cost of engine overhaul, and secondarily, the cost of fuel on inefficient engine-type aircraft.”
As an example, Jack Caloras, vice president of sales and development with CRS Jet Spares, cited the Challenger 601. “Let's say you can get $2 million for it, and that’s being generous,” he told AIN. “Now you bring it in at that maintenance event and each engine is going to cost you say $750,000, so now you’ve got that $1.5 million. Some people will pay that; other people are going to put it down and part it out, or sell it to someone else that’s going to figure something else out with it.”
In the span of a month recently, White’s company took in a pair of Citation 500s, a Hawker 400B, and a Westwind 1124. “When they fly in, the first thing we do is park them on this piece of property, and our mechanics go in and start pulling the avionics out, so we can put them in inventory. Then we remove the engines,” said White. “The airplane stays basically intact and, if somebody wants a rudder off the plane, that’s when we take it off.”
With 178 acres at his disposal, White has created his own boneyard, as most of the aircraft he has acquired still remain on the property. “They’re still here only because we have the space to do it, and it is more costly in man-hours to crush it into a pile and sell it for aluminum scrap.”
Indeed, those aircraft fuselages, so painstakingly assembled and tested, are worth surprisingly little when it comes to salvage. “We have a scrap man locally that picks them up,” noted M.J. “Butch” Holtgrieve, CEO of Alliance Air Parts. “He pays us very little, between eight and 10 cents a pound.”
Beyond the Scrapyard
M.J. "Butch" Holtgrieve spent more than two decades under the tutelage of Terry White, rising to president of the company, before joining Dodson International Aircraft Parts, and then striking out on his own to establish Alliance in Oklahoma. Based in a 50,000-square-foot, purpose-built warehouse, he takes a different approach to the industry, specializing solely in turboprops and jets. The company maintains a hangar at Oklahoma City’s Wiley Post Airport, where it receives approximately 95 percent of the aircraft it acquires. There, the wings and engines are removed and trucked along with the fuselage to the company’s headquarters, where the complete dismantling occurs.
The process takes anywhere from three days to several weeks for a larger aircraft such as a Hawker 1000 or a Challenger. “We keep all of the removable parts, control surfaces, landing gear, wheels, brakes, radios, engines, valves actuators, anything you can unbolt,” noted Holtgrieve, who has broken down more than 200 turbine aircraft over the past decade. While the company generally won’t keep windows, it will keep a heated windshield if it’s in good condition. For the wings, Alliance keeps several pairs in stock and will evaluate them against the newly-acquired set, keeping the best examples. Several fuselages of various late-model aircraft are also saved for the rare occasion where a customer wishes to buy a complete interior.
Once everything of value is removed, the metal scrapper is called in. “Aircraft are built from stronger aluminum than beer cans,” said Holtgrieve. “It’s an aluminum alloy not straight aluminum, and it doesn’t have a great deal of value.” Factor in any rivets or other fasteners and the airplane carcass is classified as mixed metal and requires still more steps to be refined back into base aluminum.
Like the airplanes acquired by White Industries' Terry White, nearly all the ones Alliance receives these days are still capable of flight, but there are exceptions. Among Holtgrieve’s recent purchases was a Learjet 60, which had an engine destroyed when a technician left a metal nut in the intake prior to starting it up.
CRS Jet Spares, which maintains a $50 million to $60 million inventory with a focus on legacy out-of-production, out-of-warranty aircraft, was one of the pioneers in the rotable parts field, and the Florida-based company has moved further into the aircraft buying and breaking-up business of late. “Financially, it was a lot easier back in the day when an aircraft was costing a couple of hundred thousand dollars to part out,” noted Caloras. “Now you are talking about a lot more money for aircraft, especially an aircraft that you would really like to get into.”
In such situations, CRJ has brought in investment partners to help acquire them. Once it decides to buy an airplane, the company then contracts with a specialist firm to dismantle it, or mechanics who will take on such tasks as a side job. “You have to make sure you have the space, wherever that plane is,” Caloras said, adding that that could entail paying rent on a hangar for the duration of the tear down, a cost that must be factored into the aircraft acquisition equation.
“Sometimes you have to fly the team in if it's not a flyer; sometimes you can ferry the plane where you want it to go.” CRS then decides what it wants to salvage, and notifies the crew how it wants the items removed, tagged, and bagged. Once it has what it needs, a local metal recycler is contacted to haul the carcass away. But again, Caloras noted, there is not much to be realized from that. “Hopefully, you get enough money to buy your crew a nice lunch or dinner,” he said.
These days many requests for bids come from owners of hangar queens. “We’ll get people that will call us and offer their aircraft,” said White, adding that they will usually then disclose that it is sitting in a hangar and has not been flown or operated for six years. “That means for six years they have been trying to decide what they are going to do. There’s an awful lot of that out there.”
For the salvage yards, which are money-making businesses, whether they decide to take on an aircraft depends on how much they believe they can earn from its parts. “Back in the 1970s, you could buy an airplane for the value of the engines,” explained Holtgrieve. “The ‘80s, maybe the engines and the radios, but once we got past the ‘90s and into the 2000s, you are going to have to know what you are doing.” He said that to make good on an aircraft part-out these days will likely take selling the engines, radios, and many other key parts. “In other words, it is going to take you much longer to get your investment out before you start turning a profit.”
Some aircraft owners might get a surprise when they finally decide to scrap their aircraft and begin contacting the dismantling companies. Holtgrieve described how he recently declined to purchase a group of early-model, high-hour King Air 90s, because of little interest in their aging PT6A-20 engines. “If there’s no market for the engines, there’s no way that a guy can buy an airplane and part it out,” he said.
Holtgrieve claims his facility has the world’s largest supply of used Learjet parts, having disassembled nearly 50 Learjet 35s, four 60s, four 55s, and a trio of 31s. But with those fleets continuing their inevitable decline in terms of active aircraft, the challenge for Alliance and others is to continually “move up the food chain,” to include newer models such as the Learjet 40 and 45, and eventually the 70 and 75.
“Ours is truly a supply and demand business,” Holtgrieve told AIN. “If there’s no demand, the part’s not going to sell at any price.” As a result, the company keeps close tabs on its inventory, and tailors it accordingly to better allocate precious storage space. “We have purged several times, where we have thrown away one or two dozen types of instruments, radios, control surfaces, and [landing] gears,” said Holtgrieve. “Depending on the given aircraft, there is anywhere from 50 to 75 percent of what you remove that will likely never sell.”