Keep ’em flying: Aircraft parts companies help keep airlines running

CEDAR RAPIDS - Each year, the air transportation industry spends tens of billions of dollars on aircraft maintenance.

When it comes time to replace a part on a plane, operators often look to surplus parts as a less expensive alternative to buying new. And they may turn to one of several local companies that have built their businesses around sourcing and selling aftermarket aircraft parts.

'The thing a lot of people don't realize is the tremendous burden of an aircraft maintenance schedule on an airline,” said Michelle Thornton, chief financial officer for Midwest Aerospace in Hiawatha. 'Companies like us make it economically feasible for airlines to run. We are vital to affordable air travel and cargo.”

According to a November 2013 report by aviation industry consultant ICF International, maintenance spending accounts for eight percent of a typical airline's costs. Spending on fleet maintenance, repair and overhaul is expected to increase at a rate of more than four percent per year, reaching $84.7 billion by 2022.

Maintenance spending is one of the biggest categories of controllable costs for the aviation industry, and ICF predicts that the industry's interest in using surplus parts as a way to control costs will continue to grow as more aircraft are retired and their parts become available for resale.

ICF anticipates that 600 to 700 aircraft will be replaced each year over the next decade.

Mark Hanrahan, CEO and principal owner of Cedar Rapids-based MidAmerican Aerospace Ltd., said he already has seen the accelerating rate of aircraft replacements affect his business.

'Prices are one-third of what they were in 2009,” he said. 'They're retiring those things all over the world.

'The value of the parts reflects the value of the whole, and everything we sell has come down in value.”

Hanrahan's company purchases and dismantles retired aircraft and sells or leases their engines and other rotable components. A rotable part is any part of the aircraft that is replaced periodically, overhauled and then returned to service.

Rotable parts are assigned serial numbers for tracking purposes and may include anything from an engine to landing gear to a coffee maker.

'There isn't anything we won't take,” Hanrahan said. 'Well, we don't take the carcass or the seats.”

Hanrahan said MidAmerican Aerospace typically buys aircraft from banks that finance planes and lease them to airlines. When a jetliner comes off a lease and is retired, it is taken to an airfield - usually located in a desert because the arid environment is more hospitable for aircraft - where it is dismantled by a crew of specialists.

The parts then are sold to parts brokers, maintenance facilities or airlines and other operators around the world.

Thornton's company may be one of the brokers that buys parts from the planes that Hanrahan's company dismantles.

'One of the unique things about our industry is that we're all sharing information with our neighbor companies,” she said. 'We're competing with them, but we're also buying from them and selling to them.

'We're doing the same thing everyone else is doing. We're just doing it with different parts.”

Thornton said Midwest Aerospace deals primarily in avionic computers, 'the things you never see when you are sitting in seat 7A on your way to Dallas.”

The company does not buy and dismantle aircraft. It obtains its parts from other brokers, airlines, maintenance facilities, and parts manufacturers, both domestically and abroad and sells them to others in those same categories.

CR Avionics is another Hiawatha company that deals in aftermarket aircraft rotables. Co-owner Rocky Dales said the company specializes in Rockwell Collins and other avionics equipment that it buys from private owners and fixed-based operator repair facilities.

The equipment is sent out to Federal Aviation Administration-approved repair facilities to be certified as airworthy before it is sold.

Although CR Avionics is a small business with just two employees in addition to Dales, the company has a global operation.

'There's not a continent in the world where we don't buy and sell,” he said.

All three businesses have roots in one Cedar Rapids company.

'We all worked together at Intertrade at one time,” Dales noted. 'We all had our own niche work.”

Intertrade was founded by two former Collins Avionics employees in 1969 and eventually was purchased by Hanrahan's father, Don, also a former Collins employee. The company specialized in aftermarket Rockwell Collins avionics.

Rockwell bought Intertrade in 1999, after which several former Intertrade employees started similar businesses in the area. Midwest Aerospace was founded in 1999, MidAmerican Aerospace in 2004 and CR Avionics in 2009.

Thornton said this cluster effect is not unusual in the aviation business.

'It's an industry phenomenon for small avionics brokers to pop up in clusters around prominent manufacturers,” she said. 'You see the same thing in Kansas around Honeywell.”

Dales said that while a big part of his business involves Rockwell-manufactured parts, having physical proximity to Rockwell Collins is not important to operations. With dealings all over the world, 90 percent of his business is conducted via email and telephone.

'We could do this from anywhere,” he said.