Spare a thought for the smaller airlines

Instead of power-by-the-hour (PBH) contracts, how about a spares support agreement? That’s the suggestion of Justin Blockley, commercial director of Bii, a specialist component supplier.
It’s one of the solutions from parts suppliers and OEMs to help keep airline fleets in the air at an economical cost.
A spares support agreement isn’t for everyone, Blockley concedes, but neither is PBH. Speaking on the sidelines of MRO Middle East in Dubai, he said: “As I see it, any airline with fewer than 10-15 aircraft is too small for PBH.
“So, instead of charging for a fixed number of hours in the air, I would propose setting a fixed term and fixed prices – with discounts – for full support for a package of spares. The airline pays a small percentage of their value and gets availability 24/7. They’re still sending a purchase order; we’re still holding the stock. It’s helping both parties.
“With PBH, if you get the paperwork wrong and components keep failing – four starters in one month and you’re talking $400,000 plus, for example – it’s a disaster. With a spares support agreement, you still give me deadlines to commit to delivering the spare, but it’s a sales transaction, not a 100% contract.
“I think airlines, especially smaller ones and start-ups, will appreciate that. It’s a good new idea for the industry.”
Blockley, who was in Dubai to evaluate a RJ85/BAE 146 spares package for possible purchase, plans to develop spares support agreements as a product but first needs to build up stock. “I’d like to buy another 747-400,” he said. “As long as operators keep signing leases on them, someone’s got to support the spares.”
Strategic acquisitions help keep smaller suppliers, such as Bii, in the game. There is merit to holding original parts. Blockley recalls the renewed demand for BAC 1-11 parts when hush kits allowed operators to keep their fleets flying. “All of a sudden you got around five years of extra business out of it because you were the only person who had the stock.”
Currently, Bii holds up-to-date parts and components – primarily Boeing – valued at just over £4 million ($5.67m) at its premises near Gatwick. It also takes materials on consignment from airlines, OEMs and lessors, and has achieved “impressive” payback for consignors in the last year.
It cites a 78% return on B737NG parts, 72% on RJ/BAE 146, 65% on B737 Classic and almost 50% on B747-400 stock.
Clearly, the strategic decision to change focus from the military to the civil market has paid off. The company’s turnover jumped six-fold to £12 million ($17m) in less than three years. Blockley attributes this success to “being big enough to cope and small enough to care”.
Bii recently added two more sales people to its staff of 21 and appointed an experienced technical director.
“We’re purely ad hoc,” said Blockley. “We go in underneath the big suppliers and the big stockists. There’s a lot that’s not included in a PBH. For example, the contract may cover the supply of all the avionics, but outside that there could be a wheel or brake. The airline will go to the market for that – the market being us.”
The company does regular business with an established customer in Dubai and has started supplying an MRO operator with bases in Dubai and Sharjah. It sees the Middle East as a “growing market” alongside the Baltics, western, central and eastern Europe, the eastern Mediterranean and north Africa, which have all shown “dramatic growth” in the past 12 months.
Adaptability is important across the MRO sector. In the continual drive for better solutions, Honeywell and rental dealership, Logix Aero, have come up with an engine rental bank for Honeywell auxiliary power units (APUs), which operators of Airbus A330 and A340 aircraft can access without the need for a direct repair contract.
The bank rents Honeywell’s 331-350C APUs on a short or long-term basis to limit aircraft time on the ground while existing equipment undergoes maintenance or repair. It also saves cost by eliminating separate contracts with Honeywell for APU purchase, upkeep and repair.