Gone are the days when the aftermarket was considered a mere afterthought. Throughout the entire supply chain, more and more OEM’s are offering solutions instead of — or in addition — to their existing portfolio of products.
Why, you might ask? Why profits of course!
Traditionally, OEM’s manufactured and engineered products used in various capacities on newly manufactured aircraft. Many of these same companies either didn’t know (or simply didn’t care) to provide effective aftermarket services to the owners of the aircraft.
That function was primarily left to independent suppliers to sell replacement units and to provide any aftermarket services that might be required; administering repairs, inspections, installing upgrades, technical support, etc.
But with airline mergers, the rapid expansion of low-cost carriers (LLC) and other product improvements have caused a shift in the traditional OEM thought process. In their view, not only is the aftermarket no longer an afterthought – but also a bountiful source of revenue and profits as well.
After-sales services and maintenance are high margin businesses and can often times be considerably larger than the original equipment business sold as new. Aircraft manufactures can gain additional revenues for as long as 25 years after the original sale.
It becomes simple math – the longer the life of the asset, the more opportunities companies will find to extract revenue down the line. Aftermarket services protect against industry volatility by providing an ongoing source of revenue.
So what impact is this having on the independent aftermarket (surplus) provider?
The simple answer is it depends. I like to say that the pie isn’t getting any bigger it’s just that the pieces are getting smaller. The challenge for the independent suppliers is to enhance or expand his portfolio – put your name on more pieces of the pie!
It is of particularly importance to the independent suppliers that they differentiate themselves from their competitors by offering more capabilities and services. This value added component is critical to prosper in this disruptive environment and remain relevant within the supply chain.
Mitchell Aircraft has embraced this accepted this challenge. Over the past several years, Mitchell has formed a PMA company (Mitchell PMA), a Military and Defense division and greatly expanded our OEM and distributed product offering.
Additionally, we have signed some long term agreements (LTA) with major operators to handle the aircraft disassembly and subsequent sales and marketing of the recycled components to the marketplace.
This partnership approach has demonstrated how maximum returns on assets can be realized to the owners of these aircraft. Both operators and leasing companies are beginning to take notice and see the additional revenue that can be gained by partnering with a company like Mitchell to bring the components to the marketplace. The numbers are significant, demonstrable and drop straight to the owner’s bottom line.
Don’t just buy from Mitchell, partner with Mitchell.
As the aviation supply chain continues to evolve and become more disruptive, Mitchell Aircraft continues to re-invent itself to remain relevant in support of and in partnership with our global customer base.
Let Mitchell Aircraft show you what’s possible with the aftermarket.
Contact us today to schedule some time to talk.
