Market landscape
Aircraft dismantling market landscape
According to public data, in 2022, more than 90% of domestic retired aircraft will be flown abroad for storage, dismantling, and remanufacturing, and less than 10% will be dismantled and reused in China. For example, all five Airbus A380s retired by China Southern Airlines flew to the Mojave aircraft cemetery for mothballing and dismantling.
At present, there are three types of common aircraft disassembly companies in the world: one is an airline subsidiary or MRO (engaged in the maintenance, repair and overhaul of civil aircraft) companies, the second is a company engaged in the sale and leasing of second-hand aviation materials, and the third is a company whose main business is aircraft storage and dismantling.
At present, most domestic aircraft maintenance companies are registered near the airport, and are used by local airports to receive and tow aircraft to be disassembled, and carry out aircraft maintenance and dismantling tasks nearby.
There are two main sources of aircraft to be dismantled, namely retired aircraft directly by airlines and retired aircraft purchased by third-party aviation asset management companies. The maintenance company of the existing airline mainly receives the maintenance, overhaul and dismantling of the retired aircraft of the airline, while the third-party independent aircraft maintenance and dismantling company mainly dismantles and processes the aircraft held by the asset management company, and does not participate in the subsequent sales and processing of parts.
Aircraft dismantling qualifications - 11
The Civil Aviation Administration of China and the local regulatory authorities have set up a special review team to comply with the requirements of the CCAR-145 regulations and consultation notices:
Document review of the "Maintenance Management Manual", "Training Outline", "Aircraft Dismantling Manual" and "Work Procedure Manual" submitted by the company. On-site review of the company's plant facilities, tools and materials, personnel qualifications, airworthiness data, safety and quality management, production control, engineering technology and other systems.
Harbin Zhonglong aircraft dismantling base
In 2015, China Aircraft Leasing Group Holdings Co., Ltd. (CALC), a subsidiary of China Everbright Group, established the first aircraft disassembly base in China in Harbin, and established Zhonglong Aircraft Disassembly Base Co., Ltd. to be responsible for construction and operation.
In 2018, the base officially entered into operation. The base is located on the south side of Harbin Taiping International Airport, with a total area of 299,149.6 square meters, a total construction area of 169,923.96 square meters, and an apron area of 120907 square meters. The construction scale of the project is 100 aircraft dismantling capacity per year, and the total investment in fixed assets is about 1.309 billion yuan.
In September 2018, CALC established a joint venture maintenance company, Zhonglong Oufei Aircraft Maintenance Engineering Co., Ltd. (hereinafter referred to as "Zhonglong Oufei"), a joint venture with FLTechnics, a subsidiary of Avia Group, a listed company in Warsaw, Poland, and in October 2019, it was approved for China's first aircraft dismantling and maintenance license, targeting the maintenance market in Northeast China, Far East Russia, Japan and South Korea.
Tianjin Haite Aircraft Maintenance Base
Tianjin Haite Aircraft Engineering Co., Ltd. is located in Tianjin Port Free Trade Zone, mainly providing aircraft maintenance, repair business, aircraft maintenance, fleet engineering technology management, aviation materials engineering technology management services and other businesses. Tianjin Haite maintenance base is located in Binhai International Airport, Tianjin, China, with a total area of more than 240 acres. At present, 2 narrow-body aircraft maintenance hangars and 1 business aircraft maintenance hangar have been built, which can accommodate 8 A320/B737 series aircraft and 4 business aircraft scheduled inspection and maintenance at the same time, and is the largest and most capable private third-party aircraft overhaul base in China.
The aircraft to be repaired by Tianjin Haite are mainly domestic and foreign airlines, and the aircraft to be disassembled are domestic and foreign aircraft introduced by the aviation asset management company. At present, Haite's business is mainly aircraft maintenance, overhaul, passenger-to-cargo conversion, etc., although the maintenance process includes dismantling links, but the pure dismantling business is less.
MEG Aviation Aircraft Recycling (Hefei) Co., Ltd
MAG is made up of an international team of experts. The founder, Sheng Siyun, is the CEO and has more than 10 years of management experience in the Chinese aviation industry. MAG has been involved in more than 400 aircraft asset management transactions with a total value of more than US$5 billion worldwide, and team members have extensive management experience in airlines, leasing companies, finance companies, aircraft capital funds, private equity, asset management and other aviation businesses worldwide. At the beginning of January 2024, MAG has completed the delivery of tens of millions of RMB angel round of financing, and this round is exclusively invested by Pansheng Capital.
MAG Dismantling is located at Xinqiao International Airport in Hefei, Anhui Province, and provides aircraft dismantling, recycling services and after-sales support for commercial aircraft. MAG provides a wide range of services for the analysis and acquisition of aviation assets, including dismantling and recycling, cross-border asset transactions, leasing and other technical services.
MEG Aviation Aircraft Recycling (Hefei) Co., Ltd
Enterprises that want to engage in aircraft dismantling need to apply for the "aircraft dismantling" license qualification, which has specific requirements for the plant, tools, personnel, technology and other aspects of the dismantling institution, and the investment in fixed assets in the early stage is high, which is often difficult for small and medium-sized start-ups to bear. To this end, MAG has chosen the path to focus its business on "material recycling and refurbishment to market", focusing on aircraft asset trading, and entrusting dismantling to qualified airlines or institutions. Since 2022, the MAG team has successfully partnered with KPA, a global supplier of aftermarket materials and services, to purchase six engines and one B737-800 as the acquirer.
During the dismantling process, where most of the original parts are often not directly reused, they can be re-certified, repaired or overhauled with the help of MAG's component MRO facilities and its network of repair suppliers and OEMs. After passing through the above process, these parts are shipped to the Global Strategic Inventory Center, where they are sent to buyers around the world to be exchanged, sold, and rented. In addition, MAG offers a variety of additional services such as engine maintenance, aviation asset leasing and sales, sunset fleet solutions, component solutions, and more.
MAG currently has more than 82 aircraft and engine sourcing opportunities across age and range of aircraft, some of which are leased narrow-body models, which can generate lease income and provide long-term supply for future teardowns. This leasing + retirement model can not only ensure the long-term holding of the company's own retired assets, improve the stability of the source of retired aircraft or aviation assets, but also effectively increase the internal rate of return.
Airbus Aircraft Life Cycle Service Center
On January 24, the Airbus Aircraft Life Cycle Service Center announced the commencement of operation, which will provide distributed second-hand spare parts for all aircraft types, from aircraft parking and storage to maintenance, upgrades, modifications, dismantling, recycling and disassembly. It is the world's only aircraft recycling program operated by an aircraft manufacturer and the first aircraft lifecycle service program for Airbus outside of Europe. The project is located in the International Airport Economic Zone of Shuangliu District, Chengdu, close to Chengdu Shuangliu International Airport, and took 14 months to complete. In the future, it is planned to cover a total area of 717,000 square meters and park 125 aircraft. From its commissioning to 2025, the center will gradually expand its operation and directly employ 150 people.
Risks and Issues
1. The risk of underestimation of expenses. Although aircraft dismantling is a big project, the income itself is not high, if the dismantling factory can only dismantle a few or dozens of aircraft per year, its income can not cover the depreciation of personnel wages, equipment and plant. At present, most domestic enterprises that are qualified to disassemble aircraft dismantle the annual aircraft dismantling volume is very small, which is not enough to become their main business.
2. The problem of machine source under market competition. At present, the aircraft dismantling industry has attracted all kinds of capital to establish aircraft maintenance bases and parks in the mainland, but the current problem lies in the "machine source", how to make the retired aircraft can be successfully returned to the whole aircraft life cycle after dismantling, and it is also necessary to dismantle the upstream introduction and downstream trade at the same time, and work together to dredge the policy, concept and regulatory problems.
3. The import of international retired aircraft is restricted. High-quality aircraft sources are very important to aircraft maintenance and dismantling companies, and in order to obtain high-quality second-hand aircraft, it will involve the introduction of overseas aircraft. In order to avoid the entry of foreign garbage, the import of aircraft for the purpose of dismantling (except for the import of old aircraft for training) has not received national policy support. The reality is that most of the current aircraft sources used for aircraft dismantling business can only come from domestic retired aircraft, but the domestic retired aircraft sources are not continuous and cannot coherently support the operation of enterprises. The attributes and import uses of old aircraft are difficult to fully supervise in practice, resulting in restricted imports and a small amount of overseas aircraft that can be dismantled, which is why there is a lack of mature professional dismantling companies in China, and aircraft maintenance companies can only take dismantling as an incidental business.
4. The technical standards for the recycling of dismantling materials are not sound. The most involved material in the dismantling of aircraft is aluminum, followed by composite materials, composite materials are more used in wide-body passenger aircraft and new models in the future, but at present, there is still a blank in the composite recycling technology in China.
5. The domestic and international second-hand aviation materials trade and circulation standards are not uniform. Second-hand aviation materials trade needs to achieve domestic and foreign connection. The difficulty faced by the sales of domestic second-hand aviation materials is that second-hand aviation materials are not popular in China, and there are also problems such as qualification certification for domestically registered aircraft that are dismantled and circulated abroad.
