Why is the aviation industry still sitting on millions of dollars of surplus stock?

Since the dawn of commercial aviation in 1914, airlines have depended on the availability of spare parts to ensure their aircraft remain operational. In today’s aviation landscape, with over 5,000 airlines (holding ICAO codes) operating around 100,000 flights daily – roughly 25 million flights per week – the demand for efficiency in spare parts management has never been more critical.

Commercial aircraft, costing anywhere from $80 million to $500 million, are high-value assets. This is reflected in the global aircraft parts market, which was valued at $537 billion and is projected to grow to $826 billion by 2028, with a growth rate of around 5% annually. While this is a massive market, it is also one plagued by inefficiencies, with one of the most significant being the large amounts of capital tied up in surplus parts.

Why have airlines been stockpiling spare materials and parts?

In an industry where high revenue is often accompanied by tight profit margins, keeping aircraft in service is essential.

A grounded mid-sized leased Airbus can incur as much as $100,000 per day in costs and lost revenue until the necessary parts and maintenance teams are available to return it to service.

Due to the significant financial risks posed by AOG (aircraft on ground) scenarios, especially when they are prolonged, airlines have historically built-up large inventories of spare parts to minimise the commercial risks of having aircraft unavailable.

In recent years, the aviation industry has faced unprecedented challenges, particularly due to the global COVID-19 pandemic, followed by the war in Ukraine and growing trade tensions between the West and China. These factors, coupled with shifting socio-economic dynamics in many economies, have severely impacted labour markets and strained the capacity of manufacturers to meet demand. As a result, the aviation market has faced uncertainty regarding parts availability and increasing costs.

In response, many airlines have tended to overstock, often holding multiple spares of the same part as a precaution.

XS AVIATION Sales Director, Gareth Corey , notes: “Overstocking has become a widespread phenomenon in the industry over the past couple of years, and it’s very common to visit airlines whose storage facilities are overflowing with consumables and rotable parts, often causing practical issues related to where these items can be kept.”

What are the impacts of holding excess aircraft parts?

In today’s unique conditions, airlines are facing multiple challenges from holding excess spare parts. The capital tied up in unused parts could be better invested elsewhere, such as reducing debt or funding new initiatives. In addition, storage costs can be considerable, especially since many parts need to be stored in specific environmental conditions to remain in usable condition. Airlines often overlook the issue of depreciation and obsolescence, with parts that sit on the shelf for too long losing their value or even becoming worthless.

Operationally, the impact of holding excess inventory can be just as significant. With large amounts of capital tied up in surplus parts, airlines lose flexibility and the ability to invest in other critical areas that could enhance competitiveness in an industry where adaptability is essential.

Optimise Your Inventory Management

At XS AVIATION , we specialise in working with airlines to optimise their inventory management. Our comprehensive materials solution covers everything from conducting a full audit of your inventory to assessing the volume and value of excess parts. We also analyse your current and future needs, identifying critical gaps and creating strategies to source hard-to-find components.

With a global network of buyers and suppliers, and with a dedicated sales and marketing team, we can buy, sell, or manage the repair of parts to ensure your inventory remains at optimal levels, freeing up capital and allowing your maintenance operations to run smoothly and efficiently.

For airlines with significant excess inventory, we offer a customised consignment partnership, helping you sell surplus parts or maximise the value of older aircraft by capitalising on the individual worth of their components.