Locatory.com: AOG situations – who earns the most?

Due to an unexpected AOG situation, carriers might have to pay compensations ranging from €250 to €600 for every passenger of a cancelled flight. Moreover, every 1-2 hours downtime may end up costing an airline another €100 000 or even more. Hence there is no surprise that air companies are on a constant lookout for new ways of making the logistics of aircraft spare parts and components more effective. Meanwhile, parts’ suppliers and brokers make the most of the AOG situations and do not miss the opportunity to increase prices.

Although the market of aircraft spare parts and components has an abundance of different players (OEMs, independent suppliers, MROs, distributors, re-sellers, etc.), airlines feel the biggest concern about the fact that those players are reluctant to share the information amongst themselves. In the aviation media there is an increasing number of discussions which point to the fact that this ill practice stems from the wish to cash in on AOG situations. If suppliers and manufacturers refuse to share information with airlines or MROs, the latter are left with very limited options. Under such circumstances, an airline dealing with an AOG situation does not have any choice or possibility to seek alternative components and thus is forced to pay the price named by the supplier or the manufacturer.

Locatory.com points out, that making AOG situations a real cash-cow is an especially common practice in the emerging markets, where the prices for aircraft spare parts and components during downtimes may be twice bigger compared to global market prices. In the Western world (e.g. the USA) AOG situations are usually solved within 24 hours, in this respect Europe is really not far behind. Little by little this tendency is penetrating into Asia, although the continent is still facing many substantial challenges. For instance, in China the unexpected aircraft maintenance and repair works may take anything from several days to even several weeks.

‘Aircraft technical maintenance and repair capabilities in China are still limited, as all activities must be coordinated with the providers of ground handling services or third parties. There are currently three major MROs in the country: AMECO/Beijing, GAMECO/Guangzhou and TAECO/Xiamen. Most airports can carry out only certain maintenance works. For safety reasons aircraft maintenance centres are often reluctant to service aircraft registered outside of China. In the meantime, the nearest technical maintenance centres or parts/components repositories are situated in Honk Kong and Singapore,’ explained the CEO of Locatory.com Zilvinas Sadauskas. ‘Under such circumstances fixing breakdowns quickly can cost an arm and a leg’.

Such opportunities to cash in are often exploited by the new players in the emerging markets, who tend to play havoc among other MRO market players. Spare parts accessibility is a necessity in every part of the world and an ability to receive the required components fast is crucial in AOG situations. The number of clients and increase in profits are the target objectives of not only OEMs, that are steadily turning into a monopoly, but also of third-party suppliers and PMAs, that offer parts and components 30-40% cheaper than the OEMs. As manufacturers and suppliers continue milking the AOG cash-cow, airlines and MROs have already started to look for alternative ways to reduce costs.

‘Despite the suppliers and manufacturers’ efforts to make the most money and attract more clients in AOG situations, airlines and MROs keep actively seeking ways to reduce financial losses and select the highest quality spares at the most optimum prices. In order to cut down the entire spares’ procurement process time and reduce expenditure, aviation market players are increasingly turning to specialized internet platforms where they can receive the already automatically systemized and analysed information, compare prices offered by different vendors and find new ones, if the prices or terms are not competitive enough. Sooner or later the only winners in this situation will be airlines and MROs as they will have all the means to select the parts and services fulfilling their expectations,’ concluded Z.Sadauskas.