TRENDS

The Business of Buying and Selling Aircraft Partsby Editor - Daniel Brindley

We talk to small business owners who resell General aviation & Business Jet aircraft parts and ask what is necessary to succeed in this business?

I talk to many small businesses who buy and sell aircraft parts and it seems to be a very entrepreneurial business! Many of these business owners put significant sums of money down buying parts hoping to buy low and then sell at a fat profit.

My main contacts for this article were Mike from Wilco Aircraft Parts, Tom from Proserv Aviation, and a few anonymous sources. I needed high-quality individuals to help with the research, so all my contacts had things in common:

  • Everyone had between 20-40 years’ experience selling plane parts
  • Everyone had prior experience working for a major aviation company
  • All are running or own successful parts companies at the time of writing

My first conversation was with Tom at Proserv Aviation

Tom started his career as a A&P Mechanic at a fortune 500 Flight Department and had a brief stint managing their parts department too.

For an outsider coming into Aircraft Parts they might not understand the heavy federal oversight and regulation involved to ensure aircraft remain air worthy. For example, they might negotiate what they thought was a good price on a lot of overhauled parts and then get asked about part documentation or tagging. The lack of paperwork or part traceability can decrease the value of parts significantly.

Tom has an edge over the outsider more specifically because he understands FAA regulation regarding airworthiness (14 CFR 91.407) specifically chapter 43.7 and 43.9. In a nutshell stating that only authorized persons like Tom, an FAA Certified Mechanic can perform maintenance, rebuild, replace parts on the plane. In addition, then make the required logbook entry documenting exactly what was removed, replaced, modified and so on. As Tom said, “the paperwork often weighs more than the plane.”

After a few years Tom worked for Midwest Express as a technical buyer, also valuable, as he learned more about buying spare parts, and managing MROs on part repairs ensuring warranties, shipments and turn times were in order.

Tom took all this knowledge to Company AB, a consignment parts business. Often working with another parts distributer, agreeing a flat commission on every part sold sometimes only 5-6%.

Company AB would get the inventory shipped in (unpaid for), catalogue it and advertise it on an ILS (online parts marketplace). Tom stated, “There was a lot of risk involved for very little money.” Tom stated, “One deal involved shipping an APU to Australia, the owner decided not to pay the other reseller leaving them on the hook for $70k.”

After 18 months Tom’s networking and experience were paying off and was selling 75% of the company sales revenue but getting little in commission. Tom said, “I found a fabulous deal on some Bombardier Challenger Parts, but my idea was dismissed by the owner even after I offered to put money in.”

Tom stated, “I called my Dad that night borrowed some cash, along with some personal savings and purchased the Challenger Parts outright that weekend.” “It might have looked like a drug-deal was going down meeting with our vans exchanging boxes late at night on the side of the intersection” Tom quipped.

Tom made $30k from his first ever deal but more important was the timing of Toms decision to set up his new company (Proserv Aviation). Tom saw a huge opportunity with Challenger 900 Parts (back in 1992). Tom stated “Aircraft Owners were no longer under contract; the airplane was ageing (10 years old) and the Bombardier Smart Parts program was now to expensive. This opening up opportunities for 3rd party sellers like me.”

Tom said, obviously, things have moved on (30 years later) and currently it’s the Challenger 300,350 & Express Parts where the opportunity is. I asked Tom why he specialized in Wheel and Brakes and he said, “they turn more often, they are more in demand and so more opportunities to make money.”

My second conversation was with Mike at Wilco Aircraft Parts, Mike has been around aircraft parts for 45 plus years.

Mike started selling parts straight after graduation for Van Dusen (now part of Avail) and then moved to Beechcraft factory managing parts coming of the production lines for both new aircraft and distributors. After that Mike went back to the FBO (where the parts seed was planted as an undergraduate) taking over the position of the manager who got him his first two jobs.

Mike is a KS native and Wichita is a BIG Aviation Hub with Spirit, Cessna, Beech and Bombardier all having a major presence. It’s also a very small industry in that everyone knows everyone, and Mike took advantage of that. In fact, Mike made relationships the foundation of his success; sell, sell, sell, network, network, network.

Just before setting up his own business Mike travelled non-stop for 12 months (seeing family only once per week) as a regional sales manager for what was then RAPID an acronym for Raytheon Aircraft Parts Inventory Distribution. At this Point Mike had leveraged enough relationships and knowledge of the supply chain from OEM all the way down to the Owner/ Pilot and everyone in between.

This gave Mike the confidence to set-up his own business starting as an aircraft parts broker specializing in the plane parts, he knew inside out, Beechcraft of course. Mike said, “I had relationship at the factory and with distributers so I could get things faster than other companies and so people would come to me.”

Mike ran the company for over 10 years very successfully and like any aircraft parts business the sweet spot had moved on. The aircraft were aging, and the clients decided to sell them and purchase new aircraft. Mike stated, “Six customer equaled 145 airplanes that I supported with aircraft parts on a daily basis and that all disappeared. The next month my expenses were $17k and my gross revenue was LESS.” Aircraft unlike cars are more subject to risk; you lose a few clients, war or recession and the aviation industry can turn on you over night, solid money maker to significant loss maker.

Mike needed a paycheck and went back to corporate life and is now General Manager and VP of Wilco Aircraft Parts business. I asked Mike what he felt his success was in aircraft parts he said, “develop your own relationships, be honest tell people ‘here is what you want and here is what you need and sometimes here is what you *can live with*’ and then leave them alone to make the decision.”

My other contact who wanted to remain anonymous has over 20 years in aircraft parts

I asked my anonymous source:

Couldn’t I simply spend $150k on a small consignment, use online data for pricing, list the parts online and watch the money come in?

In response to this Joe summed up the challenges in a very wise and succinct manner:

“Listing the parts is not the only thing you have to do it’s just one piece and not even the biggest piece; you need to do certification and quality control on the part. You also need a reputation, knowledge of the airframe and the Part. Last but not least you need to factor in a warehouse, shipping costs and insurance on the parts. Insurance alone could be 20-30k.”

Insurance was something that I didn’t think of, we are not talking about theft or damage but liability insurance. It’s a well-known fact that if a plane goes down everyone is named in the lawsuit, and yes that includes the Part Supplier.

My source did not rule out the possibility that you might be able to “list and sell” but on top of the above factors said, “It’s better to focus on a niche airframe and or part to be successful.” There is some truth to this as I often see a lot of new parts suppliers at trade events, but they are often not around a few years later.

Conclusion

In conclusion, without very deep pockets an entrepreneur outside of the aviation industry will unlikely succeed buying and selling parts. There are so many factors to consider that may be overlooked buying parts in a regulated industry. One would need to understand the airframes and parts, supply and demand, condition of the part, shipping costs, paper trail (or lack thereof) that factor into the process. Not to mention the intangible factors like experience and relationships critical to success. Reputation alone is a hard one to gain, people often will not buy without solid information that you are a reliable source, unless you can bring on a consultant or well-known player in the industry to help make your case.

I will be posting some tips on buying and selling parts please sign-up here if you would like me to send you a copy.

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