Florida aerospace special - Building a global hub for component supply

Parts to the world

A group of innovative distributors have made the area around Miami and Fort Lauderdale a global hub for component supply

Clustered just north of Miami a group of distributors supply many of the parts that keep the world's ageing aircraft in the air. AAXICO, Associated Aircraft, Heico Aerospace and Kellstrom are among the businesses that have made southern Florida a global hub of aftermarket component supply. In most cases, the companies fill in after the original equipment manufacturers have pulled out, specialising in older and rarer part numbers, handling stock and distribution on behalf of OEMs or building part manufacturer approved alternatives.

With 4,000 part numbers ranging from rotating airfoils and combustors to consumables, and 2.7 million parts delivered to airlines each year, Hollywood-based Heico claims to be the world's biggest independent manufacturer of Federal Aviation Administration-approved replacement parts for jet engines and aircraft components. "Everyone else added together don't add up to us," says Robb Baumann, president of the company's Aerospace Parts Group.

In May, the 50-year-old company won a deal to manage British Airways' alternative parts programme, adding to contracts with Air Canada, American Airlines, Delta Air Lines, JAL, United and Lufthansa. The German airline has invested $50 million in Heico Aerospace since buying a 20% stake 10 years ago, although its involvement is fairly hands-off. The BA deal is especially significant as the UK airline had long held out against using PMA parts, says Heico chief executive Eric Mendelson.

The company has revenues of $500 million and also repairs and distributes components on behalf of OEMs, as well as manufacturing electronic systems for the space and defence sectors. In recent years, Heico has been branching out from its core engine parts business and into other areas of the aircraft non-engine now represents a third of its PMA activities.

Pratt & Whitney's foray into the PMA market - manufacturing replacement parts for a competitor's engines, the CFM International CFM56 - has "in some ways legitimised what we are doing", says Baumann. "A lot of customers are still sitting on the fence when it comes to PMA and this might pull them off the fence." P&W's move will also pose a limited commercial threat, he believes: "They are doing 48 parts of the CFM56. We do 520."

Miami-based AAXICO was once an airline (American Air Export and Import Co): the present parts distribution business began as the airline's maintenance department just after the second world war. Today, the company is a stockist for a range of slower-moving replacement components from the likes of Bruce Industries, Goodrich, Gore, Honeywell and Rockwell Collins. With depots in China, Singapore, South Africa and the UK, senior vice president Terry Vieira says AAXICO can provide aircraft-on-ground support to virtually any airline in the world.

Manufacturers do not want to have to hold onto inventory, says Vieira, but are obliged to provide parts back-up for airlines using their component. "If you have a pump on 3,000 aircraft, how do you support that? We take that up." AAXICO concentrates on higher value rather than on commodity lines. Competition in the sector, says Vieira, is based on service - availability of part numbers and reliability of delivery - rather than price. "If it's a commodity product, you can take off 5% and make a sale," he says. "But you really don't want to be selling that sort of product."

Just north of Miami, in Miramar, Kellstrom is enjoying a second life. Founded in 1990, it expanded into a publicly-traded $350 million-turnover parts stockist in four years after a spree of acquisitions, but found the going tough after 9/11 and filed for bankruptcy. Under new management following a rescue backed by a New York investment house in 2002, the company is again prospering, with half its revenues and most of its growth coming from outside North America. "We are truly a global company," says president Dennis Zalupski.

About 60% of the company's revenues come from the airline sector and 30% from overseas military customers, particularly operators of Lockheed P-3s, C-130s and F-16s - types for which it claims to be "industry leader" in inventory support. Kellstrom owns $60 million worth of inventory, and keeping track of it requires a robust IT system and a network of offices and agents, including a large distribution centre in Australia. "We have tens of thousands of parts moving around the world, but I think we do the logistics better than anyone in the industry," says Zalupski.

Associated Aircraft in Fort Lauderdale is another veteran of the Florida parts distribution sector, but with its own distinct niche. Formed over 50 years ago in Maryland, but based in the south-west Florida city since the late 1970s, the company specialises in military support, mostly for overseas customers, often taking on the design authority for and manufacturing older, less popular avionics items. Sometimes products are so obscure that the original equipment manufacturer has lost the original drawings, says chief executive Frank Lannon. "We are doing a box for theF-15. Boeing didn't have the design so we are redesigning it with Boeing's help," he says.

The company, which turns over around $25 million, makes half its revenues from build-to-print manufacturing, with about another 40% coming from overhaul and repair. The remainder is from stocking OEM parts. Revenues have been growing by around 18% a year, says Lannon, helped by the attrition rate of equipment in Afghanistan and Iraq. "We are seeing aircraft coming back in pretty bad shape, especially given the climate they are flying in, with sand and sulphur gas off the oil wells," he says. Another factor has been the increasing tendency for militaries to reduce parts stocks. "The UK, for example, has cut back its inventories to almost non-existent, so when they need a part they need it now," he says.

A big reason companies like his exist, says Lannon, is that military aircraft are "lasting longer than anyone thought they would". The advantage Associated Aircraft has over OEMs is flexibility and the fact that it operates close to the customer, he says. "Our niche is where there is an air force that needs support, where there isn't a domestic supplier. We can process and deliver parts before the OEM can process the quote."

Source: Flight International