AirLiance Materials does not expect to restore revenue growth until the first half of 2004 after suffering a sharper than expected fall-off in demand during the first quarter of this year.

The Lufthansa/United Airlines/Air Canada-owned surplus spare parts distributor was established five years ago and is already "one of the top three providers of surplus material", says AirLiance executive vice-president Roscoe Musselwhite.

About 60% of the company's revenues are generated through transactions with the partner airlines, but AirLiance aims to grow the share of third-party business to more than 50% in the near-term.

As the downturn has forced airlines to park large numbers of older-generation aircraft, profit margins have come under "significant pressure", says Musselwhite.

Chicago-based AirLiance does not publish financial results, but Musselwhite says the company has annual revenues of "$120 million-$150 million" and generates net income in the "single digit millions".

The global economic slump (contributing to the entry of Air Canada and United into Chapter 11 bankruptcy protection), the Iraq war and SARS outbreak have conspired to shift AirLiance's previous growth projections "to the rightby one to two years", adds Musselwhite.

The company in November forecast revenue growth of 20% for 2003, but now expects the figure to be "flat to 5%", he says. A return to growth during the first half of 2004 is "about the best we can predict from here".

The supplier's near-term strategy is to "expand inventory management opportunities and to basically grow the size of the company", says Musselwhite.

AirLiance could also consider acquisitions to bolster its growth plans. "We are always looking at these kinds of things - there are other ways of getting capital other than from your partners," he says.

Musselwhite concedes that rivals such as AAR and Volvo Aero are "more vertically integrated" and therefore able to offer a broader range of services, including, for example, large engine leasing.

A key target for future growth is the relatively immature regional jet spares market, where AirLiance expects its business to expand "at a controlled pace of 10-15% a year. The regional jet market is certainly one that's there to be tapped," says Musselwhite.

Source: Flight International