Lessor Itochu Moves Into USM

Japanese conglomerate Itochu has diversified its commercial aviation business with the acquisition of Dublin-based Killick Aerospace, which specializes in used serviceable material.

In doing so Itochu has become the latest lessor to add aftermarket capabilities to its asset management platform. It noted that the Killick purchase fits into its strategy of identifying and investing into “downstream” profit opportunities.

“By creating synergies between Itochu's capabilities and Killick’s aftermarket services, the partnership will deliver high-quality, customer-focused solutions that meet the evolving needs of the aviation industry,” stated the Japanese company.

Itochu also cited an Acumen Consulting report predicting that the USM market will grow by roughly 50% in the next eight years to reach $11 billion.

“Utilizing used serviceable material (USM) not only reduces costs for airlines but also shortens lead times for parts procurement and supports environmental sustainability,” it said.

Active in the Japanese operating lease (Jol) space, Itochu’s portfolio numbers more than 70 aircraft. Earlier this year it closed financings for four mid-life Airbus A319s in operation with UK-based low-cost carrier Easyjet.

Another lessor to have moved into the parts business is Irish engine lessor Engine Leasing Finance Corporation (ELFC). The company acquired finalized the purchase of Chicago-based engine parts specialist INAV last year.

“Moving into the parts side of the business was a natural evolution of ELFC’s model,” said Joe Hussar, head of portfolio for the lessor, in an interview with Inside MRO.

“Prior to entering this business, after monetizing the on-wing value of the engine through leasing, we would sell the unserviceable engine to the wholesale parts market. By vertically integrating with a parts subsidiary, we have the in-house ability to capture all possible value out of our asset investment.”

Killick, meanwhile, focuses on providing aircraft and engine USM for Boeing and Airbus aircraft, although in recent years it also expanded its business to include the distribution of nitrogen generation system components and other critical equipment manufactured by Honeywell for Boeing aircraft types.