Rick Nagel, chief executive of Acorn Capital Management, explains to MRO Management’s Craig Waters why inventory, data and trusted suppliers will become increasingly important as operators navigate what he believes could be a decade-long aftermarket challenge.
Aircraft parts availability may have improved in some areas since the worst disruption of the post-pandemic period, but few operators would describe the aviation supply chain as having returned to normal.
In fact, the industry's current difficulties may increasingly represent normality itself.
For Rick, the pressures affecting parts supply cannot be separated from the wider challenges facing aerospace: shortages of skilled labour, diminishing sources of supply, constrained new aircraft deliveries and a fleet that is consequently remaining in service for longer.
Some of those individual pressures may ease, he believes, but their combined effect means the aftermarket is likely to remain tight for years.
“We’re probably in a prolonged state of status quo for some time,” Rick said. “The workforce challenge is a significant issue, from manufacturing all the way down to MRO.”
He points particularly to the loss of experienced aerospace workers since the pandemic. In the US alone, Rick estimates aerospace and defence employment remains around 100,000 workers below where it needs to be, while attracting sufficient numbers of young people into STEM disciplines and technical trades remains difficult.
The significance for the aftermarket is straightforward. Aircraft demand may be strong, but increasing production and repair capacity requires people as well as facilities and investment.
And, according to Rick, the industry has yet to experience the full consequences of losing some of its most experienced personnel.
“You might need two people to make up for the one that you lost,” he said. “You’ve lost so much experience and tribal knowledge. There's a multiplier effect depending on who you lose.”
When a $10,000 part grounds an aircraft
At aircraft level, these structural problems become much more immediate.
Components exposed to high utilisation and demanding operating environments inevitably create pressure, from landing gear and APUs to life-limited and routinely replaced parts. Yet even scheduled requirements can become problematic when supply is constrained.
Ultimately, Rick said, almost any unavailable component becomes critical if it prevents an aircraft operating the following day.
That creates an increasingly simple equation in the aftermarket: “The guy with the supply wins.”
“The advantage goes to the people with the inventory,” Rick said. “They can move it. But getting it - purchasing it - is difficult, and that's where a lot of the magic lies right now.”
The problem is being exacerbated by the shortage of material entering the used serviceable material (USM) market. Airlines are retaining aircraft they might previously have retired because replacement aircraft are unavailable or delayed, reducing teardown activity and therefore limiting another important source of components.
“Aircraft teardowns are at a low rate because airlines desperately need the planes they've got,” Rick said. “You just have a scarce amount of supply in the aftermarket.”
For operators, the cost of getting that equation wrong can dwarf the value of the component itself.
“You’ve got an asset sitting on the ground costing you maybe $50,000 a day on an older plane and $100,000 on a newer one, and you're waiting for a $10,000 part to show up,” Rick said.
If that component arrives a day late when engineers and other resources are already waiting to return the aircraft to service, the financial impact quickly escalates.
That pressure is also changing where airlines and MROs source material.
Five years ago, Rick said, the market supported a more substantial middle layer of brokers that might not necessarily have stocked material themselves. Today, customers increasingly want to deal directly with distributors that physically hold inventory - particularly suppliers they already know can deliver.
“The customer wants the right part, the right paperwork and the right quality standards, and they want it shipped reliably and delivered when promised,” Rick said. “We’ve seen a shift where people are tending to go more direct to the folks that actually have it, and they favour the ones they've had a good experience with before.”
Trust, therefore, is becoming almost as valuable as availability.
Predicting tomorrow's demand
Holding inventory, however, creates another problem. Aviation components are expensive, and a distributor cannot simply accumulate material in the hope that somebody eventually needs it.
The real competitive advantage increasingly lies in predicting which parts will be required before that demand emerges.
For Sentry Aerospares, Rick describes that capability as the “secret sauce” of the business.
The company uses years of supply-chain and demand data alongside operational information to determine which components are likely to be needed one or two years ahead, allowing purchasing decisions to be made well before requirements become urgent.
“We've got 20 years of incredible investment in supply-chain analytics and predictive analytics,” Rick said. “We let the data tell us, in many ways, where we need to be on target, which eliminates a lot of that guesswork.”
That capability becomes particularly important when buying material in volume.
“If you're buying 50 of something, or 20, or even 10 depending on what it is, you've got to move all 10,” Rick said. “If you get stuck with two or four at the end, it blows the whole model.”
Historical demand can now be combined with flight operations, component reliability and availability data to improve those decisions further. Artificial intelligence (AI) offers another layer of opportunity.
“Predictive analytics, utilising AI around all of this, is really the secret sauce,” Rick said. “Those that figure it out are going to win.”
It is not about predicting demand for every possible component. Some requirements remain inherently less predictable and therefore carry greater inventory risk. The challenge is identifying the parts for which future demand can be anticipated with sufficient confidence - and staying disciplined about where capital is deployed.
Regional opportunity
The recent acquisition of AirStart also extends that approach further into the regional aircraft market.
Regional aircraft present a slightly different inventory challenge because of their operational tempo. Higher daily cycles can alter component consumption and replacement patterns, influencing which stock-keeping units need to be held and in what quantities.
“You're going to get more daily wear out of a regional plane,” Rick said. “That changes the SKUs you need to stock and how you think about inventory, but the fundamentals of the business remain the same.”
AirStart brought established expertise in that market as well as a stronger Canadian presence, while Sentry Aerospares offered capabilities and customer relationships elsewhere that AirStart could access. Rick said the attraction was therefore both cultural and strategic.
“Our businesses had not done a lot of work in Canada or on the regional side, and vice versa,” he explained. “Immediately, both companies cheated their respective timelines for penetration into the other markets.”
Early cross-selling opportunities have already emerged despite integration still being under way.
“This was kind of a one plus one equals five,” Rick said. “We've already had some amazing sales synergy right out of the chute.”
Keeping older aircraft flying
Behind those opportunities sits another structural change reshaping the aftermarket: aircraft are staying in service longer.
Delivery delays mean airlines frequently have little choice but to retain existing equipment. At the same time, continued long-term growth in passenger and cargo demand is supporting utilisation, while aircraft can find second and even third lives through conversion, cargo operations or specialist missions.
That presents a significant opportunity for aftermarket businesses, but supporting ageing aircraft becomes progressively more complicated as original supply chains disappear.
“When aircraft are originally built and manufacturers think about the supply chain and the parts needed to support that aircraft type, they're not thinking about it decades later,” Rick said.
As fleets age, lower-volume components can consequently become increasingly important. Rick sees an opportunity for manufacturers prepared to produce parts where quantities may be relatively small but demand remains critical.
The extreme example can be found in military aviation. Rick points to the B-52, which is expected to remain operational for decades despite aircraft having originally left production in the 1950s and 1960s.
“You're talking about a 100-year-old airplane,” he said of its potential ultimate service life. “Those manufacturers and specifications are long gone or have since changed.”
Reverse engineering, recertification, material science, inspection and low-volume production therefore become part of keeping ageing platforms operational.
The commercial fleet may not yet face longevity on that scale, but the underlying principle is increasingly relevant.
“For every dollar spent buying a new airplane, there's $8 to $12 spent over its life on maintenance, repair, overhaul, modernisation and overall sustainment,” Rick said. “For us, the aftermarket has seemed like an obvious place to double down.”
A decade problem
That confidence rests partly on Rick's belief that today's supply-chain pressures are considerably more structural than cyclical.
Even if aircraft manufacturers were able to accelerate deliveries, he argues, years of pent-up demand would remain.
“We look at this as a decade problem right now, not a three- or five-year fix,” Rick said.
Geopolitical instability, tariffs, energy prices, regulation and workforce demographics can all create additional disruption. Individual pressures may rise and fall, but removing one does not necessarily resolve the fundamental supply-demand imbalance underneath.
“I think this is the new normal for a long time,” Rick said. “I go back to critical supply, workforce, regulatory dynamics and geopolitical uncertainty. Everything impacts it.”
For aftermarket suppliers, that means being sufficiently nimble to deploy capital when inventory becomes available while maintaining the quality controls required to ensure every component has the correct documentation and traceability.
Scarcity, Rick warned, cannot become an excuse for lowering standards.
“You have to make sure you're in a position where you don't sacrifice quality or your ability to deliver and make commitments,” he said.
Operators, meanwhile, may need to place even greater emphasis on knowing who sits behind their supply chain. In a market where an unavailable component can ground a multimillion-dollar asset, the lowest component price matters considerably less if the material is late, incorrectly documented or cannot be installed.
That leaves inventory owners in an unusually strong position - but only when they can predict demand, secure the right material and reliably put it in the hands of the customer.
For Rick, the trajectory is clear. Supply-chain pressure may fluctuate rather than follow a straight line, but the underlying requirement for aftermarket material will continue to grow.
And in that environment, his earlier assessment becomes increasingly difficult to argue with: the guy with the supply wins.
