Analysis of the Spare Parts Industry in the Australian Aviation Sector

This report provides a strategic business unit (SBU) analysis of the spare parts industry within the Australian aviation sector. It begins with a brief overview of the industry, highlighting key trends such as the impact of the Australasian dollar depreciation on spare parts costs and the dependence on imports. The report delves into market performance, detailing import data, market size, and local production figures. A PESTLE analysis examines the political, economic, social, technological, environmental, and legal factors influencing the industry. The report identifies key findings, including the increasing costs of spare parts due to currency fluctuations and the need for governmental support. Finally, it outlines the objectives and goals of the SBU, emphasizing the need for bilateral aviation safety agreements and the elimination of certification charges to facilitate the growth of the industry. The analysis is supported by data from various sources including the Australian Government and the U.S. Department of Commerce.

THE SPARE PARTS FOR THE AVIATION INDUSTRY (SBU) IN AUSTRALIA
Name:
Course:

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4. SBU Situation Analysis
l - Brief Summary of Relevant and Major Changes and Trends That Have Occurred Within
the SBU’s Industry Over the Last 5-10 Years
The Australian airline industry depends mainly on imports of SBU. The cost of SBU
increased during the past three years as a result of the Australasian dollar depreciation. The
spare parts industry as well as the rest of the components of the aviation industry needs the
governmental support to develop a niche business to improve the outcomes for all
stakeholders. Improved mechanisms can help the spare parts industry to nourish within
Australia once again (Western Australian Indigenous Tourism Operator Council 2017). The
Australian imports of parts of aircraft & helicopters recorded $1691 Mn. in 2015, then it fell
by 28.7% in 2016, recording $1122 Mn. which is below its value in 2014, as shown in table
(1)
Table (1): Imports of Aircraft & parts by type (A$ million)
2014 2015 2016 % share
2016
% growth 2015
- 2016
Aircraft 2,100 2,867 1,205 30.8 -58.0
Helicopters 362 883 1,460 37.3 65.3
Parts of aircraft &
helicopters
1,183 1,691 1,122 28.7 -33.7
Other 110 74 128 3.3 72.6
Total Aircraft,
spacecraft & parts
3,756 5,516 3,916 100.0 -29.0
Based on ABS & UN merchandise trade data on DFAT STARS database and
Global Trade Atlas.
The top source of Australian imports of aircrafts, spacecraft, and related parts is the
USA with 64% share among exporters in Australia in 2016, and in the second place comes
Source: Table reproduced from Australian Government – Department of Foreign
Affairs and Trade (2016, 1)

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Italy with a share of 8.7% (Western Australian Indigenous Tourism Operator Council 2017).
Accordingly, Australia does not diversify its major sources of aircraft imports.
2 - The Relevant Changes and Trends in The Macro Environment That Have Occurred within
the SBU’s Industry
It is important to analyse the macro environment of the spare parts of the aviation industry,
the PESTLE analysis is as follows:
 Political: The Australian government is not highly involved in the spare parts of the
aviation industry. More efficient planning processes are needed to enhance the growth
of the SBU.
 Economic: SBU of the aviation industry is part of an entire ecosystem of that provide
aviation fleets, services, technical training, and maintenance (Boeing 2015). The
devaluation of the Australian dollar negatively affected that manufacturing sector as a
whole in Australia, and the aviation sector as well.
 Social: Efficiency and safety of the spare parts affect the safety of customers. The Civil
Aviation Safety Authority (CASA) ensures the safety of passengers through its
certification process (The Australian Aviation Associations’ Forum 2016). It is
important to keep the maintenance, and safety of the aircrafts in the future.
 Technological: The Australian aircraft fleet is old, accordingly, it represents a limited
opportunity for parts producers within some aircraft models. There is a high complexity
through the large number of supply chain partners for Original Equipment Manufacturer
(OEM) parts (A.T Kearney 2010). New technology is required to save the industry in
general and the spare parts in particular (Deloitte 2017).
 Environmental: There is an ability to create a pooling of parts in the domestic market,
as Australia covers the large area. Also, demand from different countries is continuing

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in the summer and winter seasons (U.S. Department of Commerce - The International
Trade Administration 2017). Different weather conditions in the world guarantee the
customer demand for spare parts.
 Legal: the Australian market is easy to penetrate, as its legal protection is not high (U.S.
Department of Commerce - International Trade Administration 2016). This explains the
heavy dependence on the imported spare parts.
3 – Analysis of Market Performance in Which the SBU is Operating
The Australian domestic aerospace industry total revenues recorded $4.4Bn. in 2013,
the aircraft parts, maintenance, and military aircraft and parts share represented 30-33% of
the total revenue for the industry. Many manufacturers in Australia are suppliers for non-
Australian aircraft programs. Qantas is the leading manufacturer of commercial aviation in
Australia, followed by Virgin Australia. Boeing Australia is the largest workforce outside the
USA. Australia is a partner of the F-35, and 11 of the aircraft repair stations operating in
Australia have certificates from the FAA (U.S. Department of Commerce - The International
Trade Administration - 2017). Its market share in Australia is 26%, its revenues represent
$742 Mn. The total market size of the spare parts industry grew from 4380 thousand dollars
in 2014, to 4631 thousand dollars in 2015, then deteriorated to 4625 thousand dollars in 2016,
and it is estimated to grow to record 5180 thousand dollars in 2017. The local production also
grew from 3330 thousand dollars in 2014, to 2800 thousand dollars in 2015, to 2840 thousand
dollars in 2016, and it is estimated to grow to record 3000 thousand dollars in 2017, as shown
in table (2).
Table (2): Spare Parts Market Size and Total Local Production in Australia
(USD Thousands)
2014 2015 2016
2017
(Estimated)
Total Market Size 4380 4631 4625 5180
Total Local
Production
3330 2800 2840 3000

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The
Australian SBU industry represents a mixture between the small and medium sized
enterprises that supply spare parts, expertise, and engineering services. The firms operating in
the local market are specialized in maintenance, airport systems, aero engine, avionics,
airframe component manufacturing, infrastructure, and engine component manufacturing.
The commercial aircraft maintenance is carried out by a selected group of specialists.
Australia is a major market for spare parts in Asia and a key distribute to its markets. It has
more than 700 parts manufacturing and parts distribution organizations, maintenance, design,
and design. The SBU is segmented to include the products needed by the defence contracts,
Qantas fleet upgrade, parts, repairs and maintenance, business jets, helicopters, aerial
agriculture, Aerial Vehicles (UAVs) (U.S. Department of Commerce- International Trade
Administration 2017). The best products of the aviation industry in Australia are the repair,
maintenance, and overhaul.
Key Findings
 The cost of SBU increased during the past three years as a result of the Australasian
dollar depreciation.
 Improved mechanisms can help the spare parts industry to nourish within Australia
once again.
 More efficient governmental planning processes are needed to enhance the growth of
the SBU.
Source: Table reproduced from U.S. Department of Commerce -
The International Trade Administration - (2017).

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 The total market size of the spare parts industry grew from 4380 thousand dollars in
2014, to 4631 thousand dollars in 2015, then deteriorated to 4625 thousand dollars in
2016, and it is estimated to grow to record 5180 thousand dollars in 2017.
 SBU is highly dependent on imports from the USA.
5. SBU Objectives and Goals
The SBU in Australia requires a Bilateral Aviation Safety Agreements to be
developed to enable other countries to know the Australian regulations across different
countries to facilitate the export of aviation products and parts from Australia to the
importing countries. The Civil Aviation Safety Authority (CASA) should eliminate the
certification charges, and it has to give more support to the industry. Working close to the
Australian aviation spare parts manufacturing companies, CASA will be able to develop
more competitive certification processes (The Australian Aviation Associations’ Forum
2016).
Over the next 10 years, Qantas the leader of the commercial aviation in Australia, has
committed to the next generation of aircraft. The commercial aviation market prefers to
source its parts from approved suppliers. It includes, different types of fixed wing UAV
aircraft, and helicopter (U.S. Department of Commerce- International Trade Administration
2017).

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Reference list
A.T. Kearney. 2010. Civil Aviation 2025. A.T Kearney.
https://www.atkearney.de/documents/856314/1214502/BIP_Civil_Aviation_2025.pdf
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Australian Government – Department of Foreign Affairs and Trade. 2016. Australia’s
Imports of Aircraft & Parts. Australia: Australian Government – Department of
Foreign Affairs and Trade.
http://dfat.gov.au/about-us/publications/Documents/australias-imports-of-aircraft-and-
parts-2016.pdf
Boeing. 2015. A New Year - A New Beginning. Australia: Boeing.
http://www.boeing.com.au/resources/en-au/media/BoeingAustralia/About-Boeing/
Publications/Velocity/Velocity_February_2015_Final.pdf
Deloitte. 2017. Global Aerospace and Defense Sector Outlook - Growth Prospects Remain
Upbeat. Deloitte. http://www.infodefensa.com/archivo/files/2017-global-ad-outlook-
january_(deloitte).pdf
The Australian Aviation Associations’ Forum. 2016. Aviation Policy. Australia: The
Australian Aviation Associations’ Forum. http://abaa.com.au/downloads/TAAAF-
Aviation-Policy-Summary-2016.pdf
U.S. Department of Commerce. 2017. "Australia - Aircraft and Parts." The International
Trade Administration. https://www.export.gov/article?id=Australia-Aircraft-and-
Parts.
U.S. Department of Commerce- International Trade Administration. 2016. Top Market
Report - Aircraft Parts. USA: U.S. Department of Commerce- International Trade

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Administration.https://www.trade.gov/topmarkets/pdf/Aircraft_Parts_Top_Markets_R
eport.pdf
Western Australian Indigenous Tourism Operator Council. 2017. Inquiry into Regional
Airfares in Western Australia. Australia: Western Australian Indigenous Tourism
Operator Council. https://raaa.com.au/raaa_site/wp-content/uploads/2017/08/RAAA-
Response-WA-Inquiry-into-Regional-Airfares.pdf