What happens to planes when they are retired?

CNN  — 

We’ve all seen the pictures.

Row upon row of derelict aircraft very slowly rusting away in the desert.

Aircraft graveyards might be spectacular, but they’re just a small cog in the fascinating industry that takes care of commercial aircraft once they’re taken out of service.

As soon as an airliner is approaching the end of its operational life, a whole financial and industrial ecosystem, spanning from hedge funds to specialized recycling firms, springs into action.

A hidden treasure

Air Salvage International makes decisions on whether aircraft are saved or scrapped.

Even those aircraft deemed too old to fly can hide a large amount of value in their interiors.

“The decision to dismantle an aircraft most often depends on whether the value of its parts and components is higher than that of the aircraft as a flying machine,” says Mark Gregory, managing director of Air Salvage International, an aviation services firm based at the UK’s Cotswolds Airport.

But many aircraft do not even reach old age.

“The average age of the aircraft we scrap is 18 years,” Gregory tells CNN Travel. “This is already well below the theoretical operational life they have been designed for, but in some occasions we have dismantled aircraft that were not even 10 years old,” adds Gregory, whose firm has dismantled some 730 commercial aircraft of all types over the last couple of decades.

Air Salvage Managing Director Mark Gregory says the average age of aircraft scrapped is 18 years.

The potential of aircraft parts as an asset class has drawn the attention of specialized investment firms as well as some hedge funds.

“It is a very sizable industry,” explains David Treitel, a former executive at Apollo Aviation Group, a Miami-based financial services firm that is active in this market.

“Most of the value is in the engines, but there is an active market for all sorts of used parts and spares. It is often more interesting for an airline to replace a broken part with a used one, rather than repair it.”

There's a market for used aircraft parts.

As the supply for certain components is rather rigid, a surge in demand can prompt a global scramble and drive accordingly the relative value of aircraft and their constituent parts.

Despite the safeguards in place and regulatory oversight – all parts should be properly tracked and accounted for – the global nature of this market and its myriad intermediaries means some counterfeits end up eventually in the supply chain.

An issue that perhaps the nascent blockchain technology industry can help tackle.

“It is estimated that at least 2% of parts are counterfeit. Given the large number of parts in every aircraft, you get an idea of the size of this issue,” says Eleanor Mitch, founder of SafeFlights, a Paris-based start-up that is developing smart contract technologies to certify aerospace parts.

From retirement to scrap