Graveyard for Jets Coming in China’s Icy City as Orders Boom

By Clement Tan

Dec. 18 (Bloomberg) — China, poised to become the world’s biggest buyer of new planes, also wants to build a graveyard for old aircraft.

China Aircraft Leasing Group Holdings Ltd. is investing $2 billion to build the country’s largest plane disassembly plant in Harbin — known as China’s “Ice City” — some 750 miles northeast of Beijing. The facility starts operation in 2017 and aims to tear apart 50 jets annually after five years, Chief Executive Officer Mike Poon said at a press conference in Hong Kong today.

“The headlines for aircraft in Asia are about new deliveries, but there will be significant retirement of old aircraft,” said Will Horton, a Hong Kong-based analyst at the CAPA Centre for Aviation. “You need a robust system to catalog the parts to sell them in foreign markets.”

China’s foray into the field comes as Boeing Co., the world’s largest plane maker, also is exploring ways to wring money from the end of a jetliner’s life. With the value of parts potentially outweighing an old jet’s resale price, the $3.2 billion a year market for used aircraft parts is growing as companies discard planes well before the end of their 30-year life cycles.

The scrap-aircraft industry is concentrated mainly in the U.S., a mix of closely held operators such as Aircraft Demolition LLC — which works out of Arizona’s Pinal Airpark, known for its open-air storage — and publicly traded companies like AAR Corp.

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