Exchange core

How an exchange works

1. The customer needs a serviceable unit and has an unserviceable one.
2. The supplier ships a serviceable unit from stock, immediately.
3. The customer is billed an exchange fee — the difference in value between what they received and what they owe back — rather than the full outright price.
4. The customer returns their unserviceable unit as the core, within an agreed period.
5. The supplier inspects the core, confirms it meets the agreed terms, and closes the obligation.
6. The core is repaired or overhauled and becomes the next serviceable unit in the pool.

Exchange versus the alternatives

• Outright purchase. The customer buys a unit and owes nothing back. Simplest, and the most expensive.
• Exchange. Immediate availability at a lower cost, in return for an obligation to send an equivalent unit back.
• Repair. The customer sends their own unit in and gets that same unit back. Cheapest per event, and the aircraft waits for the full repair cycle.
• Loan or rental. The customer receives a unit temporarily and returns that specific unit. The obligation is to return the identical asset, not an equivalent one.

The distinction that matters operationally is between returning a specific asset (loan, rental, repair) and returning an equivalent asset (exchange). Equivalence has to be judged, which is why exchanges require inspection and disposition and loans generally do not.

What "equivalent" means

This is where exchange terms earn their detail, because a core that is not acceptable is a commercial dispute waiting to happen. Terms typically address:

• Part number. Same part number, or a specified list of acceptable alternates — noting that interchangeability frequently runs in only one direction.
• Completeness. The unit returned whole, with all sub-assemblies and hardware, and not stripped for other work.
• Repairability. The core repairable at reasonable cost — not damaged beyond economic repair, and not life-expired.
• Documentation. A removal tag, a reason for removal, and whatever else establishes that the unit is what it claims to be and was not involved in an event.
• Condition floor. Some agreements set a minimum acceptable condition rather than accepting anything as-removed.

Timing and the obligation

Exchange terms carry a core due date — commonly in the range of 14 to 30 days, though entirely contract-dependent. If the core has not been received in acceptable condition by then, the supplier is normally entitled to bill the core charge.

The structural awkwardness of exchange is that the sale and the obligation close at very different times. The order shipped, the invoice was raised and the revenue was recognized — so every system built around recording transactions considers the matter finished. The obligation keeps running, held by somebody else, in a building the supplier does not control.

Common misunderstandings

An exchange is not a loan

The customer keeps the unit they received. What they owe is an equivalent unit, not the same one back.

The core charge is not the price of the part

It is security against the return obligation, released or credited when an acceptable core arrives. See core charge.

"Any core" is rarely the deal

Sending back a unit of the right part number does not automatically discharge the obligation. If it is incomplete, damaged beyond the agreed condition, life-expired or undocumented, it may not be accepted.

Both parties carry core obligations

Any organization that sells exchanges also buys them. Cores owed to vendors are an exposure in the opposite direction, and one that is far less commonly tracked.

Managing the obligation

This page defines the concept. The operational problem — keeping open cores visible, aging them against their due dates, chasing them before the relationship cost rises, matching unannounced returns to the obligations they satisfy, and closing them financially — is covered in depth on exchange core tracking.