Viewpoint

Oil price a boon for MROs

Over the past 12 months we have watched the price of brent crude oil plummet from $110 a barrel to less than half that. Since a low of $45 in the middle of January, the black stuff has made a slight recovery, with barrels currently trading for around $57.

As much as some might long for it, the odds of oil prices remaining at this level for any sustained period of time seem pretty small. That’s not to say that the current market is not having an impact on our sector.

The dramatic reduction in operating costs that some airlines — those that aren’t heavily hedged — are experiencing opens up options that might have been unthinkable as little as a year ago.

Older aircraft and engines which previously may have been destined for the desert are seeing their service lives extended.

Consultancy ICF International, for example, has predicted that the market for avionics upgrades is going to grow at a rate of 6.1 per cent a year up to 2023.

Rockwell Collins agrees and has confirmed that it is expecting to see demand for retrofits of 787-based cockpit displays for installation on 757 and 767 aircraft.

At the same time the cut in fuel costs may also prove to be a boon for the passenger-to-freighter conversion market.

As the global air cargo market continues its slow recovery, there are sure to be firms considering how best to expand their fleet cost effectively.

Currently the trade-off between the high outlay of brand new, fuel efficient aircraft versus the significantly lower capital investment but higher operating costs of an older modified passenger jet, seems to be narrowing.

PEMCO’s president Kevin Casey told Hannah Davies, for her article on the conversions market in the forthcoming issue of ATE&M, that with oil prices so low building a business case for new aircraft might be harder than in previous years.

ST Aerospace is one conversion provider convinced of the future of this market and is demonstrating this through its development of an A330 PTF programme.

“We aim to have the conversion programme ready in late 2017 in anticipation of the medium-sized widebody market recovering during that timeframe,” said Dr Yip Yuen Cheong, the firm’s executive vice-president of aerospace engineering and manufacturing.

While low oil prices might not last long, there are certainly MROs willing to make hay while the sun shines.

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