Latin America and Middle East Poised for MRO Growth, But Face Challenges

Is Latin American MRO ready for growth? The region accounts for 8% of the 27,531 aircraft in the 2014 global fleet and 6% of the MRO value of $62.1 billion&m

Is Latin American MRO ready for growth? The region accounts for 8% of the 27,531 aircraft in the 2014 global fleet and 6% of the MRO value of $62.1 billion—but Jonathan Berger, vice president of ICF International, predicts this MRO market will grow to $5.9 billion by 2024, at 5.2% per annum. 

This means “over the next decade, Latin America will drive $2.3 billion in absolute MRO spending growth,” he said at Aviation Week’s MRO Latin America in Buenos Aires in mid-January. Like the rest of the world, the narrowbody fleet will be behind most of the growth.

The top seven Latin American airlines account for more than half of the $3.6 billion 2014 MRO spending—with the Latam Group driving the biggest chunk—23% compared to Gol, in second place at 8%.

TeamSAI predicts the Latin American and Caribbean fleet will have a compound annual growth rate (CAGR) of 4.7% from 2015-25, including 1,460 deliveries and 540 retirements. For this region, TeamSAI predicts the MRO market will be worth $3.2 billion in 2015 and grow to $6.5 billion by 2024—with engines accounting for 46% of the expenditures, followed by components, line maintenance and airframe MRO, according to Tom Cooper, executive vice president and principal.

Despite these promising figures, the falling price of fuel is challenging the economies of oil-producers Brazil and Venezuela—and a few of the region’s top airlines have had a negative operating profit in the last few years. This “has resulted in slower MRO growth than expected,” said Valter Fernandez, executive vice president of TAP Portugal.

Other negative economic effects include weakening currencies—and big fluctuations—in some countries that swing contract values, local import taxes that add hidden costs, customs challenges and poor infrastructure that hinders logistics. However, “good growth will happen here—and it could be bigger than projected if we clear some of these hurdles,” said Fernandez.

Franklin Hoyer, director of the International Civil Aviation Organization’s South American office, agrees. He has said “economic and infrastructure limitations and inconsistent cross-border regulations hinder efficiency and barriers to growth. The region needs to work together.” It is progressing on this front through the Regional Safety Oversight Cooperation System of Latin America. It includes most South American countries and is focused on harmonizing regulations and fostering other multinational activities such as exchanging ramp inspection data and providing technical assistance via a pool of engineers.

Like Latin America, the Middle East is challenged by a fragmented regulatory structure and finding enough qualified maintenance and engineering staff. While countries such as Saudi Arabia and the United Arab Emirates have larger cash reserves than Brazil and Venezuela, that is not the case for all countries in the Persian Gulf region.

The Middle East accounted for 5% of the 2014 fleet and 7% of the air transport MRO demand, according to Berger, but it is poised for a 5.3% CAGR over the next decade, higher than the 3.8% in Latin America.

While there are many operational, cultural and geographic differences between the two regions, both are addressing regulatory and protectionist measures that could ease the movement of goods and people between countries.

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