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MRO Market Disruptors and Cybersecurity Problems Assessed

Oliver Wyman's 2018 MRO Survey reveals top market disruptors and uncovers a lack of cybersecurity focus.

Oliver Wyman’s annual MRO survey reveals that aviation executives think the top three market disruptors over the next five years will be the growth in OEMs’ aftermarket activities, aftermarket consolidation and game-changing technologies.

The first of these two forces could probably be expected because Airbus, Boeing and Embraer garnered quite a bit of attention in the past year for their vertical integration activities and expansion into the MRO market. At the same time, engine and component manufacturers continue to lock up bigger shares of new equipment support and leverage their intellectual property, which impacts material pricing and competitiveness.

The corresponding consolidation that is occurring—between large suppliers such as Safran and Zodiac Aerospace, which closed in February, as well as smaller, privately held companies that are vertically integrating—means the aftermarket is becoming less fragmented. And airlines and independent MROs are starting to feel the effects of this trend.

“I think each day the independent MROs are losing a bit more and it’s getting harder” to compete, says Brian Prentice, an Oliver Wyman partner. In addition, “airlines are seeing a loss of options,” he adds.

To try to ensure a competitive landscape, Prentice says some airlines' procurement organizations are strategically sourcing at least some of their aftermarket work to independents.

He also expects to see more consolidation between independent MROs over the next five years.

Derek Costanza, an Oliver Wyman partner and MRO survey co-author with Prentice, shares his opinion and thinks this consolidation trend is not finished because the market is still very fragmented. He advises operators to be very strategic in sourcing plans and “look way beyond where the market could be.”

The survey’s third highest market disruptor, emerging technology, is largely tied to Big Data’s potential and technology investments that aftermarket companies are starting to make after taking more of a wait-and-see stance the last few years.

“This year, individual airlines are investing in data scientists and analytics, and they are doing the best with what (data) they have today,” for mature and new aircraft, says Prentice. Airlines are collecting more data from mature aircraft at the point of maintenance and applying machine learning, as well as seeking predictive maintenance from the vast amounts of data on new models, he says. However, “no one has cracked the code across fleets,” he adds.

Within five years, he expects to see big changes in airlines’ maintenance planning and forecasting due to Big Data, as well as shop floor efficiencies gained through augmented reality.

Given the number of high-profile cybersecurity attacks across industries, Oliver Wyman also queried aviation executives about cybersecurity and risk management practices as part of this latest survey. The results should raise concern.

Less than half of respondents--which include airlines, OEMs and MROs from around the world—have assessed their own cybersecurity threat levels, and an average of 39% have not assessed the cybersecurity status their third-party vendors.

Given aviation’s interlinked and interdependent ecosystem, the industry is only as strong as its weakest link—and companies need to understand how their systems interface.

“We’ve build a safety mindset” in aviation, but now the industry also needs to build “a security mindset” that proactively looks for security problems and quickly mitigates risks, says Prentice.

Costanza thinks recent cybersecurity breaches—including ones at Delta Air Lines and Boeing—have prompted people to take action but feels “there is a bit of a rush to get caught up, harden systems and understand where the vulnerabilities and risks could be.”

Because of the severity of the problem and the extent of the industry’s interconnectedness, he advocates that the MRO industry work together to ensure adequate preparedness.

 

Oliver Wyman

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