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Surveys Say Growth

The global MRO market is set to grow in 2018, providers report.

Earnings season is well underway, and early returns show that the commercial aftermarket headed into 2018 with significant momentum.

Pratt & Whitney posted double-digit aftermarket growth, while Honeywell reported "stronger than anticipated" services revenues, driven primarily by air transport.

The good news for MRO providers: there is plenty more good news to come—at least according to two analyst surveys conducted in mid-January.

"We estimate civil deliveries grow at a 6% pace from 2017 through 2020 with the aftermarket appearing to grow at a somewhat faster pace (6-7.5%)," Jefferies analysts write in their latest aftermarket activity survey. "Following 7.7% growth in 2017, we forecast 6.5% aftermarket growth in 2018, followed by 6.4% in 2019."

Canaccord Genuity, which surveys MRO providers quarterly, says its latest responses show the strongest six-month outlook in four years.

"MROs forecast a ~7% sales increase through [June], with the growth led by the European and U.S. markets," Canaccord analyst Ken Herbert writes. "We view this as a very positive sign."

Herbert added, however, that parts-purchase outlook shows only a 5% uptick, resulting in a 2% gap compared to MRO activity— the largest we have seen it since we started this survey in 2009."

Why such a measurable disconnect? Used serviceable material explains part of it. Used parts represent 15% of all parts purchased these days, Canaccord's data shows.

Another major reason—airlines are simply getting smarter. "MROs see airline inventory management programs as the most increased headwind since our Q3/17survey," Herbert writes.

Headwinds notwithstanding, the MRO market is growing.

"Buoyed by the continued strong fundamentals," Herbert writes, "we believe the outlook for the commercial aftermarket remains very robust."

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