MRO spending is moderately pro-cyclical. That is, when economies and traffic decline, MRO spending tends to decline more sharply. And the happy converse is also true. When times are good, MRO spending increases a bit more than traffic.
2018 is shaping up as a very good year. The consultancy Focus Economics say the consensus forecast for real growth in the Euro area is 2.2% in 2018, the fastest pace since 2007. The U.S. should also have a strong year, with recent growth coming in above expectations and the possibility of growth-encouraging tax changes on the horizon. Overall, the consensus forecast is for the global economy to grow a healthy 3.2% in 2018 and a still-strong 3.1% in 2019.
One reason growth is very good for MRO is that financially strong airlines invest in the discretionary upgrades that are deferred in leaner times. That has certainly been true for U.S. network carriers. For example, Delta Air Lines has gone beyond lie-flat seats on its new A350s to Japan, adding a door to create privacy. And it is starting to add lie-flat seats to its long domestic transcontinental flights.
“All our widebody international aircraft already have direct-aisle access flat-beds,” notes Delta spokesperson Catherine Sirna. “We are in the process of modifying the 777 fleet, which has lie-flat beds today, to have a similar product to the A350.” Delta’s 777s will be retrofitted with 28 Delta One suites, supplied by Thompson Aero Seating, and 48 Premium Select seats. “We are continuing to evaluate which other existing aircraft will receive interior product enhancements,” Sirna says.
Delta’s other major passenger upgrades are adding more seat-back screens, expanding high-speed Wi-Fi and offering free entertainment and mobile messaging. Sirna says Delta will continue to “lead the industry in making these enhancements.” For example, on October 1, Delta became the first U.S. global carrier to offer free mobile messaging. And the airline will equip over 600 aircraft with high-speed Wi-Fi for both domestic and international flights over the next two years.
Other financially strong U.S. majors are also beefing up their product. American Airlines is “just coming off of a huge lie-flat upgrade to international,” says spokesman Joshua Freed. “For passenger connectivity, the main upcoming news is the addition of satellite-based Wi-Fi domestically and an upcoming expansion of in-seat power ports domestically.”
The new double-aisle jets, the Boeing 787 and Airbus A350, may require significantly less maintenance per flight-hour than their predecessors. But financially healthy airlines are finding ways to use those roomy hangars for modifications that reward passengers, airlines and shops.