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MRO Consolidation Attracting Increased Airline Scrutiny, Wolfe Says

Industry veteran believes growing concerns may prompt smaller carriers to cooperate more to establish MRO networks.

KUALA LUMPUR -- The growing concern among airlines about vertical consolidation in the MRO industry is likely to spur a reaction from carriers, and may even prompt smaller airlines to cooperate more to establish MRO networks, a veteran industry executive predicts.

The increasing trend of OEMs entering the aftermarket sector and looking to consolidate MRO services for their products is well-known. However, there are “already rumblings” from airlines about this shift, and some “dissatisfaction” emerging, said Ian Wolfe, Cebu Pacific’s senior advisor for engineering and fleet management, during Aviation Week’s MRO Southeast Asia conference.

It is not yet clear what the full impact on MRO cost will be from the new industry dynamic, said Wolfe. But there is clearly a risk that costs will rise as competition decreases. It will become more difficult for airlines to go to the market to find the right services at an attractive price point.

Another risk is that when large-scale issues affect new engines, as has occurred in recent years, the recovery process is “brittle” because of more limited repair sources, said Wolfe. This can lead to increased aircraft groundings as modification and repairs are undertaken.

Airlines will be “taking a hard look” at these developments to gauge the effect on their cost base, said Wolfe. If it looks like MRO is becoming more expensive as a result of OEM-led consolidation, Wolfe believes airines will not accept the situation, and will “step in and do something about it.” This could include airlines reversing recent trends and increasing their stakes in MRO operations again.

Also, smaller airlines -- particularly LCCs -- may look to develop combined MRO networks in their regions, said Wolfe. These smaller players do not have the scale to support an MRO operation on their own, but together could develop an effective and efficient network with competitive rates.

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