U.S. MRO Trends Still Favor Outsourcing.jpg Alaska Airlines

U.S. MRO Trends Still Favor Outsourcing

Network carriers continue to increase outside maintenance spending.

U.S. independent shops may have challenges in recruiting. And they struggle with OEMs for the MRO business. But both MROs and OEMs are going after a bigger slice of a pie that is growing larger, the increasingly important U.S. outsourced MRO market.

The top-ten U.S. passenger airlines notched up their outsourced share of maintenance spending 1% to 48% in 2017, according to FAA Form 41 data. Over the five years from 2012 through 2017, the outsourced share rose nearly 3% from 45% at the beginning of the period.

And much of this increase came from those reputed in-house addicts, the network airlines. American Airlines edged its outsourced share up less than a half percent in 2017, but over 3% in the past five years. Delta, which had the slimmest unit MRO costs among network airlines, increased its outsourced share nearly 3% in 2017 and more than 4% in the past five years. United has also increased its outsourced share more than 4% in five years. Competitive pressure to cut costs and the new generation of jets probably explain these increases.

Southwest, in contrast, has decreased its outsourced share 8% in five years, though at 53% this share still remains above the 45% average for network airlines. But JetBlue is outsourcing much more these days, 75% of its total maintenance spending. Frontier spends 45% of its maintenance outlays outside its own shops.

Despite recent changes, American still spends the smallest share outside, 39%, followed by Delta at 46% and United at 52%.

But pure scale still makes the network airlines the biggest outside spenders, with American paying providers $1.4 billion in 2017, Delta $1.1 billion and United $1.6 billion. Outside spending by Southwest and Jetblue were $837 million and $579 million respectively.

These short-term changes follow long-term trends, which have clearly been toward outsourcing. Since 1995, the outsourced spending share has more than doubled, from 23% to 48%, for the ten airlines and their predecessor carriers.

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