The rapid growth of the aircraft maintenance sector in the Asia-Pacific region is creating a significant risk of oversupply, according to some industry executives.
New MRO joint ventures and facility expansions are being rolled out in many parts of Asia. While dramatic fleet growth is projected in this region, signs are emerging that there could be too much maintenance capacity, said speakers at Aviation Week's MRO East Asia conference.
The MRO market is "reshaping itself" and has been "shifting to Asia," said Vehbi Ozer, Turkish Technic's strategy planning and projects manager. He predicts that in the near future the Asia-Pacific region will represent the biggest MRO market.
This region now accounts for 28% of the global MRO market value of $64 billion, said Francois Dubrulle, president of asset management company The Green Airliner Singapore. Asia has essentially caught up to Europe and North America in terms of market share. The global total is projected to rise to $96 billion by 2025, with Asia-Pacific growth likely to exceed that of the more developed regions.
Rapid expansion is both a challenge and a danger for the Asian MRO industry, said Daniel Stromski, Haeco's GM for inventory technical management. He likens the current situation to a "gold rush," with a wide range of companies looking to set up new operations or joint ventures in Southeast Asia and China.
Stromski said this is causing worries about the supply and demand balance. While Asia represents a great opportunity for MRO providers, the "industry should be careful where it invests," so it does not "create oversupply of [MRO] capabilities."
Many governments in the region are subsidizing or helping to establish MRO ventures, said Ian Wolfe, Cebu Pacific's head of engineering and fleet management. Return on invested capital is not always governments' top priority in these cases, as they are often more focused on political, strategic or employment objectives, said Wolfe. This creates more surplus in the industry and disadvantages independent MRO operations.
Wolfe believes the massive aircraft backlog for the Asian region could be creating an overly optimistic picture of future MRO demand. He questions whether all of these aircraft will actually be delivered, as airline yields are already under pressure. Many carriers are looking to defer orders or cut their backlogs, Wolfe notes.
One of the biggest concerns with the wave of MRO growth is finding enough skilled workers, said Jan Steenbock, VP-marketing in East Asia for MTU Maintenance. Demand for aviation workers is so high that sourcing them from local populations is becoming harder. Cost advantages for MRO operations in Asian countries such as China are being eroded, said Steenbock.