Printed headline: Foreboding or Optimistic Outlook?
The aviation market historically has been cyclical, so now that oil prices and interest rates are climbing, people are looking for indicators of an impending industry downturn and whether it will be a steep or gradual decline if it occurs. As one person at MRO Europe said, he is looking for the canary in the coal mine. Are Primera Air’s collapse and Small Planet Airlines’ need to restructure two airlines “canary” warning signs?
If MRO Europe in mid-October was any indication, the answer is “no.” The troubles of Primera and Small Planet are not causing widespread alarm across the aftermarket. The message I heard at MRO Europe was largely that business is good, companies are expanding and flexing with the upward market need, and there is a lot of innovation going on, from digitalization to streamlining processes to forging partnerships—sometimes with competitors—to best service next-gen aircraft, engines and components. In a nutshell, people are focused on growth and the positive. And given that the overall global commercial airline fleet will increase by about 50% in the next decade, a large, healthy competitive market is needed.
The more next-gen models that join the global fleet, the more often the topic of data ownership comes up. However, pundits predict the passionate debate about “who owns the data” will evaporate in a few years because data alone isn’t where the value is—it’s what you do with it. First, operators sign data agreements with service providers, so this notion of conscripting data for nefarious reasons should disappear. Second, as companies deliver value through digital analytics, predictive maintenance and optimized maintenance programs, the important aspect becomes who delivers the best big data analytics outcomes as digitalization matures.
In the meantime, mergers and acquisitions are thriving, and the teardown market is very tight because assets aren’t coming out of the fleet as predicted, so finding prime used serviceable material is a challenge.
Material and components was a dominant theme at MRO Europe. Boeing closed the KLX acquisition in early October, and in another step toward integrating under Global Services, it streamlined its parts solutions. Safran Nacelles and Lufthansa Technik signed an agreement to cooperatively support nacelles for the CFM Leap 1A. PDQ signed an agreement with Zodiac to sell the OEM’s excess inventory. GKN Fokker Services and UTC Aerospace Systems signed a lifetime repair license agreement to support the latter’s hydraulic components on certain Bombardier CRJs. Unison and StandardAero extended their material services agreement. These are just a few examples from the event, but hopefully you get the idea.
Partnerships are flourishing. Expect new ones to form as operators seek further efficiencies and cost savings. No matter what happens to the economy, those factors will not change.