AW_12_29_2014_4484.jpg Chris Dodson
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Cabin Mods Dominate Narrowbody Airframe MRO

MRO providers finding growth opportunities in narrowbody heavy checks and cabin upgrades as operators seek to extend lives of existing aircraft.

Talk with anyone who is knowledgeable about the narrowbody airliner MRO market and the conversation quickly turns to cabin upgrades, where, it appears, the major MRO market opportunities in this segment continue to grow.

“There will be an increasing amount of spending on interior refurbishments, focusing on weight savings as well as upgrades to power supplies in order to accommodate greater use of personal electronic devices,” says Ken Herbert, an aerospace and defense analyst with Canaccord Genuity, a San Francisco-based investment banking company. Much of this work, he points out, is due to the large number of narrowbody aircraft delivered between 2005-08 and now coming due for major airframe checks. This, he adds, represents a paradigm shift.

“For the past five years, much of the interior upgrade activity has been on widebody first and business class cabins. Now more activity is moving toward the economy sections of single-aisle aircraft,” says Herbert.

Narrowbody MRO growth will be driven by the Boeing 737NG and Airbus A320 over the next two years, particularly in the Asia/Pacific region where he notes there has “been an explosion of the low cost carrier (LCC) business model.”

In fact, Earl Diamond, CEO of narrowbody airframe MRO specialist Avianor in Montreal, sees LCCs accounting for more of his company’s modification business. “The trend we see at Avianor is continual activity on the conversion to—and creation of—LCC cabin layouts. This has driven interior reconfiguration work for us,” he says.

At the same time, heavy inspections remain a huge component of the narrowbody MRO market, which Richard Brown, principal of consultancy ICF International in London, calls “a duopoly between the A320 and the 737NG,” especially as MD80 retirements have caused a decline in that segment.

“There will be continued demand for airframe maintenance checks in 2015 and 2016 from the mainstays of the narrowbody fleet—the 737NG and the A320—due to increasing C and D check events, driven by fleet demographics—age, hours and cycles,” says Brown. “Strong growth in developing regions continues, particularly in Asia as the fleet matures and heavy maintenance comes due.”

Data compiled by Aviation Week puts both the 737NG and the A320 in first and second place, respectively, for major airframe MRO spending in 2015 and 2016. Specifically, operators of the A320 are projected to invest $810 million globally this year and about $843 million in 2016. The 737NG family is projected to account for over $485 million in 2015, and $493 million by 2016.

Those families will account for “substantial opportunities for heavy airframe maintenance and modification over the next 2-3 years,” according to Tucker Morrison, COO of FlightStar Aircraft Services in Jacksonville, Florida. The long-time maintenance and modification specialist in Boeing narrowbodies plans to pursue more Airbus narrowbody work in 2015, but the main market will involve earlier production 737NGs and A320s, which Morrison calls “prime candidates” for cabin upgrades and reconfigurations.

“The airlines want to extend the useful lives of these airplanes by enhancing the customer experience,” he explains. “Anybody who gets on an airplane today will notice the condition of the cabin and whether the airline has kept up with advances in technology. The flying public wants to see something that looks brand-new, even if the aircraft is 10 or 15 years old.”

Morrison has bet on a surge of heavy maintenance and modification work in 2015 with the opening of a new 130,000-sq.-ft. hangar at Jacksonville’s Cecil Airport that will provide five additional production lines. “It will allow us to serve not only our existing customers but those we have had to turn away in the past because of capacity constraints,” he points out.

The new hangar also will open further opportunities for passenger-to-cargo conversions for narrowbody aircraft, which Morrison says is a “market that seems to be picking up, especially in the U.S., on the 737 Classics and 757 families.”

Interior upgrades and modification work will be high on the list for a growing number of narrowbody fleet operators—when they book heavy checks—according to Ernesto Ruiz, chairman of the board of Aeroman in El Salvador. “Very frankly, this is being driven by more airline marketing departments, which is why airlines are adding Wi-Fi and state-of-the-art inflight entertainment systems as a part of their modifications,” he notes.

“Technology—in and of itself—is driving the modifications,” Ruiz adds.

Aeroman’s focus is the A320, as well as the 737NG and 737 Classic families. To prepare for other opportunities in narrowbody work, Aeroman has just broken ground on a new 116 meter (381 ft.) wide by 116 meter deep hangar slated for completion in August 2015. The new hangar, he explains, will enable the company to initially pursue the Embraer E170 and E190 jet MRO market, but will also provide the capacity to go after widebody airframe heavy checks for the first time. A decision as to which widebodies is expected in early 2015.

“With the additional capacity, we are also preparing for potential business from operators of the new A320neo and the 737 MAX,” says Ruiz.

FL Technics, a specialist in narrowbody support, is seeing some changes in the MRO market, according to Zilvinas Lapinskas, CEO of the Vilnius, Lithuania-headquartered company. The MRO, he points out, has focused its services on the A320, and the 737 Classics and 737NGs, since they are the most widely operated aircraft in Europe, including Russia and the post-Soviet CIS countries.  They are also compatible with the low-cost carrier business model.

“One of the major changes in the narrowbody MRO market for 2015-16 is the increasing pace of retirements of Boeing 737 Classics, as more companies are switching to newer aircraft, and the economies of Russia and the CIS continue to grow,” explains Lapinskas. “As a result, the demand for maintenance work on the 737 Classics is expected to stay pretty low during the upcoming year.  At the same time, Airbus A320 maintenance is expected to pick up, mainly due to increasing demand for this aircraft type in the aircraft lease market.”

Lapinskas adds that FL Technics is seeing more interest for specialty, high-end engineering work, including cabin and avionics upgrades. That is especially true for Wi-Fi integration in the cabin and other communication modifications.

But he also reports a trend toward dismantling relatively young aircraft by some operators, with the coming introduction of the A320neo and the 737 MAX. “Currently the aftermarket for such aircraft as the 737NG has been filling up with more players offering spare parts, thus impacting not only prices for new parts, but also creating competition for independent MROs.”

Given the dynamics of the narrowbody MRO market, one question concerns component overhauls. “I believe that there will be strong demand for overhauls on all key components, such as landing gear, over the next 3-5 years,” says FlightStar’s Morrison. 

That will be especially true in cases where airlines are looking at fleet life-extensions. “The cost of purchasing new aircraft as well as lease rates are very high. So there are operators who are asking ‘Does it make sense to go with something new, or does it make more sense to upgrade an older aircraft?’ The fact is, we are seeing a desire to retrofit and upgrade,” Morrison remarks. 

A version of this article appears in the December 29, 2014/January 14, 2015 issue of Aviation Week & Space Technology.

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