Friday’s Fast 5: ICF On MRO Growth, Global Expansion

Following the delivery of his MRO forecast at Aero Engines Europe 2016 in Lisbon, ICF International principal Richard Brown discusses some of the details with James Pozzi.

Following the delivery of his MRO forecast at Aero Engines Europe 2016 in Lisbon, ICF International principal Richard Brown discusses some of the details with James Pozzi.

Many airlines are becoming profitable again. Will this manifest in increased MRO spend in the next 10 years?

Airlines are making money because of a few factors: capacity discipline with a focus on profitable flying rather than market share while also benefiting from lower fuel prices. The introduction of modern equipment generating reduced maintenance and benefits of aircraft under warranty also need to be taken into consideration.

In which maintenance segments are airlines spending their money?

Looking at how airlines are spending their money, one of the strongest growing market segments is in modifications, which includes interiors. There has certainly been increased activity and growth in discretionary spending, and using interiors as an example again – the retrofitting of cabins. With the introduction of new aircraft types such as 787 and the A350, Airlines will typically put a new product in that aircraft. Then they will take the opportunity to retrofit the existing fleet over a period of time. We are also seeing increased spending from airlines in business class and premium economy cabins.

You’ve stated that while there is a notion that Asia-Pacific is going to be the dominant aviation market, it has already arrived by usurping Europe. How will this play out in the long-term?

Asia-Pacific is going to become the largest generator of MRO over the next decade. It’s already second after North America, and looking specifically in the engine market, the region will account for half the engine spend by 2025. Spending is driven by strong deliveries into China but also growth from regional low-fare carriers such as Lion Air, Indigo, AirAsia and JetStar, while growth in widebody fleet from the likes of Singapore Airlines and ANA. From an MRO perspective, factors we are continuing to watch include some of the infrastructure not being in place to support the fleet. Like in the Middle East, some equipment is still leaving the region so the challenge for suppliers is making sure they have the right capabilities in the region. In specific countries like China, issues such as tariffs and customs can be potential issues, the Chinese market in itself is a market you serve traditionally from within China.

Will these factors lead to more aftermarket joint ventures in both China and Asia-Pacific?

The attitude in China has been the airline joint venture route either with an OEM or independent MRO, such as GE, Pratt & Whitney, MTU or Lufthansa Technik with Air China and Philippine Airlines. The JV route works because airlines often want to do the work themselves, and they want to gain the knowledge but may not have the expertise. This allows the OEM or the independent MRO to provide the training and the know-how with airline providing the labor. The local carrier can do the work themselves but the quality and expertise is provided by the partner. From a regulatory perspective, the Chinese authority is quite conservative and safety conscious. There’s a view that if you are working with the OEM or an established provider, the regulator will look on this favorably and that the operator is maintaining to the correct standards.

You highlighted the issue of data in your trends to watch focus. This topic often divides opinion in the sector. How do you feel aviation fairing as in this area?

The aviation industry continues to evaluate how best big data can benefit operators, OEMs and MROs.  The aim is to achieve increased asset availability, optimized inventory and ultimately reduced maintenance cost, which is what operators are looking for. Many questions emanate from this. We are all trying to understand how big data can be optimally used. How should we as an industry approach this? Does it fall to the OEMs, regulators or an industry association like ICAO? With airlines having a variety of different aircraft and engines in their fleet, each comes with potentially different solutions. Aviation is still very much a paper industry, and operators are looking for help in how to approach data in a more coordinated manner.

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