The interiors retrofit market has been booming of late, with low fuel prices, high traffic demand, and an increasing focus on the passenger experience leading airlines to spend money on their cabins. But there are a few signs that the tide may be receding—at least for a bit.
Part of the reason is cyclical—many major operators, including several U.S., carriers, are moving through major cabin upgrade programs. But trouble with a few traditionally free-spending operators could add to the decline.
It is no secret that the Gulf region's big three—Emirates Airline, Etihad Airways, and Qatar Airways—are struggling. A combination of factors—some of them common, such as lagging demand in the region, and some unique to a specific carrier, such as Etihad's questionable partner investments—have them seeking cost savings.
One area that's affected: the aftermarket.
"We believe Middle Eastern airlines are delaying spending," Canaccord Genuity analyst Ken Herbert wrote in a recent note. "One MRO told us that Emirates has recently asked for significant price cuts on its MRO work due to cash constraints, and material inventory levels at Emirates are lower than has been the historical average."
As a result, Herbert said, it would not be surprising to see these carriers—and perhaps others—delay future upgrade programs. "The traditional model holds that airlines re-do their widebody aircraft interiors each 5-8 years, with year 7 the peak year," he wrote. "We believe that even with the improved airline profitability, this pattern has been pushed to the right."
Even with the momentum slowdown, the interiors market will stay solid, Herbert projects. His bet for interiors mods and retrofits in 2018: mid-single-digit growth.