The tenth year of airline growth is having the expected effects on maintenance demand. The supply of MRO is getting tighter, although some new facilities have or will come on line soon. But labor could still be a bottleneck in some regions, and drop-in checks will get pricier. That at least is the outlook seen by three major MROs.
“We have been seeing more requests for MRO services, in particular for our engine MRO business,” summarizes Lim Serh Ghee, president of ST Engineering Aerospace. The ST Engineering chief says tightening capacity of MRO results from continued increases in demand as airline traffic continues to grow. And the pressures are compounded by shortages in skilled mechanics and technicians, “which is a problem particularly acute in the U.S.” Lim believes any increases in MRO prices will be driven by these labor shortages, rather than shortages of facilities.
One reason for not worrying about physical capacity is that ST Engineering has been anticipating demand. That is why the company opened its new MRO facility in Pensacola, Florida, in June. And it is trying to wring more output from both facilities and labor by accelerating automation in hangars and shops. “For instance, we are adopting self-service tool cribs and robotics for polishing engine blades and other parts to do more work with less headcount,” Lim says.
Almost all of ST’s MRO work is already done under multi-year contracts. Lim says his customers have generally been eager to have long-term agreements as they help to ensure cost predictability and lock in capacity for maintenance needs.
Winter 2018-2019 and even the winter 2019-2020 are almost sold out across Lufthansa Technik’s European facilities, according to Marcus Motschenbacher, CEO of LHT Malta. “Even the summers surprise us with higher demand than anticipated.” Motschenbacher says tight capacity and high demand are also characteristic LHT’s U.S. operations.
The LHT exec expects tightness to affect pricing. “Customers with longer-term contracts will still benefit from the lower rates concluded back some years ago. But short-term customers need to face higher pricing, indeed.” New customers willing to sign longer-term contracts with a steady and continuous nose-to-tail input might still get current prices.
In Northeast Europe, Magnetic MRO is seeing and expects further tightening of capacity, both for airframes and engines, according to Base Maintenance Director Sergei Shkolnik. He expects two effects. First, prices will be higher, “especially for those unlucky or unwise customers and airlines who have been fishing around for cheaper MRO deals, rather than commit to a few years of guaranteed agreements with MROs.” Second, Shkolnik expects even those careless fishermen are going to seek longer-term contracts. “Magnetic MRO is observing this already.”