What are the main challenges in the aftermarket?
Pascal Parant (AAR): Current generation engines are staying on wing for longer than expected, and stub life threshold is now rising. Some components will barely be repairable due to the high usage. NG are expected to have even higher time on wing. So USM will be more challenging. Current price for good assets makes the return on investment challenging, and a lot of cheap money is flooding the market, giving the USM market a kind of Eldorado for new comers that may just do a Ponzi scheme for some of them. We can expect “cold meat” from inexperienced companies at the next downturn.
Mike Cazaz (Werner Aero Services): Overvalued assets make it difficult to buy, if you are a buyer/supplier. Too much “stupid money” coming in to the market, and as a result inflating the value of the used assets. Too many teardowns of narrow body aircraft create oversupply of some engines and spare parts.
Katia Diebold-Widmer (MTU): Firstly, short-term, capacity constraints in slots is certainly a challenge, and parts delivery potentially an issue. We will be discussing these during the panel session.
Also, the market dynamic is changing: there is increased OEM coverage for next generation engines and independent providers will need to intensify their cooperation with OEMs to access both engine MRO and repair licenses, as well as MRO volume. MTU Maintenance benefits from MTU Aero Engine’s risk and revenue share partnerships with OEMs in this regard.
And in terms of the European market in particular, we are looking at a mature market with relatively flat growth. That being said, it is also an important market as many key MRO players, including MTU Maintenance, have main locations in Europe.
Eric Beauregard (AV&R): The OEM interest in the MRO market and the turnkey contracs used to capture this market for years to come.
Alexander Stern (N3 Engine Overhaul Services): Shortages in spare part supply can be seen everywhere due to extreme increases in new engine production. Also the entry of new engines and the exit of others creates high MRO volatility.
Highest flexibility to react quickly to new customer demands and fleet issues are key factors to win new business. As leasing is growing, the MRO must have better entry/return/support processes for these engines.
The positive is occasionally lost when we discuss the aftermarket, what would you consider the positives/the drivers in the industry?
KDW: Take for instance the European market: There are definitely opportunities for tailor-made service offerings in which engine MRO, leasing and asset management can be combined to provide highly customized solutions for our customers, whatever stage of the lifecycle their engines are in.
Another key focus in the long-term will be the development of monitoring systems and predictive analytics, like our ETM. Such developments will result in better predictions of performance in the field and, in turn mean, better shop visit planning, parts logistics and fleet management, ultimately leading to savings in cost and turn times for customers.
PP: Everybody sees the importance of the aftermarket. OEMs try to control it. Independents must keep growing to exist and be strong players. And airlines are in limbo, between strong competition, with fewer aftermarket players, and strong presence of OEMs that are using their brand to assert their presence in the market. So it is a vibrant market with a lot of opportunities for expert companies (both airlines and MRO).
AS: MRO could support the industry by repairing and recycling parts to reduce pressure on the new parts supply chain. MROs’ responsiveness to manage campaigns on new engines and to support OEM to improve the product.
EB: Technology is becoming essential so impact between low cost country and high cost employee cost country will become less and less relevant in the future.
What are the key messages you would like people to take away from your contribution to this year’s conference?
PP: Be creative, keep feet on the ground, don’t let OEMs monopolise the market, and think that “is fine,” as we are all frequent flyers, we are amongst the ones who will pay the bill at one stage or another!
MC: The grass is not always greener on the other side, be ready for the bumpy ride. A provider's reputation and service quality are more important than the price.
EB: A wind of change is coming, and it is not only affecting the new make industry but it also will affect the aftermarket.
If you could ask our delegates one question, what would it be?
PP: Are we moving toward a more expendable engine, with fewer repairs due to longer time on wing?
MC: What is the most important factor you take into account when you plan your short term or long term acquisition of engines?
KDW: It is part of our credo to keep evolving and creating even more cost-effective solutions for our customers. So, what concerns do you have about the market, now and in the future, and how would you like to be supported by MTU?
AS: The life cycle of an engine is 15-20 years with up to three overhaul events. How long do you think the lifecycle will it be for the next generation of engines, and how often will a next-gen engine visit an overhaul shop? How many shop visits do you need to fill a profitable overhaul line?
Aero-Engines Europe takes place on 13-14 September at ME Madrid Reina Victoria, Spain. To find out more, read the agenda and register, visit www.aeroengineconference.com