Boeing 737 MAX BOEING

U.S. MRO Spending Headed For Another Record in 2019

Boeing 737 MAX grounding could alter type of spending and boost outlays.

The long traffic boom has been very good for maintenance. MRO spending is moderately pro-cyclical and tends to grow faster than traffic when traffic is climbing and decline more sharply when traffic declines.

But just how good things have been is becoming more clear. Airlines for America (A4A) reports that maintenance spending by nine U.S. passenger airlines grew 8.9% from the first quarter of 2018 to the first quarter of 2019. Over the same period, passenger traffic rose 4.6% and the CPI 1.6%. So in addition to benefiting from growing passenger traffic, MRO spending went up another 2.5% in real, inflation-adjusted dollars.

It’s not exactly clear how much of this gain was due to more maintenance actions, such as maintenance or upgrades on older jets, versus higher costs of parts and labor. But the top-line revenues of MROs and aftermarket OEMs are doing very well.

And according to A4A forecasts, we are probably in for more of the same, at least in the short term. The association expects passenger seat capacity to grow another 4.3% from 2018 to 2019. For summer 2019, A4A expects passenger traffic to increase 3.4% from the same season in 2018.

The grounding of Boeing 737 MAXs may alter the type of MRO spending and may actually increase the total volume of spending. The 72 MAXs in U.S. fleets represent about 1% of seat capacity and their absence would cut the capacity increase by about the same 1%. The effects would be greatest on Southwest, American and United Airlines.

But A4A says affected airlines are compensating for the absent MAX in several ways. These include using spare aircraft, increasing use of other models such as the 757, deferring retirements, perhaps leasing additional aircraft if the grounding is prolonged and deferring discretionary maintenance and upgrades. The first four tactics actually increase maintenance while only the fourth reduces it. Those older jets that are filling in for MAXs are generally much more maintenance-hungry than the new aircraft.

So the MRO market still looks like Goldilocks, at least in the U.S. and in the short term.

TAGS: Airlines
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish