Despite worries over OEM dominance in the aftermarket, U.S. passenger carriers continued to increase their reliance on outsourcing in 2018. Or perhaps it would be more accurate to say, because these airlines are increasingly reliant on outsourcing, they are increasingly concerned about competition in the aftermarket.
According to FAA data summarized by MIT, the top-ten U.S. passenger airlines outsourced 50% of their MRO spending in 2018, up from 48% in 2017. This continues the long-term trend toward outsourcing, which represented only 23% of the same airlines’ (or their pre-merger predecessors’) MRO spending in 1995.
Much of that increase traces simply to the growing importance of low-cost carriers, relative to full-service or network airlines. LCCs outsourced 58% of MRO spending in 2018, down from 70% in 1995. But these same LCCs now represent a much bigger share of the market, with 21% of total MRO spending now, versus 5% in the mid-1990s.
LCC giant Southwest Airlines increased its outsource share slightly in 2018, from 53% to 54%. But over the last ten years Southwest has cut this share by nearly 9%.
The three remaining network airlines increased their outsource share from 45% to 47% from 2017 to 2018. Over the past ten years, this share has risen 3.3%. Delta Air Lines is now the most aggressive outsourcer, spending 54% of maintenance funds outside, followed by United with 52% and then American with 39%.
Total MRO spending by the ten passenger carriers was $12.6 billion in 2018, of which $6.2 billion was spent on outside maintenance and parts.