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Global MRO Trends In 2019

New technologies, joint ventures and airline growth are driving expansion of MRO services worldwide.

Printed headline: Global MRO

Across the globe, both independent MRO providers and those affiliated with airlines are expanding their capabilities and offerings. Although the fastest expansion is occuring in the emerging markets of the Asia-Pacific region and Latin America, mature markets of North America and Europe still account for the largest share of MRO spending globally. In all regions, new technologies—including predictive analytics, AI and blockchain—promise to reduce costs while enabling improved maintenance options for airlines. Here is a summary of the worldwide trends.

NORTH AMERICA

  • Airline MROs are adding capacity. Delta TechOps opened a new 150,000-lb.-thrust test cell for the Rolls-Royce Trent 1000 engine in Atlanta—the world’s largest facility of this type. United Airlines and Southwest Airlines are planning to open new hangars in Los Angeles and Houston, respectively, for their maintenance operations.
  • MROs are on the hunt for experienced workers, and wages for certain roles are rising. Avionics technicians are in high demand, as are mechanics experienced with electrical and software systems.
  • MROs and OEMs are attracted to the U.S. outsourcing market, with many airlines still preferring to outsource. In the summer of 2018, FAA Form 41 data revealed that the top 10 U.S. passenger airlines increased outsourced maintenance spending 1%, to 48% of all MRO spending in 2017.
  • With FAA’s ADS-B equipage deadline of Jan. 1, 2020, MROs are adding modifications services.
  • The North America aftermarket, encompassing the U.S., Canada and Mexico, is set to generate $187.6 billion in MRO spending in 2019-28.

LATIN AMERICA

  • The expanding middle class is driving airline growth, and MRO growth should follow.
  • Many carriers think onboard internet connectivity is becoming necessary to compete.
  • The Mexican government’s decision to cancel the new (but partly built) Mexico City International Airport  has left airlines and MROs serving the metropolis in limbo. The new airport was intended to become a major hub for the continent.
  • Airlines and MROs—from Aeroman in El Salvador to Copa Airlines in Panama—have set up maintenance schools producing hundreds of new mechanics. Others closely collaborate with local technical schools and universities to develop talent.

AFRICA

  • Some of the continent’s most prominent airlines are struggling. Cash-strapped low-cost carrier Fastjet has extended some of its loan agreements to later in 2019, while regional airline SA Express received 1.1 billion Rand ($96 million) in government support to remain in operation.
  • According to Nick Fadugba, general secretary of the African Airlines Association, areas in need of attention include spare parts provisioning, materials management, component maintenance, refurbishment and conversion of aircraft cabin interiors. In some countries, even wheel and brake overhaul and repair capabilities remain a challenge.
  • Analysts believe there is room for better cooperation between MROs in Africa, which could lead to the emergence of MRO centers of excellence in specific areas to avoid wasteful duplication.

EUROPE

  • MRO consolidation is occurring due to a combination of acquisitions and liquidations. In the past few months, Magnetic MRO acquired Dutch line maintenance provider Direct Maintenance, while the U.K.’s Monarch Aircraft Engineering went out of business.
  • Capacity constraints on engines old and new are still challenging the engine repair segment, but repair specialists are targeting greater efficiencies in the management of their shops to address the issue.
  • Regulatory agencies are making contingency plans for the U.K.’s possible exit from the European Union, although it is not clear yet how much tougher any Brexit—hard, soft or delayed—will make cross-border regulatory collaboration.
  • Joint ventures in Eastern Europe, with favorable access to skilled labor and lower costs, are continuing to be established by MROs such as Lufthansa Technik.
  • Airbus canceled the A380 program in January, but heavy checks are predicted to be steady over the next decade.  Despite some of the megatransports being offloaded by carriers, many industry analysts do not foresee a strong secondary A380 market developing.

MIDDLE EAST

  • MRO investment continues to pour into Saudi Arabia and the United Arab Emirates, with the recent moderation of oil prices contributing to delayed retirements of older, less efficient aircraft, increasing maintenance demand.
  • With several high-profile airline bankruptcies in Europe in recent years, MROs in the UAE are increasingly looking to the continent to source technical talent. However, in the long-term, training people in-house is still the preferred option, with Etihad and Emirates setting up their own Part 147 training schools.
  • Broader component repair capabilities and logistics support has continued building up in Dubai, as seen in recent times with foreign companies like UTAS and Lufthansa Technik Dubai.
  • New technologies such as blockchain continue to pique interest from MROs in the Middle East and elsewhere.
  • Despite difficulties for lessors setting up their main hubs in Dubai, hampering any ambitions they have of rivalling Ireland and Singapore, the Gulf city is likely to see its status as a leasing location grow in the coming years.

CHINA

  • One major challenge for Chinese airlines lies in procuring quality components on time from suppliers, says Yongdong Hu, head of Satair sales and support in China. Reasons for this include low stocks or long lead times, geographic distances, different time zones, complicated logistics and communication with foreign suppliers.
  • Industry analysts note that MRO infrastructure development in mainland China has not been able to keep up with recent growth.
  • China’s ambitious play in the aviation leasing segment is expected to continue over the next two decades, but challenges around expertise remain.
  • The Civil Aviation Administration of China (CAAC) is seeking to improve airworthiness certification capacity and develop a high-quality certification system. The regulator has outlined improvements in project management, working modes, personnel training, legal and regulatory frameworks, system layout and incentive mechanisms.

ASIA-PACIFIC

  • Several airlines or airline-affiliated MROs are looking at expanding their in-house maintenance capabilities or facilities, including AirAsia, Malaysian Airlines and Gameco. Independent MROs, including GMF AeroAsia and Sapura Technics, are also expanding.
  • There is great market potential for inflight connectivity on aircraft fleets in the Asia-Pacific region, with connectivity specialist Inmarsat estimating penetration of only 20% in the region.
  • Repair services for new engine types are beginning. In early 2019, Pratt & Whitney added MRO capability for its geared turbofan PW100G-JM at its Eagle Services Asia facility in Singapore.
  • Use of drones for aircraft inspections in hangars is expanding.

INDIA

  • The Indian government, which estimates that around 90% of MRO for Indian airlines is outsourced to other countries, has set an ambitious goal of reversing that, having 90% of the work being
    carried out in India.
  • However, some industry figures believe India’s current tax system—considered less favorable for the MRO industry than that of other countries, is counterproductive in achieving that target.
  • According to Aviation Week’s MRO and Fleet Forecast data, India will see the world’s highest aircraft fleet growth. The forecast projects a compound annual growth rate of 10.4% until 2028, with aftermarket demand of $23.8 billion over the same period.

 

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