What will the MRO industry look like in 2018?

Vision of the future

What will influence the MRO industry over the next 10 years? Consultant David Stewart  gazed into his crystal ball and this is what he saw ....

At this year's MRO USA conference in Fort Lauderdale, Florida, David Stewart, principal consultant at consultancy Aerostrategy, ventured to present a snapshot of the support landscape in which the world's airlines will attempt to keep their aircraft flying.

"The whole idea was just to make people think," says Stewart. "A good 50% of this may be wrong, but we believe people need to plan against all the elements that will influence the MRO industry over the next 10 years."

He believes there is nothing too "left field" within this vision and believes that most are quite reasonable assumptions. "It is pretty certain that there will be consolidation in the airframe MRO business with the emergence of three or four players globally," he says.

Stewart predicts that 75% if air transport MRO will be outsourced in 2017

THE MARKET IN 2018

So here goes: in 2018, the air transport fleet numbers 28,000 aircraft. The fleet is heavily concentrated on two aircraft models, the Airbus A320 and Boeing 737 from the world's two major airframers, whose families combine to represent around 48% of the fleet.

With an enterprising degree of stealth, they have together locked in 50% of those single-aisle customers with integrated MRO contracts that include airframe/component maintenance, rotable logistics and/or fleet management options, thereby leveraging their key strengths in aircraft health management systems and distribution networks to increase competitiveness.

The global fleet has increased by 9,000 aircraft since 2007, a 4% compound annual growth rate with the installed base of 27,966 aircraft comprising 6,128 future orders, 7,314 firm orders, 206 parked aircraft and 14,318 aircraft in the retained fleet.

The Asian and European fleets in 2018 are nearly the same size as the North America base. Orders stand at 6,900 aircraft, with new single-aisle aircraft accounting for 41%. Boeing and Airbus launched their next-generation models in 2014 and 2016 respectively - together representing 41% of the orderbook.

The Boeing 787, introduced in 2009, now accounts for 4% of the active fleet with more than 1,200 aircraft in service, while the A350XWB comprises 18% of the orderbook.

A recent move by both airframers to launch new widebody designs to replace the Airbus A330/A340 families and Boeing 777 has resulted in 300 orders from airline customers.

Over the intervening decade, the air transport and MRO sectors have both restructured significantly. North American airlines have consolidated to four majors with an average fleet size of 500 aircraft.

Green aviation policies prevail following the USA's ratification of the Kyoto II Protocol in 2011, while in the early 2010s foreign ownership rules were finally liberalised. Major internal MRO facilities, meanwhile, have been either divested or spun-out.

Elsewhere, the Middle East fleet has doubled since 2007 with Dubai becoming an important MRO and aviation hub. In line with the trend to lower cost labour bases, African MRO bases have emerged.

"Snecma already has an engine maintenance presence and rumours in the industry currently doing the rounds suggest that Air France Industries is looking at this region as well for airframe work," says Stewart.

CARRIERS DWINDLE

Within Europe, transatlantic open-skies liberalisation has led to the consolidation and subsequent disappearance of several leading flag carriers, while low-cost carriers have dwindled from a high of 45 to less than 15.

In Asia-Pacific, liberalisation has facilitated numerous start-ups since 2007, while the Chinese fleet has tripled, absorbing most MRO capacity growth. Interestingly, Japan and South Korea have both emerged as engine and component MRO locations.

The 2017 MRO market is worth $61 billion, a $15 billion increase since 2007. Modifications account for $5.3 billion (a 2.8% compound annual growth rate), heavy airframes $7.2 billion, and the component business - the highest compound annual growth rate at 3.9% - $13.3 billion.

Line maintenance work is valued at $13.1 billion, while engine MRO totals $22.4 billion of annual work, a 3.8% compound annual growth rate.

In total, air transport MRO accounts for 45% of a broader $140 billion global maintenance market, with outsourcing at 75% - up from 52% 10 years previously, although this could yet be owned or partially owned by airlines.

Around 90% of engine MRO, 30% of line maintenance, 85% of component support and 75% of heavy airframe maintenance support is outsourced.

Captive engine maintenance has declined significantly due to independents gaining market share with the spinning out of captive MRO facilities.

While OEMs have moved to licensed service centres and formed joint ventures for some engine models to offset the threat of parts manufacture approval, they have however retained the largest share and control 50% of the engine overhaul market.

In terms of airframe heavy maintenance, the independents have become the chief beneficiaries of the outsourcing trend, offsetting the effects of slow market growth and gaining significant market share, with five major global suppliers controlling more than 40% of the market.

Source: Flight International