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Challenges, Opportunities in Shifting Aerospace MRO Landscape

The demand for aircraft Maintenance Repair and Overhaul is on the rise. Are aerospace companies ready?

Dave Roegge | UPS

The aircraft Maintenance Repair and Overhaul (MRO) business is poised for stunning growth in the near term, but the aerospace companies that provide those services must navigate a rocky and often-unpredictable landscape in order to thrive.

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Rapid fleet growth and the rise of emerging markets, especially in Asia, will change the way aircraft operators make decisions about their MRO supply chains.

Rapid fleet growth and the rise of emerging markets, especially in Asia, where the aftermarket is fragmented and uncoordinated, will change the way aircraft operators make decisions about their MRO supply chains.

Meanwhile, MRO providers also must contend with new competitive forces and an increasingly demanding customer base. They need to be vigilant and ready for upcoming shifts in market forces. And they need to forge and nurture global partnerships with suppliers and logistics providers who know how to succeed in times of rapid, but unpredictable, international growth.

Boeing’s 2014 Current Market Outlook projects the world’s fleet will double over the next 20 years as 36,770 new planes take to the skies. Forty two percent of those will replace older ones, mainly in North America.

But, in general, commercial planes are being retired at a modest rate now. The average age of aircraft at retirement has risen steadily over the last 40 years from about 15 years in the mid-’70s, stabilizing above 25 years today, according to a 2015 report from Avolon, a global aircraft leasing firm.

This means the MRO market will be lucrative. Research published by the International Air Transport Association predicts the market will reach $89 billion in 2023, up 47 percent from 2013. Some of that growth will be attributable to pricing power along the supply chain.

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Greater globalization brings with it inexperienced workforces, immature logistic networks and regulatory oversight challenges.

For now, North America is the top region for MRO value, but Asia is on track to eclipse it, according to research from Team SAI, which provides consulting and technical services to the global aviation and aerospace industry. Asia’s MRO market share is set to reach $29.8 billion by 2024. That’s nearly double the current size.

Turbulence ahead

Plane-makers and suppliers, meanwhile, are building more efficient, reliable and advanced commercial and military aircraft, engines and components. This new technology puts added pressure on MRO providers to be versatile and to cultivate new skills.

How all this shakes out is yet to be determined. But fleet growth will change the timing and type of maintenance required. Old ways of doing business are falling by the wayside, and supply chain performance will be under closer scrutiny.

Aviation growth in emerging markets also carries risk. IDC Manufacturing Insights said in a report last year that greater globalization brings with it inexperienced workforces, immature logistic networks and regulatory oversight challenges.

The MRO environment is tense, and the competition is fierce. One reason is that original equipment manufacturers (OEMs) want to capture a bigger share of overhaul activity and preventive maintenance, IDC said. In asserting more control, they’re leveraging their position with suppliers on parts and prices. This, in turn, pressures MRO providers on cost.

MRO providers must be agile and flexible as the type and timing of maintenance changes with newer planes with more durable parts, new designs, and more efficient engines and other characteristics come into play.

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There are a lot of questions as the MRO ecosystem reshapes. But there are also opportunities.

Capturing the opportunity

There are a lot of questions as the MRO ecosystem reshapes. But there are also opportunities.

The potential for growth is almost limitless. We know demand for MRO services is on the rise, and we know it’s coming from new regions. Aerospace companies just have to be ready to adjust quickly to new demands.

We also know that third-party logistics players will play a role, especially those with a worldwide presence and dependable core services. They can help manage the regional risks and compliance demands as well as workflow dynamics.

It’s all about being prepared, being nimble and aligning yourself with partners who can get you where you need to be. goldbrown2

dave roegge sepia
Dave Roegge is Director of Marketing, High Tech at UPS.

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1 Comment

  1. prkralex

    In Aerospace industry production innovation as become far more dependent on supplier innovation, and such innovation increasingly results in longer-term strategic supply agreements to assure supply and differentiation in products. When explosive industry growth is fueled by product design innovation, such as what has occurred in commercial aerospace and now automotive, partnerships with strategic suppliers become even more important.

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