Recovery on the horizon? How MROs are adapting to a changing aviation market
Following a two-year period of mass aircraft grounding, the aviation industry’s recovery is underway as air travel demand seeks to surpass former levels.
Alongside the industry’s recovery, is a rush to reinstate, recertify and maintain an adequate fleet capacity to meet rising travel demand. With changes to airlines’ fleets and a personnel crunch, maintenance, repair, and overhaul (MRO) organizations are poised to respond to these demands.
So, how are MROs navigating a post-pandemic aviation industry? And what is the sector’s outlook for the next decade? AeroTime investigates.
Edging closer to pre-pandemic levels
In 2022, MRO demand is forecasted to reach almost $80 billion, which is around 87% of levels recorded in 2019.
A market outlook report released by US-based management consulting firm Oliver Wyman described the MRO market in 2022 as “being reshaped by a fleet in transition”.
The industry’s global aviation fleet was recorded to be the same size at the beginning of 2022, as it was in 2017, and is expected to eclipse 28,000 aircraft within the first half of 2023.
However, the industry’s fleet size has experienced significant fluctuation following the onset of the COVID-19 pandemic.
At the beginning of 2020, the industry recorded its largest number of aircraft, about 27,844 units, in the global aviation fleet comprising turboprops, regional jets, widebodies and narrow-body aircraft.
The pandemic led to the mass storage of more than half of the industry’s fleet, including old and new aircraft, as well as early retirements of ageing aircraft.
MRO demand fell to around $53 billion in 2020, down from $90.8 billion in 2019.
As aircraft were used less and less, the remaining active aircraft flew fewer hours. Aircraft operators explored methods to maximize engine life-limited parts (LLPs) by cycling through their fleets. Aircraft engine LLPs are parts within the engine that require mandatory replacement after a certain time period, regardless of operation or storage. The measure to cycle fleets was deployed in order to delay shop visits as much as possible while staving off most non-essential maintenance and modification events.
MRO expenditure (spending related to airframe checks, components, engines and line maintenance) also took a hit as fewer aircraft were active globally. However, spending related to airframe checks remained resilient as these checks are done periodically and are not halted when an aircraft is in storage.
However, demand has slowly recovered as MRO demand against 2020 levels grew by 17% in 2021 and is forecast to increase by an additional 26% in 2022.
More aircraft were added to the industry's fleet from February 2021. As travel demand increased, a corresponding growth in fleet size and aircraft utilization was also recorded.
MRO activity in airframe checks and engine shop visits is forecasted to rise in the near short-term as the need to fulfil aircraft maintenance events that were deferred in 2020 and 2021 increases.
Demand across the MRO industry is expected to grow by 12% annually between 2022 and 2024, accounting for an increase of around $20 billion, according to the Oliver Wyman report.
By 2023, demand is expected to recover and exceed 2019 levels, with a forecast of $97 billion according to an Aviation Business News publication in December 2021 sourcing data from Naveo Consultancy.
However, the MRO market is expected to grow at a slower rate than in the preceding decade due to the record number of aircraft retirements in 2020.
The market’s demand from 2019 to 2032 is expected to increase at a compound annual growth rate of 2.6%, a slower rate than in the preceding decade (2010 - 2020).
The MRO sector is forecasted to reach $118 billion by 2030, which will be 13% below a pre-COVID forecast of $135 billion.
A new landscape calls for a different approach
Domestic travel and the utilization of narrowbody aircraft have been a large driver in the recovery of air travel post-2020.
IATA reported in March 2022 that, domestic traveler numbers in 2021 were at 61% of 2019 levels. The association added that the numbers are expected to improve to 93% in 2022, 103% in 2023, 111% in 2024 and 118% in 2025.
Despite lagging behind, international passenger traffic is steadily increasing as inter-continental gateways re-open and expand.
“It has been a brutal two years for airlines. But we are seeing signs of recovery now. International travel in 2021 stood at only 25% of where we were in 2019,” said Willie Walsh, IATA Director General during a keynote address at Changi Aviation Summit on May 17, 2022.
“But in the first quarter of this year , it [international travel] has recovered to 48%. And indeed some parts of the world including Europe, North America, and Latin America, the recovery has reached around 60%,” Walsh added.
As the industry continues to recover, some MROs are reflecting alterations in strategy and their approach to their services to clients to better align with the industry’s fleet changes.
“The make-up of the business today is slightly different to what we had pre-pandemic – we used to be predominantly widebody-focused but today we have significantly bigger content on the narrowbody end,” Frédéric Dupont, VP of technical sales at Etihad Airways, was cited as saying in the December 2021 Aviation Business News publication.
Partnership and synergistic relationships are becoming a new reality for MRO companies in the post-pandemic era.
In the Aviation Business News publication Richard Marston, MAAS Aviation, Director of customer services, marketing & sales Europe said, “It is evident that the MRO industry is finding new ways to build partnerships with customers, OEMs, and each other, to manage the continued impact of Covid-19."
“We established a blueprint for this with our new facility in Kaunas, Lithuania that opened in February 2021. This is sited adjacent to FL Technics’ maintenance hangar and the close proximity has enabled us to build a streamlined centre of excellence for aircraft transitions where aircraft painting flows seamlessly into the mix. Airline and lessor customers alike find the cost savings, improved turnaround times, and [an] overall reduction in complex logistics that is provided by this partnership to be extremely worthwhile,” Marston added.
However, as international traffic and airline services gain momentum, flexibility is emerging as an underlying factor in the success of MRO organizations and their relationships with their clients.
“We are working very hard to be as flexible and reactive as we can, to meet ever-changing customer requirements. They are looking for more solution-orientated services rather than ‘one-size fits-all’. We’re putting a lot of focus on customer support and experience,” added Dupont.
Richard Kendall, the chief commercial officer of HAECO Group, an aircraft engineering and maintenance organization based in Hong Kong, also emphasizes flexibility as the industry works to onshore parked aircraft capacity.
“A lot of short-term activity exists around bringing aircraft out of storage and re-starting cabin upgrade projects that were put on hold over the past 18 months,” said Kendall according to a quote in the December 2021 Aviation Business News publication.
Kendall also highlighted an increase in demand from leasing firms that are seeking MRO services as a number of aircraft transition to new leases.
“This means that there is quite a squeeze in hangar capacity for airframe maintenance over the next six months, but the prospects beyond that are less clear. Engine maintenance impact has been lagging that for airframe, but we can see an increasing trajectory for that sector later in the coming year,” Kendall added.
Louis Philippe Mallette, senior vice president of operations at AJW Technique, an MRO based in Canada, added insight into how airlines are responding to the changing MRO landscape with their own in-house repair services.
In the Aviation Business News publication Mallette said, “the pandemic has caused rapid divestitures of some parts of each business, especially where there is heavy leasing and labour expenses. We see a greater share of airlines outsourcing their maintenance in the hopes of reducing their internal cost structure, especially as MROs have become even more cost-competitive now that there are fewer that survived the pandemic.”
Varied regional growth and recovery
The recovery and growth of the MRO market is expected to vary per region according to Oliver Wyman’s report.
At the end of 2021, China’s active aircraft fleet was already larger than its previous size in January 2020, and the corresponding MRO demand in the region had surpassed its pre-pandemic levels.
However, MRO demand in North America is expected to reach and surpass 2019 levels in the latter months of 2022, while demand in the Asia Pacific fleet is not expected to recover until 2024.
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