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MRO recovery Post Pandemic

MRO recovery Post Pandemic
MRO recovery Post Pandemic.

The COVID-19 pandemic sure shook the Aviation industry, will thousands of grounded planes and jobs lost, there was a time when the aviation industry across the globe was almost on a stand-still. But there was hope, aviation professionals across the world believed that once the pandemic clouds fade away, the aviation industry will be back on its feet in no time and that is exactly what has happened. Today almost 18 months later as vaccination rolls out, travel industry has opened up, airports are crowded once again, lockdowns have ended and things are headed in the right direction. Boeing predicts global commercial fleet will surpass 49,000 airplanes by 2040. China, Europe, North America and other Asia-Pacific countries each account for about 20per cent of new airplane deliveries, with the remaining 20 per cent going to other emerging markets.

In this article let us explore how the pandemic affected the MRO sector and weather there are any opportunities or major changes in the global MRO industry post pandemic.

MRO Market recovery statistics

As per the Oliver Wyman forecast there is a 39 percent decline in MRO revenues across the industry while MRO markets are expected to recover to 2019 levels in 2022 or 2023. Airline expect a slightly earlier recovery than MRO. The pre-COVID forecast originally predicted USD 91.6 billion in MRO spending but an updated report released at the end of July showed the dropped numbers atUSD 50.3 billion. The drop in MRO spending is especially pronounced in the sector’s biggest and most expensive segments: engines and airframes. The Oliver Wyman report estimated that airframe spending plummeted by 59 percent, with a pre-COVID spend estimate of USD 17.9bn adjusted down to just USD 7.9bn post-COVID. Deferred engine overhauls and parked fleets made engine spend fall from USD 43.5bn pre-COVID to USD23.2bn post-pandemic. 

As per CAPA reports, the Asia-Pacific MRO industry is expected to face a temporary capacity crunch when airlines return more of their fleets to service after the COVID-19 pandemic. However, the longer-term capacity outlook is brighter as MRO providers are keeping facility expansion plans largely on track.

Major MRO companies in this region have seen a significant dip in business due to airlines parking large numbers of aircraft and deferring heavy maintenance. But demand could spike quickly when COVID-19 restrictions ease, with many Asia-Pacific airlines needing MRO providers to help reactivate aircraft that have been in storage for several months.While the Asia-Pacific travel sector may be recovering more slowly in the short-term, in the long term it is projected to grow much faster than in any other region, according to Boeing.Aircraft delivery estimates show that Asia-Pacific will be the key marketplace for Boeing and other manufacturers. Darren Hulst, Boeing VP-commercial marketing says the centre of aviation gravity [will continue] to pivot more and more towards Asiaover the next few decades.

Skilled workforce shortage will continue to be a challenge…

One of the major challenges facing the MRO industry could continue to be workforce shortages – a potential problem for many parts of the aviation industry, but seemingly a particular headache for MRO. As per the Boeing forecast of 2021, there will be a need of 612,000 new pilots, 626,000 new maintenance technicians and 886,000 new cabin crew members to fly and maintain the global commercial fleet over the next 20 years.

One of the major factors for this are instability in the industry, competition from other industries, lack of qualified applicants, and a reduction in long-term labor supply and reluctance of women entering the industry. According to Oliver Wyman,women make up only 12 percent of staff and 8 percent of those in leadership roles across maintenance and engineering organizations.

Parked Aircraft

At the beginning of first pandemic wave, airlines parked around 60 percent of the total global fleet. Never before has the industry seen so many of its aircraft temporarily put out of service. This unprecedented situation has caused a number of maintenance and repair challenges. Before parking the aircraft, even if it’s just for a few days, there’s a detailed process that includes covering intakes and exhaust points, protecting the internal entertainment systems, greasing and cleaning landing gear, turning off cockpit controls and disconnecting batteries. Most parked aircraft are then put on a service schedule that requires basic visual inspections every seven days, electrical and brake maintenance every 14 days and fuller checks, including starting the engine and inspecting anti-ice systems, every 30 days. Most of this parked aircraft are enroute to permanent storage while many of the widebody fleet have gone into early retirement. This is because the longer the aircraft is parked, the periodic maintenance interventions go down.

This uncertainty faced by airlines for their parked fleet has affected the MROs, particularly the independent MROs as the airlines are now mostly opting for basic in-house maintenance process as a part of their cost-cutting policy.

Also, longer aircraft remain grounded, the higher the chances that some airlines will not survive the crisis. If and when airlines go bankrupt, MROs and other dependent companies are likely to follow. 

Early fleet retirements

Apart from workforce challenge, early retirement of major widebody aircraft across the globe by almost all major operators led to further disruptions in MRO market recovery.  As per Oliver Wyman, despite making up only 20 percent of the fleet, widebody aircraft made up 35 percent of retirements in 2020. Recovery of widebody flying is expected to take longer and will grow more slowly than narrowbody flying into the future. These shifts will have profound impacts on the MRO industry. Besides, changes to fleet plans and strategies will also led to further long-term disruptions in recovery.

New Aircraft Challenges

The parked aircraft might never see the light of the day again, and with increased number of early retirements, coming years will witness more and more Next-Gen aircraft. These fleet will be more technologically advanced with latest innovations, giving less time for MROs to adapt to this change. New innovative solutions like predictive maintenance, increased digitization, utilization of Big Data and blockchain technologies have already paved their way deep into aviation circles. Hence MROs will have to invest heavily to support these new capabilities and train their technicians on how to operate and service them.

Further complicating this challenge for MRO suppliers, newer aircraft are not only more high-tech, they also require less maintenance and fewer replacement parts. With traditional MRO services thus likely to decline, how suppliers respond to the shift to next-generation aircraft will be vital.

OEMs Versus MROs

The next five years will prove to be the most challenging for MRO industry. The main focus needs to be to create adaptable business, however problems like competitive positioning of OEMs versus MROs in the aftermarket and labor availability might just affect the market recovery. Oliver Wyman predicts a steady growth of OEMs over the next five years. This growth will be mostly concentrated on new platforms. OEMs are likely to be more focussed on engine and component aftermarket rather than airframe.

More Mergers and Acquisitions for mutual benefits

Earlier the mergers and acquisitions were most for the purpose of cost savings and synergies. However today this market focuses on new product deliveries and robust market expansions into emergent MRO markets like Asia and Middle East.  The acquisitions are used to gain new capabilities, access emerging technologies, and geographic expansion.

As majority of the aerospace market is focussed in US, several tier suppliers are penetrating the US markets through M&A. The M&A activities are also increasing in the Asia-Pacific region as several OEMs are opening manufacturing facilities in Asia. This will lead to a smaller number of independent MRO operators in the long run.

In what seems to be like one of the largest mergers in the aviation industry, AerCap completed the acquisition of GE Capital Aviation Services business (GECAS) from General Electric. This merger not only positions AerCap as the worldwide industry leader across all areas of aviation leasing: aircraft, engines and helicopters but will have large scale implication in commercial aftermarket.

Boom in Passenger to Freighter Conversions

Passenger-to-freighter conversions are expected to reach historical levels – many facilities are fully booked through 2024 as per Aerodynamic Advisory predictions

Road to Recovery

As per the forecast by Aerodynamic Advisory, MRO spending remained resilient in China and nearly recovered in the US…elsewhere it remained well below pre-COVID levels

However, all hope is not lost. A dynamic time awaits the MRO industry on multiple fronts. Aircraft OEMs need to revise their aftermarket goals and narrow their offerings including broad support. Engine OEMs need to watch supply chain to handle coming ramp-up and need to carefully manage their supply chain to prepare for the ramp-up.

The exact time span for MRO market to completely recover still remains largely uncertain. Needless to say, Covid has clearly challenged what we do and how we do it. Now is the time for MROs to revisit their strategies, workforce training technics, operations to adjust to the new normal.