Less still means more for Asia-Pacific MROs

World beating Asia-Pacific fleet expansion will keep MRO growth at close to 5% year even though airlines are investing in fuel efficient aircraft and keeping their fleets young.

by CHIEF CORRESPONDENT, TOM BALLANTYNE  

November 1st 2014

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Despite the increasing numbers of new generation, fuel efficient commercial jets entering airline fleets that need less maintenance less often, the business of Maintenance, Repair and Overhaul (MRO) continues to expand in the Asia-Pacific and the Middle East. Read More »

But the sector also is undergoing significant change as manufacturers win more after market business from their airline clients - including Asia-Pacific carriers – when the airlines sign on the dotted line for their planes.

Vistara owners took delivery of their first A320 in September

A recent example was the decision by India’s newest airline, the Tata-Singapore Airlines joint venture Vistara, to sign a comprehensive maintenance agreement, a “Flight Hour Services Tailored Support Package” with the European planemaker, for its first A320 jet. The package included airframe maintenance, engineering, reliability and components supply chain management. It was the first such deal for an Indian airline.

While Vistara is hardly the only airline to give its MRO business to an Original Equipment Manufacturer (OEM), it is another example of the increasing inroads OEMs are making in the MRO market.

Independent MRO providers should be aware of OEM’s growing importance in the aftermarket support business, said Turkish Airlines chief executive, Temel Kotil, when he delivered the keynote address at the MRO Europe conference in Madrid last month.

In the past, he said, a balance existed between OEMs, airline MROs and independent players in supporting the worldwide fleet. Now, he predicted, there will be a shift in market power in favor of OEMs, fueled by the latest generation of aircraft coming into service. “In the long term, the MRO market will be dominated by OEM monopolies,” he forecast.

But this did not mean Kotil was happy with the shift to OEM dominance of the MRO sector. “Costs need to come down, while maintaining quality and safety levels, especially in emerging markets,” he said.

With the worldwide fleet forecast to grow exponentially in the next two decades, led by Asia and Africa, he said that high-cost services could stifle this growth potential.

In the meantime, the global MRO revenue pie continues to grow. According to U.S. aviation consultancy Team SAI, the aircraft MRO market, valued at $57.7 billion this year, will increase to $86.8 billion by 2024. Another U.S. consultancy, ICF International, forecasts the market will expand by 3.9% annually and be worth $89 billion by the end of the next decade.

Expansion will be at a “healthy” compound average rate of 4.2%, said TEAM SAI with growth to accelerate to 4.9% until 2019 and then slow to 3.5% until 2024. Narrow body aircraft MRO work will account for 46% to 48% of the MRO business in that period, wide bodies for 40% to 43% and regional jets at 9%.

The Asia-Pacific will grow at 5% per year from 2014 to 2024, with China’s market expanding from $4 billion to $10.2 billion in that decade. ICF also forecast the greatest growth in demand would be in the Asia-Pacific, which will spend $7.1 billion more on MRO services in 2022 than it did in 2013, followed by the Middle East and China.

Speaking at a recent U.S. MRO conference, ICF principal, Richard Brown, said aircraft modifications will be one of the fastest growing MRO sectors, at 6.4% annually, as airlines install winglets, upgrade interiors and invest in inflight connectivity technology.

“The biggest driver of revenue overall will remain engine services with the sector predicted to generate more than $35 billion in 2023, up from $24 billion in 2013.

‘While we are set for a period of significant fleet renewal in the next 10 years, which is likely to see maintenance cycles lengthen, it seems that the increasing number of aircraft in the air and the need to ensure older aircraft are as efficient as possible will generate plenty of MRO work,” he said.

Apart from winning business, both OEMs and MROs face the issue of training and retaining sufficient numbers of qualified engineers to service the growth in demand. In September, Boeing projected Asia-Pacific demand for new commercial airline pilots and maintenance technicians in the next two decades would be 39% of the global requirements for new pilots and that 224,000 new technicians and engineers would be needed in the region through to 2033. It said China will require 101,000 technicians, Southeast Asia 55,000, South Asia 30,000, Northeast Asia 24,000 and Oceania 14,000.

All of which will undoubtedly be the centre of discussions at the 14th Annual MRO Asia Conference & Exhibition, which is being held from November 4-5 in Singapore. It is expected to attract some 2,500 industry professionals from 50 countries to the Lion City to address the critical MRO issues that face the region.