Shifting fleet dynamics and global economic trends mean that while the world’s largest maintenance, repair, and overhaul (MRO) market isn’t growing anytime soon, opportunistic service providers still have reasons for optimism, the latest MRO forecasts suggest.
Analysts speaking at MRO Americas in Phoenix agree that the North American MRO market—the revenue generated from work on the region’s aircraft—will be stagnant at best for the next decade. Aviation Week’s just-released civil aviation fleet and MRO forecast has the North American market shrinking at 0.9% per year, on average, through 2023. Consultancy ICF SH&E—the most optimistic of the prognosticators—projects an average annual growth rate of about 1.4%. Global annual growth rates, dragged down in part by North America’s stagnation, are pegged at between 3.6% and 4.2%.
All agree that the North American MRO market, which has about 30% of the global fleet, also makes up about 30% of the global MRO pie. Aviation Week estimates work on North American commercial jets and turboprops to account for $17.1 billion in revenue this year, while the world fleet is expected to generate $56.3 billion.
Analysts also agree that North America’s major re-fleeting trend is going to change the region’s MRO mix. Team SAI projects that North American carriers will take delivery of 3,700 new commercial aircraft in the next 10 years, but 80% of them will be replacements, leaving a fleet of about 8,000, up from 7,300 today.
An influx of new narrowbodies will change the fleet makeup, and by extension the MRO market’s dynamics. Team SAI calculates that three aircraft families —the 737, A320
, and 757—each generate a double-digit share of North American MRO spending, and combine for 40% of the total. No other type has more than an 8% share.
In 2023, the market will be even more top-heavy, with the Boeing 737
family accounting for 28% of the market, up from 15% today, and the Airbus
A320 rising to 18% from 12%. The Boeing 777
, ranked seventh today at 5%, will climb to third with a 7% share, leapfrogging the Boeing 757
and 767 as well as both of Bombardier
’s smaller and larger regional jet families.
Within MRO verticals, stagnation or contraction is the trend.
“Components is the only segment we see showing growth,” says Aviation Week’s Director-Forecasts and Analysis Brian Kough, pegging it at a paltry 1.5% per year during the 10-year period, which will give that sector a 25% share of the MRO market in 2023. Engine work, the largest segment, will contract about 1% per year and account for a 41% share of the 2023 market.
While the North American fleet’s MRO needs aren’t growing, forecasters emphasize that certain economic variables could conspire to drive more work back to the region. Rising labor costs in markets like China are changing the contract maintenance equation, tilting the results more favorably toward keeping work closer to home.
ICF SH&E Vice President Dave Stewart says his company’s forecast includes “a slight boost” from presumed recapturing of work on North American aircraft— mostly widebodies—that are now sent to presumably cheaper markets for heavy checks.
Team SAI CEO Chris Doan says 62% of North American widebodies are sent away for heavy checks. What used to be a 30% savings per check has dried up, as wages in developing markets have increased.
“There are diminishing returns,” he says. “There is a new opportunity in place to considering [recapturing] widebody aircraft work.”
Airline growth beyond North America’s borders could bring opportunity as well. A Qantas
representative noted during a session here that the carrier is interested in a partnership that would support its A380
line maintenance needs at Los Angeles International Airport.