Stagnation in Europe's airline industry will keep the region's aftermarket needs growing at below the world average for the next decade, even as Eastern Europe continues to blossom, analysts at last week's MRO Europe event in London projected.
Europe's MRO market—what is generated by its operators, as opposed to what is conducted in the region—will grow 2.9% annually, climbing to $21.8 billion in 2023 from $16.9 billion this year, says Chris Doan, CEO of consulting firm TeamSAI. This is a tad below the global figure of 3.1% per year through the decade as revenues move to $76 billion from $56.2 billion, he notes.
Western Europe's spending will be almost stagnant, climbing just $2.7 billion to $16.8 billion over the decade. Eastern Europe, by contrast, will nearly double its spending, to $5.0 billion from $2.8 billion, largely to support an expanding fleet.
Europe's net fleet growth of nearly 2,400 aircraft in the next decade will be split between Western and Eastern European markets. However, while about half of the Western European deliveries will be replacements, nearly all of Eastern Europe's new aircraft will add capacity, accounting for the difference in the sub-region's MRO market growth rates, Doan says.
Europe's airlines are in a low-growth mode, guarding against adding too much capacity even as record load factors roll in. In the first six months of 2013, Association of European Airlines' members grew revenue passenger kilometers 2.5% compared to the year-earlier period, while capacity was up just 1.3%.
Despite the European MRO market's slow organic growth, the region's shops continue to perform more aftermarket work than any other region.
Europe is projected to handle $10 billion in engine work this year, nearly half of the global total of $23 billion. European engine shops handle about $2 billion in North American operator engine work a year, and $1.5 billion for Asian operators, ICF SH&E Principal Richard Brown estimates.
The European market's MRO growth may be slow, but it will be enough to surpass North America's by 2023, primarily due to long-awaited U.S. airline fleet replacements, which will see aftermarket needs practically flatline, going from $19.9 billion this year to just $20.6 billion in 2023, TeamSAI figures show. The Asia-Pacific market, third in the 2013 rankings at $13.9 billion, will top the table in a decade, at $24.3 billion.