As the global trend toward next-generation (NextGen) air traffic management systems evolves, and parts obsolescence issues increase, airlines operating aging fleets are considering upgrading cockpits with modern avionics as replacements for legacy electro-mechanical and electronic flight instrumentation systems (EFIS).

ICF SH&E estimates the avionics upgrade market for air transport was $570 million in 2013, but the consultancy forecasts it to reach $1 billion by 2023—in constant 2013 dollars—for a compound annual growth rate (CAGR) of 6.1%. “Avionics upgrades are (projected) to increase faster than the overall MRO market, which is growing at a 3.9% CAGR for the period,” says Richard Brown, a principal in the London office. “Upgrades are offered for a wide variety of mature programs including MD80s, 757s, 767s, A300/A310s, 737 Classics and Dash 8s.”

Operational and bottom line improvements drive the upgrades. “The ability to fly more fuel efficiently, such as using RNP (required navigation performance), and continuous descent, can translate into measurable fuel and time savings for airlines, along with reduced pilot workload and enhanced safety,” he explains. “They also reduce maintenance costs by streamlining the number of components, minimizing the issue of component obsolescence and maximizing dispatch reliability.”

Brown calls system obsolescence “an increasingly prevalent problem” with mature avionics. “It is frustrating operators as they deal with potentially long spares lead times from avionics OEMs,” and try to secure scarce parts for equipment manufactured in the 1980s or early 1990s.

The coming of NextGen air traffic management will be the major driver for commercial airliner avionics upgrades, reports Delmar Fadden, a board member and technical consultant for Sandel Avionics. “NextGen will generate a very large-scale change in the air traffic operational environment, requiring new capabilities to fly more efficiently—such as using RNP routings—from a growing number of airports.” This will mean a “significant amount of retrofitting” on older aircraft, to include upgraded flight management systems, autopilots and primary displays, he says.

In the U.S., NextGen is being phased in incrementally over the next five to six years, with widespread implementation by 2020, although Fadden calls that “a moving target.” At the same time, he points out, older electromechanical systems will experience high failure rates and reach a point where they will become more difficult to repair.

“When the failure rates increase, the repair costs will become competitive with—or more expensive than—retrofitting with a new system. That's when it's time to replace them,” says Fadden.

Dave Bailey, sales director for Esterline CMC Electronics in Canada, cites parts NextGen and obsolescence as a primary driver for upgrades. “There are thousands of aircraft operating with vintage cathode-ray tube (CRT) displays, and with them, increasing reliability and maintainability issues for the airlines,” he says. “CRTs are very expensive to repair or replace, and for products with built-in CRTs, repair costs escalate more quickly than average. The cost of repairs [often is] based on the cost of building spare parts for the older items.”

CMC recently launched CMA-6800, an LCD/LED form-fit-function CRT replacement display for the ATR 42, ATR 72 and Bombardier Dash 8.

ICF SH&E's Brown suggests that the decision to install new cockpit displays also may be based on a bigger- picture view. “Airlines have to weigh upgrade costs against the increasing maintenance costs generated by the aging engines and airframe,” he points out. “Current low capital costs available to purchase new airplanes may encourage some to opt for new equipment, rather than to make the investment to update legacy aircraft such as 737 Classics. However, for other aircraft such as the 757, which performs well as a freighter, upgrades may be a realistic option to extend in-service aircraft life.”

The Boeing 757 and 767 have presented an upgrade market opportunity for Rockwell Collins, which announced a cockpit makeover for those airplanes at Farnborough in 2012. This involves replacing the original factory-installed six, 6 X 7-in. CRT displays with three large-format liquid crystal display (LCD) units, diagonally measuring 15.1 in. The OEM expects certification of the new cockpit under an STC in April, reports Craig Peterson, Rockwell Collins's director-air transport avionics marketing. The launch aircraft is a 767-300 operated by an unnamed customer.

“The retrofit will increase reliability and give the operators of those aircraft a springboard to the next-generation air traffic control compliance capabilities, expanded utilization and enhance their aircraft values,” says Petersen, noting the combined 757/767 in-service fleet of more than 1,600 presents a robust market. “These airplanes are still viable with respect to their payload, range and fuel efficiencies, which is why we see some significant level of longevity.”

The cockpit display upgrade model for 757 and 767 could be duplicated on other platforms, including those with electromechanical, analog cockpits, which Peterson states are “presenting a lot of challenges” today.

“For instance, the 737 Classics still use mechanical airspeed and gyroscopic indications, which have very low reliability rates and high obsolescence challenges when it comes to finding spares,” he says. “There is also a matter of weight and display capabilities.”

Asked if the 737 Classics are considered by Rockwell Collins as candidates for cockpit retrofits, Peterson says the OEM is always evaluating new opportunities. Shahram Askarpour, president of Innovative Solutions & Support (IS&S), predicts that the avionics retrofit market could total $10 billion over the next 10 years. He predicts the MD- 80/90 series, 737, 757 and 767 aircraft will account for most of the business, with North American and European carriers generating 80% of the market.

“There are also some definite opportunities in the regional airliner market. While it is not one we are retrofitting now, it is certainly on our horizon,” Askarpour says.

IS&S's Cockpit/IP flat panel display system has received FAA, Transport Canada and EASA certification as an upgrade for the 757, 767, and 737-300, -400, and -500 models, and Askarpour expects certification in the third quarter for the MD-88 and MD-90 aircraft—specifically to replace older EFIS, flight management and standby systems. The installation reduces component count while using the existing wiring, and overcomes the shortcomings of the flight management systems.

With more aircraft being retired in favor of newer, more fuel-efficient models, the avionics upgrade market could take a hit. While Askarpour agrees this could reduce the market's size, he notes that operators purchasing new aircraft will have to wait years for delivery—and make do with their existing fleets in the interim.

“This is even true of aircraft that went into service in the 1990s such as the Boeing 777. Those aircraft are now flying with equipment that is already 20 years old, and it's that age group that represents the next wave of demand for a cockpit retrofit.”

Rocky Mountain Aircraft in Canada is experiencing growing demand for modern avionics installations. According to Tim Shaw, avionics manager of the MRO and leasing company, 80% of his avionics business is focused on cockpit upgrades. “The trend we are seeing is toward full avionics upgrades, rather than partial replacements involving an instrument here or there,” he says.

Shaw reports that in 2013, about 20% of the aircraft that came to the facility for avionics modifications underwent full, new generation cockpit upgrades, generating about 50% of the company's avionics-derived revenue. “For 2014, we expect that full upgrades will grow to 30%, and 60% of the avionics repair and modification sales.”

“With the upcoming (NextGen) requirements, more operators are taking into consideration the unreliability of the existing equipment, the growing scarcity of parts and high repair costs,” Shaw adds.

That translates into more upgrade visits. “Until about 2010, we did one complete modern avionics installation per year. Today, it's one every two months,” notes Shaw.