Boeing's ongoing struggles and Airbus’ recent acknowledgment that its narrowbody rate ramp-up schedule was too ambitious mean more fleet-planning headaches for affected operators.
It also means more opportunity—and pressure—for aftermarket providers.
“Aerospace supply chain issues have again raised the focus on the aftermarket,” wrote RBC Capital Markets analyst Ken Herbert in commentary accompanying his latest quarterly MRO survey.
“Travel remains robust, and airlines continue to increase spending on legacy assets to meet lift requirements.”
Mix in headwinds on almost all new-aircraft production lines—and, crucially, on both Boeing and Airbus narrowbodies particularly—and overhaul shops continue to be buzzing.
Boeing’s prolonged struggle to ramp up 737 production into the high 30s, let alone the 50-ish range once targeted for 2025-2026, has helped fuel spending on older 737s and A320s. Now that Airbus has acknowledged it will not reach a rate of 75 A320s per month in 2026 and will fall short of its 2024 delivery target, there’s even more near-term pressure on older metal.
One near-term result? A surge in already-robust MRO spending.
Herbert’s survey of more than 40 aftermarket providers found MRO sales rose 13% while parts purchasing jumped 18% compared to the first quarter.
While demand is certainly not waning, the strong sequential results may reflect improvements in material availability. If parts aren’t available, work can’t be done, affecting revenues from both.
Turnaround times have been a constant issue during the recovery, particularly for engines and components. Last quarter’s performance could be a sign that suppliers are beginning to catch up.
Survey responses suggest the parts-sales jump is not a sign of inventory padding. Measured on a simple 1-10 scale, inventory satisfaction levels are at their lowest in the post-pandemic era, the survey showed.
The trends bode well for the aftermarket as a whole. Herbert’s survey has total commercial MRO spending on track to be up 13% for the full year.
What are the primary risks that could leave industry short of that solid full-year figure? Better-than-expected delivery pace from manufacturers (unlikely), material availability delays (possible), or a sudden drop in passenger travel demand (always a wild card, as the pandemic reminded everyone).
Even if parts and turnaround times remain problematic, operators will probably have little choice near-term. Many will place their bets on keeping existing aircraft and engines in service, rather than the accuracy of long-promised new-aircraft delivery dates.
And that should keep most shops full into the second half of the decade.
“We continue to expect gradual normalization of [MRO] demand, but the [second quarter] [20]24 industry disruptions have led to a surge in activity,” Herbert said. “We believe the structural under-supply of new aircraft will support the aftermarket ‘super cycle’ narrative at least through 2025.”
