How MROs Can Move Ahead In Post-COVID-19 Environment

Everything about the coronavirus pandemic has been dramatic: the speed at which air traffic slowed, the huge numbers of aircraft that were parked, and the resulting hit to airline revenues. As many as 15,000 aircraft have been put into some form of parking, storage or early retirement.

Early in the crisis, the question of how much parking, storage and end-of-life maintenance was being planned for the fleet gave an indication of how long airline executives expected the pandemic to last. Some were even requesting minimum or curtailed work packages, not just because of the unprecedented volume of aircraft being parked but also because they were looking to “keep their planes warm” in expectation of a quick rebound. Airbus reacted swiftly by adapting the type and amount of maintenance needed for various durations of parking, thereby optimizing maintenance costs, and by creating a geospatial “Parking Management” app based on its digital Skywise platform.

The big question quickly became: How long will parking be required? On the one hand, there is an imperative to preserve cash and ground aircraft. On the other hand, airline bosses wanted to limit the time and effort needed to get the fleet flying again once the worst of the crisis is over. As the true size and scale of this pandemic continues to unfold, it may become evident that some of the early decisions made about short-term aircraft parking were premature.

It is also clear that less efficient aircraft will be the first to be retired. For example, Delta Air Lines announced very early on that it would retire its entire MD-88 and MD-90 fleets. Furthermore, as airline executives scrambled to decide which aircraft would be parked and for how long, the playing field shifted again with rapidly falling fuel prices.

The word being used most often about aircraft mix these days is “adaptation.” Virtually all airlines have declared they will emerge with smaller and more efficient fleets—with fewer types and more fuel-efficient planes. American Airlines recently said it will retire Airbus A330-300s, Boeing 757s and 767s, Bombardier CRJ200s and Embraer 190s. Shortly thereafter, Delta declared that its entire fleet of Boeing 777s will not return to service, despite recently investing heavily in new interiors for many of them. It is also a clear signal that long-haul traffic will be slower to recover.

If there is a small silver lining here, it is the unexpected opportunity for bundling maintenance. In many cases, abrupt parking meant both aircraft and mechanics were collocated. This presents a rare chance to embody mods in one shot without having to compete with network planners for precious ground time, as is the case during so-called “normal” times. One U.S. operator is working at full pace, performing a cabin retrofit for a sizable portion of its Airbus fleet. Another told me it is taking full advantage of this period for multiple modifications and tidying up aircraft to the extent of even being able to “clean the seat tracks with a toothbrush” if the crisis continues. Doing maintenance is good, as long as it does not consume too much cash and provided it goes into aircraft that will eventually fly again.

After the crisis, the “new normal” for airlines seems destined to be operating with less liquidity and a smaller workforce, resulting in demand for off-balance-sheet approaches for long-term spares and maintenance. The surge in availability of used serviceable material that will accompany early retirements of aircraft will create a much higher supply than demand in that market.

How will MROs fare in this new environment? Traditionally, in downturns the MRO sector is hit as hard as the airlines. Line activities dry up quickly as routes and frequencies are shed, and heavy maintenance is deferred as aircraft requiring major MRO events are preferentially parked. Meanwhile, engines and components are harvested from owned-asset aircraft, resulting in less work for engine MROs and OEMs, which rely heavily on that aftermarket for services business.

For the MROs able to adapt quickly, there should be rich pickings as the crisis ebbs. Carriers with ultra-low costs per available seat-mile are betting on a fast rebound when it finally happens. MROs that can match the cost structure of those carriers will be best placed to benefit from the upturn. Successful will be the agile MROs that adapt to the need for bundled services incorporating a wide spectrum of activities and can add extra value—as well as those that act as true partners in helping carriers with their recovery efforts.

The new normal for MROs will be a very different place, with consolidation likely, highly competitive bundled offerings and greater levels of partnership. The only remaining question is: When will all of this start to take off again?

—Paul Oliver has been in customer support roles at Airbus since 2002 and has led North American customer service since 2016.