StandardAero continues to see strong demand across both its commercial and business aviation segments and anticipates an uptick in military business once assets deployed in global conflicts hit their maintenance windows.
The independent engine MRO specialist saw total revenue increase 4.6% in the second quarter to $1.6 billion. Both commercial and business revenue grew 6%, helping offset a soft military segment that saw revenues decline 3%.
Commercial demand “remains at historically strong levels across the platforms we support, and we have not experienced any reduction in demand from higher jet fuel prices,” CEO Russell Ford said on a recent earnings call.
The company does not expect that to change, citing past spikes and historically tight capacity in overhaul shops.
“Typically, these fuel price increases don’t stick around for several years. They’re typically shorter in nature than that. It never gets to a point of impacting the maintenance schedule,” he said. “Airlines are used to this; they’re designed to handle this, and there are many levers that they can pull before they get to the lever of adjusting maintenance schedules. That is the last lever they want to pull, especially in an environment where maintenance capability is constrained.”
Business aviation, which makes up about 20% of the company’s revenues, is less sensitive to fuel price fluctuations, Ford noted. Military flying, which generates another 20% of StandardAero revenue, is not affected at all.
Looking ahead, the company is gearing up for a jump in work on military platforms it supports, including the GE Aerospace F110 and T700 as well as the Rolls-Royce AE1107 and AE2100.
“When there’s a conflict, the demand for new aircraft is immediate. The demand for maintenance is a lagged effect,” Ford said. “The increased op tempo over the last six months, you don’t see the maintenance quite yet, but it’s a leading indicator for us when we see the increased flying hours. We have high confidence that those flying hours will create maintenance events that we start to see in the [second half] of this year and will continue into next year.”
StandardAero also revealed a new license “expansion” with an unnamed OEM partner, Ford said. The deal covers multiple turbofans and turboprops, the company said. The $180 million agreement adds new engine variants at “several” locations, improves “economics” on some existing work and adds component repair authorizations, he added.
The company posted a second-quarter net income of $97 million. Its dominant engine services segment posted revenues of $1.4 billion, up 4% year over year. Component repair services boosted revenue 9.2% to $194.6 million.
Full-year guidance sees commercial revenue growing in the low double digits to mid-teens. Military work will increase in the low double digits. Business aviation will grow in the low single digits.
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