MTU Sees MRO Revenues Up 20-30% In 2021
The German engine specialist, a partner in the PW1000G program and one of its key MRO providers, has benefitted from warranty work linked to several reliability problems.
The increased PW1000 geared turbofan (GTF) business helped its commercial MRO revenues fall only 6% in the third quarter—significantly less than other engine MRO providers and the aftermarket as a whole.
While slowly rebounding traffic is expected to help drive demand on other platforms, the GTF demand is expected to help well into 2021.
“We expect growth in the MRO segment between 20% and 30%,”
CEO Reiner Winkler said November 19. “Within that, the organic growth in the core business [will be] mid- to high single digit, and the rest from additional GTF warranty shop visits.”
The 10% range in guidance reflects uncertainly around the recovery’s pace, which will determine demand on other platforms.
CFO Peter Kameritsch said MTU is on pace to generate €2.6 billion ($3.1 billion) in commercial MRO revenues in 2020, which would be a 4% decline compared to 2019.
MRO-business margins are not benefitting from the larger share of PW1000 work, because most of the revenue is linked to materials used during the shop visits.
MTU’s MRO unit both buys and bills out new parts at list prices, “so material content of these new spare parts flow through the MRO division with a zero [earnings] contribution,” Kameritsch said.
MTU’s MRO business margin is in the mid-single digits. Commercial spares sales are expected to be up in the mid-to high single digits in 2021, the company said. It is not yet seeing an uptick in used parts entering the market on the heels of pandemic-driven aircraft retirements.
"Currently, I think the market is basically dead when it comes to these kind of transactions,” chief program officer Michael Schreyogg said. "We are actively in the market,,, to buy assets. But it's hard, I can tell you because everyone is in a wait and see mode currently. I do not expect that on volume programs, like a V2500, you will see a lot of excess of material. Maybe it's more on programs where they are more under pressure, like A380 engines."