Seller’s Market Drives Business At Independent MROs

Credit: FL Technics

LONDON--Business is booming at MROs, with demand skyrocketing for available slots as commercial air traffic recovers. At the same time, labor and resource shortages have led more airlines to consider outsourcing maintenance. The result could lead to growth opportunities for independent MROs.

“We are fully booked. We’re getting a lot of requests and we have to say no, because we sold all of our slots,” said FL Technics CEO Zilvinas Lapinskas at Aviation Week’s recent MRO Europe conference. “We’re getting requests from leasing companies to do teardowns of aircraft which are parked around our hangar and we tell them, ‘Maybe next June,’ or something like that.”

According to Mirjana Ceh, chief commercial officer at Avia Prime Group, the environment is a seller’s market for MROs. “Slots are sold out into the middle of next year,” she said, noting that this has resulted in some airlines opting for longer-term contracts.

A faster return to service in the U.S. following the pandemic led to “a significant shortage of capacity in the U.S. MRO market that extends all the way to North and South America,” according to Brian Sartain, vice president of repair and engineering services at AAR. “If you’ve got a slot for maintenance in the U.S. you can fill it,” he added.

Sartain predicts it could be two to three years before cyclicality of the market comes back and slots become more readily available. The impact is greatest, he says, on aircraft lessors, cargo carriers and smaller airlines without the ability to afford nose-to-tail payment year-round. “Those are really the customers that I think are losing out as everybody rushes back to the commercial market,” he noted.

This renewed demand has led to more maintenance demand—and more complications. “In the U.S., most of the parked aircraft are back into service that are going to be back into service. In fact, airlines have gone into a deep reservoir of old airplanes that we never thought would fly again,” said Sartain. He noted that this has led to “some unique situations trying to maintain those airplanes because they are so very old.”

At Avia Prime Group’s MROs—Adria Tehnika, JAT Tehnika and Linetech—the postponement of heavier checks has resulted in more difficult maintenance work. “We see a lot of corrosion and unusual repairs,” said Ceh.

A rise in more complicated MRO work, paired with the overall labor shortage, has led some airlines that previously performed maintenance in-house to consider outsourcing.

“We’re getting requests from airlines that were doing maintenance in-house,” said Lapinskas. “These are interesting discussions because now I think the goal is to show that they have to concentrate on their main business and they can buy maintenance in the market. I believe that we will hear about some big, interesting projects that [airlines] start to outsource. We see good opportunities for independent MROs to get bigger market share.”

According to Ceh, airline customers without in-house maintenance capabilities tend to spread work around to two or three MROs because “they don’t want to have all their eggs in one basket.” Meanwhile, Ceh says airlines that do hold in-house maintenance capabilities now want to outsource even more due to labor shortages.

Sartain noted that all these trends have led to better opportunities for AAR. “The [COVID-19] crisis allowed us to take our customer relationships to a different level,” he noted, adding that the company has been able to negotiate longer-term deals “because there’s a certain amount of strength right now in that when you have slots available, we can have a more meaningful conversation.”

This trend is also happening at other MROs in the North American market. “You’re seeing a lot of longer-term contracts for independently sourced MRO,” said Sartain. “That dynamic is leading to what I would say are much more constructive and positive conversations with airlines, MRO providers and the third-party market. We’ve got a sense that it’s creating a little bit healthier ecosystem.”

Ceh added that this increase in demand for outsourcing has led some MROs to pursue growing facilities, which could explain the recent boom in new hangar projects around the world.

Lindsay Bjerregaard

Lindsay Bjerregaard is managing editor for Aviation Week’s MRO portfolio. Her coverage focuses on MRO technology, workforce, and product and service news for, Aviation Week Marketplace and Inside MRO.