This article is published in Aviation Week & Space Technology and is free to read until May 30, 2026. If you want to read more articles from this publication, please click the link to subscribe.
Third-party engine MROs are increasingly investing in acquisitions and vertical integration.
Supply chain disruptions for new aircraft deliveries and MRO cost airlines approximately $30 billion in 2021-25. International Air Transport Association data shows that this represents just over 20% of total passenger airline industry profits during that period. The challenge is simple to see and complex to solve. Airlines—well-run ones, at least—make money when aircraft fly. With supply chain challenges likely to continue through 2028, MROs have a strategic window to make decisions that support aircraft availability, airline profitability and their own bottom lines.
A good chunk of the impact, $10 billion or so, is due to the ongoing and well-documented teething of new-generation engines within fleets and increased shop turn times. Maintenance and fuel costs tied to running older aircraft longer account for another $7 billion and $9 billion, respectively. Finally, airlines have held larger spares inventories to buffer disruption to the tune of a $4 billion profit hit to date—“to date” being the operative term, as the impact could well double by the time disruptions ease.
While fully sorting the supply chain will take time, capital and some macroeconomic zen, MRO providers are taking definitive steps to address airline needs and their own self-interest.
While there is a Las Vegas buffet level of segment variety within the MRO market, I tend to focus on three areas: new-generation engines, spares and all other component repair and overhaul. New-generation engine MRO, with its OEM-coupled shop networks and tighter hold on intellectual property (IP), is more of a walled garden within which OEMs’ ability to drive part availability and manage shop network capacity rules the day. Spares, component repair and other overhauls are a different matter. In these areas, MROs are making organic and inorganic investments to build both vertical depth and horizontal breadth, particularly when it comes to mergers and acquisitions.
MROs’ strategic considerations align with how different types of scale matter in these segments. Within spares and component repair, depth of catalog increasingly makes a difference in the ability to provide operators with options across new, used and parts manufacturer approval (PMA) parts. This is particularly the case for third-party service providers or Tier 1 and 2 suppliers that look to the long tail of part sales as a meaningful aspect of their revenue and profitability. The overlap of company portfolios and strategic interests in this segment is fueling organic investment and merger and acquisition activity alike.
Aftermarket providers are taking two approaches. One is a merger-and-acquisition-led shaping of portfolio companies to provide breadth across new, used and PMA parts. Portfolios are not novel, of course. However, the recent uptick in bringing PMA providers and other aftermarket-focused businesses into those portfolios demonstrates how portfolio companies are identifying opportunities to provide operators with greater options for availability.
In return, established Tier 1 players are scaling their own capability for repair and part offerings while also building customer experiences that may differentiate them from the experience of working across cobranded, but operationally separate, portfolio companies. The portfolio-driven model provides customers with options.
A second approach is based on control. Control of operational variability, turnaround time and IP is especially important for repair and overhaul. Within the overhaul market, this means investments in vertical integration and greater control of IP, be it in parts or repair offerings. Vertical integration is most prominent in the engine aftermarket, and those serving legacy versus new-generation motors take slightly different approaches..
Third-party MROs, particularly those serving legacy programs, are making internal and acquisitive investments in physical space, used material and assets that increase their service levels. For OEMs and Tier 1 suppliers with aftermarket businesses, their investments are broadly focused on automation, process and capital improvements to drive throughput of parts production, repair and overhaul.
The sustained impact of material and maintenance slot availability on airline performance is actively shaping aftermarket providers’ strategies. Whether through broadening umbrellas of spare parts offerings or increasing maintenance throughput, aftermarket providers are focusing investment on creating those options. What is good here for aftermarket providers may even be better for airlines that fly more, hold less inventory and see their own strategic options broaden in line with “unlocked” profits. Whether airlines deploy this found money in passenger experience, new products or elsewhere will be well worth watching.
Related Content
