Podcast: Asia-Pacific Hot Topics—AI, China, Fleet Growth, Slots And USM

Join Aviation Week editors in Singapore from the GoLive! Theater at MRO Asia-Pacific as they share what they are hearing at the 25th anniversary event. Watch a video of the live recording here

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Joe Anselmo: Welcome to this special edition of the MRO Podcast before a live audience at Aviation Week's MRO Asia-Pacific Conference and Exhibition in Singapore. I'm Joe Anselmo, editorial director and editor-in-chief of Aviation Week and Space Technology magazine. And I'm joined by two of our MRO experts, editors, Lee Ann Shay and James Pozzi. So Lee Ann and James, I'll start off with some key takeaways. I'm used to moderating the Check 6 podcast talking about things like space. Don't know as much about MRO as you two, but from spending some time at the show, some of my key takeaways. Number one, supply chain. Obviously nothing new there. It's been going on for years, but there's just a sort of a perceptible shift that maybe things are starting to turn in the right direction in terms of improvement. That doesn't mean we'll be back here in a year and won't be talking about it and it'll all be solved, but at least the ship seems to be turning a little bit, a little more confidence.

Tariffs huge issue at MRO Americas in Atlanta back in April. That's really seemed to quiet down, but when you ask here, tariffs are still an issue. And one of the biggest issues with tariffs here in the Asia-Pacific, it's just the uncertainty. We had one executive on stage say, I don't care if you put 50% tariffs in, I just need to know what to plan for. And there's such uncertainty with the trade situation in the world that's really making it difficult for companies to make investment decisions. Number three, AI, which I thought was interesting. We did a poll here at the show. 96% of respondents said they're going to use AI, but only 34% are actually doing so in any meaningful way. So the uptake of AI and the MRO industry is definitely going slowly. It's coming, but it's going slowly. And I guess my fourth takeaway was just workforce and in particular I learned something today about China. China has an aging population just like Europe and North America, but they also have high youth unemployment. So MRO shops in China are not having problems, we hear, filling their workforce gaps. The aviation colleges are turning out plenty of labor and that's not a big issue in China like it is in Europe, in the United States. In fact, there was one company said their average age was 33 for workers. So something else. Lee Ann, what did you think of all that and what were some of your key takeaways?

Lee Ann Shay: Thank you, Joe. That's a lot to comment on. Yeah, it was MTU Maintenance Zhuhai who said that the average employee age is 33, which in Europe, isn't it in the forties?

James Pozzi: About the mid-forties, roughly, yeah, last time I checked.

Lee Ann Shay: Yeah. And the U.S. where I'm based, it's in the mid-fifties up, so that's a big discrepancy. Artificial intelligence. I had the privilege to moderate a panel on artificial intelligence and the whole gist was is it a buzzword or is the industry actually using it? And there were several examples of how companies are using it to make great use to increase efficiencies, to cut costs. One example, I went to ST Engineering's new maintenance shop, they had an official opening on Monday. They have converted one component shop into a CFM56 maintenance shop, and then another area that was used for maintenance engine maintenance, but now it's being dedicated for the LEAP-1A and -1B engine. And they have an engine inspection tool that is a robot with a camera that it can take pictures of an engine when it's being inducted. But now they've added artificial intelligence to it too, just to help get that inspection done quicker and faster.

And then during this panel, they had executives mention several things they're doing and one that really stuck out to me was just maintenance work cards. Because we all know that especially on the airframe side, it's still, we talk a lot about digitalization, but it's still very much a paper-driven process. It's changing. But some companies are now starting to use artificial intelligence just to kind of wade through all of that paperwork and the task cards and the work to better coordinate the task cards and the people and the material and everything to really speed that up and help the technicians get the information they need quicker. So to Joe's point, is artificial intelligence suddenly just going to roll out quickly in the next year? Probably not. But we work in a very regulated industry where safety is a huge concern. As one person said, you could get something to 99%, but that doesn't cut it. It has to be a hundred percent. So to Joe's point, I think that is part of the reason why some of these initiatives are just going to start out slow.

James Pozzi: Yeah, I mean I agree with the AI subject. Definitely a cautious, but very much a committed adoption of AI coming up. And I think this region as a whole has generally been very good at digitalization and new technologies and getting on board with that from what I've seen certainly over the last five to 10 years. So yes, but from some of the things that really surprised me, I guess now we know there's a lack of engine repair capability in the region and capacity, but that is really starting to bite, particularly in the wide-body part of the market. So wide bodies I think is around 200 aircraft in region and there's just a lack of shop capacity at the moment. And the bottlenecks have really started to affect operations and airlines getting slots and they're sending a lot of that work for engines out of the region out of necessity.

Now, a lot of these shops here were airline maintenance affiliated. There's fewer of those now and the OEMs have a big foothold in this region, in that part of the market. There's definitely a lack of independent MROs working in the engine space and that is obviously challenges and quick turn and hospital shops. That is also a massive lack of those, especially compared to Europe and North America where there's an abundance of them, especially by independents. There just seems to be a real lack of those and that's certainly something that's starting to really impact in terms of supply chain. TATs are still a bit too long. Although playing back in I guess to the supply chain side of things, they have improved somewhat over the last couple of years, certainly since 2022, 2023 when it was really reaching its nadir post-pandemic, but they are on the whole TATs still a bit too long on particularly new generation engine programs and they would like them to be the OEMs and the airline customers would like those to be shorter than they are. So that's something still to work on with that.

Lee Ann Shay: Another example of that, there was a lot of talk about component and engine MRO, but our keynote yesterday in the conference, AirAsia X CEO, Benyamin Ismail said that three of its A330s are still grounded because of engine problems. They just haven't been able to get the engines inducted in that case getting pushed back largely because of supply chain problems. So you've got three wide-body aircraft that could be flying that are stuck, they just can't get the engines into the shop.

Joe Anselmo: Lee Ann, one of our chief Aviation Week forecasters, Brian Kough is here and presenting. We wanted him to join, but he is in high demand, so unfortunately he couldn't. So I'm going to put you on the spot. What were some of the key takeaways from Brian's forecast here?

Lee Ann Shay: Excellent question. Lots of different facts and figures. 40% of the current order backlog, so there's 17,600 aircraft in that backlog are going to Asia-Pacific, China and India. So when you talk about the growth of this region that is not hype. 40% of the aircraft that are ordered are coming to this region and our—so Aviation Week is going to release its 2026 forecast like the next decade in a few weeks. So the numbers are preliminary, but right now we are predicting the global MRO market demand to be about $140 billion worldwide by 2026, which is a pretty big number.

Joe Anselmo: James, one of the things you've been talking about with us is the disconnect between demand and supply, and that feeds into the supply chain problem as well. Tell us a little bit about that.

James Pozzi: Yeah, I guess it comes back to a lack of MRO capacity and capabilities. There are a lack of independents in the region, but it's interesting what that's creating as a result. So another thing that I've been very surprised by has been the growing acceptance for used serviceable material, not just from Asia-Pacific. We've seen that move forward over the last few years a bit more, but the main one I was very surprised by to hear was China. So China for several reasons has a growing acceptance of USM parts, which in my time in the industry, I dunno about you, that was never really the case. The preference was I guess for more OEM manufactured parts. So that is very much a consequence of TATs, for example. And also cost reduction carriers now are more accepting of USM and the landscape is also changing. So domestic policies from the CAAC regulator towards USM, it's allowing for that more open procurement environment.

They are enabling that more. And another factor in that's worth mentioning the fleet expansion in China is there's a lot of aircraft going into that country over the next 10 years. And there's already, as we know, a lot of aircraft as it stands. So yeah, it'll be interesting to see how that accelerates over time and how that grows in terms of the USM adoption there for airlines. But certainly I think while the regulators are playing ball with that, the CAAC, and that's once again a necessity because there's a supply chain cost and just the sheer demand and the need for parts. So like with other regions, although in different ways, countries and carriers and regions are looking at methods that they weren't previously doing so to obtain parts because as we know, the shortages and the lags are a huge, huge challenge for the industry.

Lee Ann Shay: And to jump in on that PMA, more companies are willing to use PMA just again because if you've got a lack of parts and you can get an aircraft back in, that seems to be growing in this region too.

James Pozzi: And some airlines in China and in the region are tearing down their own aircraft now. They're really instigating that. I think it was AirAsia who said in the session yesterday, they tore down an Airbus A320 last year and they again said they had to do that out of necessity and the need for those parts. So that's something I certainly would never have guessed happening in a million years, just a few years ago. But the fact it is doing so now, we could see more airlines look to do or to orchestrate those tear downs themselves with their aircraft that are leaving the fleet.

Lee Ann Shay: And, sorry, one other thing about the parts. Mark Spoor who leads GAMECO in Guangzhou said that in addition to airframe component and engine MRO, they also have the capability to design and manufacture parts. He was speaking on the panel that you moderated and I think it was like 38,000, 40,000 parts. It was a huge number that really surprised me, but again, that was partly related to, if you don't have a part you can make it.

Joe Anselmo: So our sound technicians are going to do their best to clean things up. But boy, it is bustling here. It is noisy here at MRO Americas. This is the, we're in Asia, excuse me, I knew I was going to say that Lee, and I knew I was going to do that. It is noisy here at MRO Asia-Pacific, and this is the 25th anniversary of this show. 25 years ago, I believe it started in a basement of a hotel in Hong Kong. What's it like today?

Lee Ann Shay: It is very loud and it's bustling and there's a lot of really great energy and people are doing deals. There's been several press releases come out today, even with contract signings, et cetera. But last year here at Asia-Pacific we had a record attendance and we're up about 20%, which is a big number, but I think that is indicative of the growth that is happening here in the region.

Joe Anselmo: Any surprises, guys? This week we hit the ground running. Today's day three going nonstop. Anything you come across that surprised you?

James Pozzi: I hate to repeat myself at all, but I would go back to in terms of topics, the USM market in this region, and particularly China definitely caught me by surprise. And I think the realities as well of that lack of capability and capacity for certain programs, particularly around the engines and the wide bodies, given that this is very much a wide bodies have a lot of prominence in this region, that definitely has caught me by surprise over the last few days.

Lee Ann Shay: I think it would be that average age of 33 for the MTU Maintenance Zhuhai employee. I thought that was astounding. There was a 90% cut in time for an application that ST Engineering is using AI for. So that was a big number. You know what I'm going to add? We haven't really talked a lot about workforce. There are some new maintenance training schools coming online in India, and I just learned about a new one in Kuala Lumpur that Asia Digital Engineering part of the Capital A AirAsia group is going to launch. And I was just talking to the CEO a little bit earlier today and he said that they're hoping to get the certification from Malaysia soon, but that school could be opening the next month or two. So again, some of those basic things you need to fuel all of this growth that we've been talking about. Joe, how about you? Any surprises?

Joe Anselmo: I had one surprise, and it's not unique to just this event, but it's something I've been seeing in the past few months, which we're talking about aircraft fleets that are going to double and nobody is talking about sustainability anymore. It's like the topic just disappeared, it's vanished. I heard it mentioned maybe once or twice here, it's the same in North America and Europe. It was, you go two, three years back and people were bending over backwards to brag about how sustainable they were and it just seems to have gone away, James.

James Pozzi: Yeah, interesting. You mentioned that last week I was along with Lee Ann was at Aero Engine Europe in Hamburg. And I guess the walk back from sustainability and some of those initiatives that were really driving decision-making or strategies that came up a few times. And I think someone remarked that we are now in a new reality where for several reasons sustainability is not really at the front of the agenda anymore in Europe. So I think maybe Europe, certainly in aviation was one of the leading regions on that drive that mission. But yes, things have changed definitely I think in the last year or so I'd say. Would you agree, Lee Ann?

Lee Ann Shay: I'd agree.

Joe Anselmo: Okay. Well guys, we're just about out of time.

Lee Ann Shay: Oh, can I plug one more thing? I keep interrupting, sorry. Absolutely. Okay, so next year we'll be back in Singapore and I have the dates for us. I should have it right here. Okay. The next MRO Asia-Pacific will be September 22nd through 24th. And for those of you who will be going to Europe, the next MRO Europe is going to be October 14th through the 16th in London.

Joe Anselmo: And I'll be at MRO Americas. I just jumped ahead of myself a little bit.

Lee Ann Shay: That would be in April. So yeah, he will be back at Americas. 

James Pozzi: I'll be in London.

Joe Anselmo: But Lee Ann, James, thank you. Thank you for your time. Thank you to our live audience for your time and your participation. And a thanks to our listening audience. Don't miss future episodes of the MRO Podcast by subscribing wherever you listen. A one last request. If you're listening in Apple Podcasts, please consider leaving us a star rating or review. Thank you for your time and have a great week.