Podcast: MRO Capacity: Will Finding A Slot Get Easier This Year?

Listen in as Aviation Week Network editors ask a critical question: Will the capacity crunch ease this year? Airframe and engine maintenance slots have been tough to book since travel rebounded and supply chain pains strain turnaround times. 

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Lee Ann Shay:

Welcome to this latest MRO podcast. I'm Lee Ann Shay, Aviation Week's Executive Editor for MRO and Business Aviation. And I'm here with my colleague James Pozzi, who is Aviation Week's MRO Editor for the Virginia region. In this episode, we're going to be talking about MRO capacity, which is the cover story for inside MRO's February issue. James, thank you for joining me. You did a lot of research for your MRO capacity cover story in this issue. What insights did you glean about airframe capacity for 2024?

James Pozzi:

Well, I think the background to it, firstly is quite positive in the sense there's a lot of demand for work, for maintenance, and everything related to that. Traffic, of course, from a passenger perspective is increasing since over the last couple of years. Airline capacity is ascending. The latest figures from IATA published recently a testament to that. So air travel is coming back, I think, stronger than people thought. But of course this puts a lot of pressures, I guess, on the MRO industry to meet the demand for maintaining these aircraft, particularly airframe MRO. Slot availability is a real challenge. Airlines, especially ones that maybe have a bit of flexibility and are looking for maintenance, maybe a shorter notice than booking ahead for the next winter season, for example, for base maintenance, they're the ones that are finding it particularly challenging in case they need those slots at relatively short notice.

So looking at some of the data, and this is particularly for heavier C&D checks, which are coming back strongly compared to previous years. So with using our Aviation Week fleet and MRO forecast data, there's healthy demand for both of these maintenance tasks. So the C checks typically these can take, sorry, a C check, seven to 14 days or longer depending on the aircraft type. That's just some numbers there to illustrate that, but there's going to be quite a strong level of those this year. I think around approximately 10,206 C checks are anticipated in 2024 by Aviation Week, whereas heavier D checks, which depending on the aircraft of course, generally occur in a timeframe of six to 10 years. As I said, it's all dependent on the aircraft. Of course, with new aircraft, less maintenance intensive and with longer intervals between C checks, that's expected to be robust.

2,643 events are forecast this year. So demand is there. It's very strong. But of course, as mentioned before, capacity is a tricky one. The industry is still recovering in some regards, not from a demand sense, I think, or it is, because we are near to eclipsing 2019 levels. But issues like lagging repair times due to a shortage of parts and material supply, of course, the age-old issue of workforce shortages, and of course sluggish OEM production rates are really starting to be felt in the market, and that's not just for kind of airframe production, but of course engines as well. They are left exposed to the airframe OEM production rates. That puts pressure, of course on the engine manufacturers too, to meet those demands. So yeah, a perfect storm really in many ways, a lot of factors all contributing to this. But in summary, demand is very strong and that's great, but capacity in order to service these aircraft, these engines, that's some way short still. That's fair to say. That's the consensus of a lot of people in the industry today.

Lee Ann Shay:

Thank you for those points. I think it's interesting to talk about lead times and contracts. I think airlines are much more willing to sign longer term contracts for engine maintenance, than they are for airframe maintenance. Given just the supply and demand issues that you just talked about, are you hearing that airlines are willing to sign longer deals?

James Pozzi:

Yeah, I think that's certainly something they're prepared to do. One OEM told me that at the moment they're PBH, power by the hour, contracts versus time and material. They're about a 50-50 split, but over time he expects that to raise to 70-30 in favor of PBH. So there's definitely I think a preference from that for airlines at the moment and having that cover paying for the time on wing. And yeah, I think airlines are, a lot of them, I think the advantage now is a lot of airlines have planned their future fleets. They know how they're going to look over the next five years at least, and now they can undertake the maintenance arrangements and contracts to do that. We're seeing a lot of, every week now we're seeing a flow of long-term agreements. As you mentioned, there's five years, for example, for airframe maintenance on specific aircraft, and I think that's probably what airlines would go for, having that long-term coverage and I guess that certainty in place of the timeframe for repairs, the volume of repairs over that contract length. So yeah, certainly that's something that will continue, no doubt about that.

Lee Ann Shay:

And frankly, I've also been hearing that airlines just can't have all of their heavy maintenance done during what used to be the slower winter period in Europe and in the US. So some of that maintenance is going to have to go into the spring. They're still trying to keep it out of their peak flying season, obviously, but there's a certain dynamic that's going on just from the timing. And I do think that airlines are a little bit more willing to secure a little bit longer time, because the slots just, they aren't available right now. A lot of MROs are full for 2024, some of them are booked out the 2025, so they have to do a little bit more forward planning.

And inside MRO, we also in this issue note that AAR, which has about 50 lines of 737 maintenance lines, they're signing multi-year agreements. And they recently partnered with two customers to commit to additional nose-to-tail lines, which is leading AAR to expand both its Miami and Oklahoma City facilities. We've got a story in there about Coopesa. Coopesa in Costa Rica has had plans to modernize its facilities, but it looks like this time it's actually really going forward, and they hope they plan to do some ground prep for the two new hangars in San Jose, Costa Rica this year. Finish those two new hangars and when they do, that will about double its capacity.

James Pozzi:

Yeah, Latin America's region's interesting for capacity. And the projects you mentioned there, of course over the last year I saw FL Technics, for example, are planning to set up a facility in the next few years in the Dominican Republic. So yeah, it seems like capacity requirements seem to be in every region of the world. Someone is either building new facilities or planning to lease hangars if they become available. Because if a hanger becomes available on the market often for lease, that'll be snapped up very quickly. There's always an MRO provider willing to take that extra capacity and space in the form of a hanger. So there could be a lot of interesting building projects going on over the next five to 10 years, no doubt about it.

Lee Ann Shay:

Yeah, I agree. And especially, you know, narrow bodies, you want to keep your narrow body maintenance, having maintenance going to closer to home with the narrow body fleet continuing to increase, there's definitely a demand. So I agree there's going to be some supply that needs to change. Let's switch gears to engine capacity. Are slots getting any easier to find?

James Pozzi:

I wouldn't say so at all. That's a tricky one. And I think as with so many issues currently in the market, often it's interlinked between MRO's airlines who are the engine customers, and of course the OEMs. Now in the engine space, the news has been dominated I guess over the last few years by the ongoing issues with the CFM International Leap engine. Of course, the new generation narrow body to succeed long term. The CFM56, which obviously was such stalwart reliable engine for the manufacturer. And of course the Pratt & Whitney Geared Turbo fan, which is the successor to the VT500 engine. I mean, let's start with the GTF then. So I think the figure at the moment as it stands is 350 GTF-powered A320 Neo aircraft are going to be grounded from now through to 2026, to facilitate inspection work. And that's a durability issue, of course, not a technical one.

That's already begun, that started sort of the end of last year, and that is going to put pressure, I've heard from a couple of shops that is going to put a bit of capacity pressure on them. I mean, they're ready for it, they've adjusted accordingly, and they're kind of taking on some of that work. But that is going to feed capacity, and of course could have an impact on other shop visits that are needed for engines. We're thinking about, amazingly, the stats I heard about a year ago was that 30%, for example, of VT500 engines haven't undergone their first shop visit yet, which is incredible really, when you consider the longevity and lifespan of that program. So yeah, this is going to add a bit more pressure on, I think. Same with the CFM Leap, those fixes are kind of rolled out, as well. Again, another durability issue.

In a strange way, although none of this has been positive for the manufacturers having to deal with these issues and the industry being disrupted, but I think the long-term optimism is there, because they're durability issues and not technical ones. I think that would be a totally different problem if it was a technical issue on those engines. So there is confidence there that the manufacturers will get it right and work with their MRO network, and their in-house shops to have that fixed. I think we could see definitely more partners for OEM programs and MRO shops adding capability, and of course expansions. We're hearing a lot about airframe maintenance, and the need for base maintenance shops and capacity space, but companies with the engine capabilities will likely do the same as well. ST Engineering, in addition to expanding its airframe MRO, it's kind of investing in areas such as robotics and automation, as well as growing its engine capacity. So looking into technology to improve efficiencies and having more space for these engine types.

And of course the Eagle Services division of Pratt Whitney in Singapore, that's expanding of course to meet some of these engine needs. So maybe expect a bit more of that. I think it's worth attention, sorry, paying attention to the wide body segment as well. That's recovering quite strongly now. That was pretty sluggish just after the pandemic four years ago. And of course that's dominated mostly by Rolls-Royce and GE Aerospace. And there's a steady volume of work anticipated there with I think just more than 2,400 overhauls expected this year by Aviation Week data.

And of course the demand of that is going to increase by the looks of it. So more companies are looking to grow their capacity in wide body MRO. An example of that, who I spoke to recently was N3 Engine Overhaul Services. Of course they're a Rolls-Royce, Lufthansa joint venture, specializing in trend repairs on those engines, and they're looking to grow their operation in Arnstadt, Germany. And they gave some good figures about the illustration of how much they're growing. I think they did 160 trend engines last year for overhaul, and this is going to go up to 200 this year, and their plan long term is to ramp up to 250 annually. So that really gives an illustration of where demand's headed, not just for the trend, but I guess also the wide body engine market too. So that's recovering and yeah, the market definitely needs to, or the industry, sorry, needs to adjust accordingly to meet that demand.

Lee Ann Shay:

Thank you for those insights too. And when you were talking about wide body and the engine maintenance and technology, I thought one thing that is different in this cycle than I think like the other boom cycle a little over a decade ago is the technology piece. During the pandemic, and even a little bit before then, MROs were really investing in new technology. The engine OEMs I think have really led the space in predictive preventive maintenance, using data to signal when something is going to fail before it fails. And so I think the MRO, I personally believe that MROs are not just going to build hangers willy-nilly to meet this demand. There's going to be new hangers, but I also think that new technology to make both the workforce and hangars more efficient, get those, figure out which components need to be, have the long lead time, get those components in for repair maybe before even the airframes. So there's just a lot of stuff I think that could make this next cycle a lot more efficient. Do you agree?

James Pozzi:

Yeah, absolutely. And I think that applies to hardware and software. You mentioned some of the tools that are being rolled out. I know recently one of, we reported on some stories about the potential of artificial intelligence in MRO. That's an interesting one that I'm currently trying to get my head around and learn a bit more about, and see how that could be applied. But yeah, digitalization, I mean, there's always projects going on, whether it's a new software rollout such as an ERP system or maintenance prediction tools, that particularly I think is seen as key for the future of the industry. And it was something that a lot of people were talking about several years ago and it was in their plans. But now I think people are really doing that, embracing the digitalization and undergoing these projects as well. And it'll be interesting to see really how it develops over time.

I think when the accusations towards aviation has always been that maybe the processes for things like technology roll-outs is pretty slow in comparison to other industries. There's a grain of truth in that, but maybe a bit unfair in some aspects too. So it'd be interesting to see where we are, say five years from now, and how much of this technology that people are looking at and developing, and trialing, and investing in ultimately. It'd be interesting to see where we are with that and what the adoption rates are like, because ultimately that is the key. As the fleet modernizes, the global fleet and the new aircraft, highly technological, computer driven software, everything on that side. It'd be interesting how the MRO industry responds or plays its own role in modernizing its operations and everything too. So yeah, definitely something to keep an eye on and I'm sure we'll be reporting on a lot over the next few years.

Lee Ann Shay:

Absolutely. I think we should schedule a podcast not for five years, but in three years. So let's make that happen, because I agree with you, but there's so much to talk about. And we've got MRO Latin, Aero Engines Americas, and MRO Middle East coming up, and a lot of these topics I think are going to be great conversation fodder over the next bit. James, thank you so much for making the time to talk today. That's a wrap for this podcast. And thank you all for listening, and don't miss the next episode by subscribing to the MRO Podcast. And one last request. If you're listening an Apple Podcast, would like to support us, please leave us a star rating or write a review. Thanks a bunch. Until next time, be well.

Lee Ann Shay

As executive editor of MRO and business aviation, Lee Ann Shay directs Aviation Week's coverage of maintenance, repair and overhaul (MRO), including Inside MRO, and business aviation, including BCA.

James Pozzi

As Aviation Week's MRO Editor EMEA, James Pozzi covers the latest industry news from the European region and beyond. He also writes in-depth features on the commercial aftermarket for Inside MRO.