Listen in as Aviation Week's MRO team report on what they're picking up from the floor at MRO Americas 2023 in Atlanta.

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Rush Transcript

Lee Ann Shay:

Welcome to the latest MRO podcast. I'm Lee Ann Shay with my Aviation Week colleagues, Lindsay Bjerregaard, James Pozzi, Sean Broderick and Christine Boynton. We're here at MRO Americas in Atlanta where more than 15,000 people are here. It's been a very robust show so far. Let's talk about our observations. Christine, you've been covering the airlines. What big news are you hearing? What are your observations?

Christine Boynton:

Well, there's been plenty of talk about strong demand and a struggle to keep up with it because of labor shortages, because of supply and production constraints. But one common theme that has emerged from all the airlines here at the show is really the importance of strong partnerships with suppliers of maintenance providers. From a cargo perspective, Atlas Air spoke about dealing with the velocity of material movement as being challenging, and what they found was they needed more real-time information and visibility to information so that communications to suppliers became real critical and to, quote, "help them thrive."

Alaska Airlines spoke about the struggle with logistics challenges coming out of the pandemic, and now in their recovery, the material challenges, the labor shortages. And what they've done is they've partnered with a supply base to understand their challenges, to really dig deep into their supply chain further upstream to their tier two, three and four suppliers and understand what their challenges are. Having transparent communications, seeing where they can work together on solving their problems, those are all things they pointed to.

For CommuteAir and Republic, too, they talked about maintenance networks facing some serious attrition and trying to partner with them, sharing any feedback on service issues that might come along with a newer workforce and sharing what they find to put it back into their training, working through those kinds of technical knowledge issues together.

Lee Ann Shay:

I agree. There's been a lot of workforce and supply chain discussions, challenges. I mean, most people seem to think that the supply chain problems are not going to be solved this year, maybe not even next year. The traveling demand is there, but supply chain issues are very much real. What else are people hearing?

Lindsay Bjerregaard

Speaking of workforce, I covered two of the different workforce panels. One of the things that I thought was interesting, aside from the typical conversation that comes up with workforce in terms of let's get them younger, let's go into high schools and middle schools, let's do apprenticeship programs to get people into the business, there was some discussion this time around about bringing in international talent, the importance of that, and then the issues with visas and immigration policies, particularly for the US. One person from AAR said that it's much easier for them to hire internationally at their Canadian facilities than it is here in the US.

And then this morning there was a session about the changes that have come to Part 147 technician training curriculum. And the takeaways I came away from that panel with was that the changes to that have provided a lot more flexibility to schools. They can add new technologies, they can shape their MRO curriculum based on what the industry is telling them that they want. They also have flexibility on where they train people, so it doesn't just have to be at their one specific campus. They can work with high school partners through nonprofits like Choose Aerospace. They can do on-the-job training at MRO partner facilities. They can increase the number of their campus locations. And they also mentioned that it's easier for them to find instructors because they don't necessarily have to be A&P certified mechanics. They could be a specialist in something specific like composites or structures and come in and teach that specific class. So they're hoping that that's going to help improve the technician training in the pipeline, and hopefully that will be the case.

Lee Ann Shay:

That sounds good. And that will help the supply chain because part of the supply chain is really, there's just not enough people to do the work, especially when it comes to repairs. So even if you can find a new person, most of the time they don't have the experience necessary or the training that is required to just jump in and be super productive. Sean?

Sean Broderick:

Along the supply chain lines, one of the interesting themes I think that's emerging is the challenges with workforce are not going away anytime soon. So the emphasis on doing things more efficiently is becoming... Again, airlines and MRO shops always want to do things as efficiently as possible. But the emphasis now, again with Christine's point on partnerships, important that MROs are invested in doing things way more efficiently than they ever did before. A couple of examples, a very interesting Go Live session from GE where they talked about the repair technology they are developing to do things more quickly. So taking the human out of inspections where they can, weldings where they can to drive more efficiency into the process.

And another interesting thing, and sort of a related theme, the repair development on the new generation engines. I would've thought that if you think about how quickly your repairs are developed based on how long an engine's been in service, the number of months it enters into service, you would think the new ones would have fewer repairs than the older ones because of advanced technology and reliability and all that stuff. It's actually the complete opposite. The newer engines, they're developing repairs much more quickly because of the higher technologies that are in the engines that require more tweaks along the way to make sure that they're running at the efficient level that their customers have demanded.

And another thing that's driving it, less so than the technology, is the desire for customers to want to have repairs versus new planes. GE is a big proponent of…all the engine OEMs really, are driving repairs through their own shops, their own processes. But the pace, I mean just a piece of data that was thrown on the chart, the LEAP-1A is about 120 months, I think, into service life roughly. You got about 1,000 repairs to [inaudible 00:06:07]. For the engine it replaced, the CFM56-5C, they didn't hit that level until about 240, 250 months after entering into service. So the rate at which GE and the other OEMs develop in repairs is amazing to me. Again, it's part of the process of efficiency and cost of ownership.

Lee Ann Shay

Just a couple with that, I've heard a lot more about PMA and DER repairs. Again, it goes back to the supply chain problems, but airlines are much more apt to use PMAs and DERs just to get the part repaired and back flying.

Sean Broderick:

Still tough in the engine space. In fact, there was one of the panels I was in, it came up, and doesn't it come up in everybody's panel, pretty much, PMA. And one airline said, "Look, we would love to use it and we would use it, but part of the problem we have is we have 70% of our fleet is owned and 30% is leased. We can track where those parts are, but it's a nightmare for our maintenance people to say, 'You got to use a repaired original part on that engine, maybe use a PMA on that engine.'" It's not worth it a lot of times for them on the engines, at least in the hot section. Everywhere else on the airplane though, it's definitely becoming more accepted. And the airlines are pushing more for it, I mean every big airline out there at least.

Lee Ann Shay:

Yeah. And here's your point, I agree, the engines is a different beast and also depends on whether it's a new aircraft or an old aircraft, it's owned or leased. In the cargo panel today they were talking about, it was Amerijet, talking about their fleet and are they going to keep the older, it's converted 767 in a few years, what do they do? They maybe look at the A330s. And part of the equation involves the access to parts. And as some of these older aircraft keep flying in today's environment, that becomes a real sticky point.

Sean Broderick:

Sure.

Lee Ann Shay:

So, James, what have been some of your key observations?

James Pozzi:

Well, I'll get onto a topic that I want to speak to about in depth shortly, and that's China and the MRO market there, a very fascinating landscape at the moment. But some of the takeaways so far in this region, very high yield business for airlines, of course. Demand is certainly there in abundance from the market, but North America perhaps could eventually find supply, could possibly outstrip demand over time because there are issues, obviously meeting that demand. A panel yesterday believes that we will continue to see via the equity investment in North America's aftermarket and see outside the region, of course. P has traditionally liked MRO and the returns it can bring, providing it is the right fit. There's been a couple of cases, maybe the fit hasn't been so good, but generally it seems that the panel yesterday on that discussion believes that there's going to be more of that in the next couple of years.

So yes, onto China anyway. So obviously the economy's experienced a downturn in the past year or so since the country regressed back into COVID restrictions, following spiking cases nationally. Long term, there may be a shift in the supply chain in China, but that's not totally certain. What is certain is that China's MRO market is no longer about cost and selling on low prices and low cost services. There's a lot of design and manufacturing capability there now, and that's continuing to increase. Quality standards interestingly, are also rising, and they are able to meet industry expectations in many market segments.

Now, a really fascinating angle for that as well is the role of the U.S. and the relationship between China and the USA long term. One of the panelists earlier stated that the U.S. still has 25% tariffs on Chinese aerospace goods. So that will impede Chinese participation in the supply chain. He also referenced a possible presidential candidate stating about cutting exports China in some long term, which he didn't think would be a very wise decision, but that's certainly very, very interesting from a geopolitical standpoint of course.

He also said that if the USA backs away somewhat, then other countries will certainly be more than willing to step in or do business with China. So that's an interesting conundrum there really. But we've recently seen the market open up a bit in China too, for USM, which is interesting because that certainly wasn't the case a few years ago. China seems to be driven a lot by patriotism, whether it's the airlines or other industry companies. And China ultimately wants to produce its own aerospace equipment and materials. Obviously we've seen this to some degree with the Comac C919 aircraft. But as one of the analysts stated, they would certainly like to build their own engines eventually and everything else on the aircraft.

He also pointed out that last year's engine joint venture with Rolls-Royce and Air China is certainly a major feather in the cap for its widebody engine market in the country. But despite its ultimate goal to be the dominant player in aerospace in China, and of course probably outside of China too, he does actually see more joint ventures still occurring with Western companies who are obviously keen to do business there. And he pointed out the component segment perhaps as being one part of the market for those joint ventures. That's what's going on with China.

Lee Ann Shay:

Yeah. We haven't talked about the exhibition, the biggest exhibition in the history of MRO Americas. One of the coolest things I've seen was the Lego engine, the LEAP engine that Lufthansa Technik built. It weighs 992 pounds, it rotates, it’s 60% scale of a real LEAP engine. Just pretty cool. Anybody witness any other new things that really stuck out?

Sean Broderick:

Scott Colter and his race car. That's all I need to see. No, being fair, the best thing on the show floor doesn't change year to year. It's always the technician competition. It is fascinating to watch them compete. It's fascinating to watch them just to do the work that they do to understand, as a non-A&P guy here, I try to understand as much as possible about the work that is done and the things we cover. No better way to see examples of blades being removed or tires being checked, and to watch the competition. Every year it's... Really, it's a cool enough event, it could stand on its own and be really cool. I think we benefit more from having them here than they benefit from having us here. That's my opinion.

Lindsay Bjerregaard:

And I mean, I would certainly agree with that opinion. I think the Aerospace Maintenance Competition is one of the coolest things we have here. With all the talk about workforce and trying to increase workforce diversity, I think one of the most heartening things when you go and you watch that competition is you see a lot of that diversity. Over the years, there have been a lot more teams that are sponsored that are all female teams. I think this year there was an airline that sponsored an all-female student team, and you're just seeing a lot more fresh new faces and it's just great to see.

Lee Ann Shay:

Absolutely. And 84 different teams participating in this year's competition. Yeah, and I mean, they're from schools, MROs, airlines, the military.

Lindsay Bjerregaard

They even have commercial space teams there.

Lee Ann Shay:

I didn't know. The Aerospace Maintenance Competition is fantastic and it keeps expanding and that's a good thing. Well, thank you all for participating. We could go on and on because it has been a really great show so far. But don't miss the next episode of our podcast by subscribing wherever you listen to the podcasts. And one last request. If you're listening in Apple Podcasts and want to support us, leave us a star rating or write a review. Thank you so much.