This week’s MRO Europe event will coincide with a challenging time for the region’s commercial aftermarket. James Pozzi and Lindsay Bjerregaard discuss some of these challenges and preview some of the talking points from the upcoming event.
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Rush Transcript
Lindsay Bjerregaard:
Welcome to the latest MRO podcast from Aviation Week. I am Lindsay Bjerregaard, Aviation Week's managing editor for MRO. And today we're going to preview the upcoming MRO Europe event, which takes place in London from October 18th through 20th. Joining me today is James Pozzi, Aviation Week's MRO editor for the EMEA regions. He heads up our coverage in Europe and he will also be attending the event next week. So James, welcome.
James Pozzi:
Hi Lindsay.
Lindsay Bjerregaard:
Great. Well we are going to be expecting a very busy show floor this year. There are going to be more than 450 exhibitors from across the aftermarket and there will be a few interesting features on the show floor as well. So we're going to have a Hangar Equipment Zone, as well as an EASA Services Zone, which will feature Part 21, Part 147 and Part M specialists. There will also be a variety of pavilions for regional and country aviation clusters, such as France and the Netherlands. And then in addition to our Go Live theater, we're also going to have a new feature called the Zone Theater, where exhibitors will be giving short presentations about new MRO products and solutions. But with all that said, let's get into some of the trending topics we expect to see discussed next week. Europe is the world's second largest commercial aftermarket, but it has seen a very slow recovery from COVID-19 in the past two and a half years. So James, as we near the end of 2022, what do you make of the overall health of Europe's MRO industry?
James Pozzi:
Well, yeah, Lindsay, it's fair to say that when placed in comparison to 2021 which was, there's no way of sugarcoating it really, was a dire year for the industry off the back of 2020. 2022 was always going to be recovering from a low base. I guess that was a positive in itself. Europe has finally started to move past COVID-19 and cross-border travel has definitely picked up this year. Aircraft utilization rates over the summer months were encouraging. I've seen the data up until the end of August. Unsurprisingly, a lot of this has been led by narrowbody aircraft. I think they're into the Boeing 737 and Airbus A380 aircraft, we'll no doubt get a clear indication of how well those summer months played out very soon when the data comes through for encompassing August and then September as well. So maintenance activity has also fared better as a result of this increased flying activity. Not just in line maintenance checks, which is an obvious one I guess for picking up when there's more aircraft flying, but also the return of more extensive planned work scopes related to base maintenance.
James Pozzi:
Now engine MRO work, which of course was put off in large volumes over the last couple of years, it's been one of the characterizing trends I guess of certainly of the engine MRO market. The airline deferring these checks, that's picked up a bit this year. We're thinking restoration work and full overhaul check work as well. They're all picking up but it is still somewhere off the pre-crisis levels, it's fair to say. However, despite the moderately better climate, there's obvious challenges ahead and these could be long term issues. Turnaround times are still far too long in Europe; we're seeing that everywhere across the continent, cost rises are impacting on supply chain given several factors. One, including the close proximity to the war in Ukraine from the Russia invasion.
James Pozzi:
And the past few years have also seen a mini exodus from the industry, in terms of skilled labor. And the skilled labor market now varies seemingly from country to country. Before you could characterize it as a European trend, a western Europe trend, and maybe an Eastern Europe trend. But now what is happening in Spain might be different to what is happening in the UK. Conversely, what is happening in Poland is completely different to what is happening in Bulgaria so it seems. So yeah, new trends have emerged there, but certainly a lot of challenges around the manpower issue as well.
Lindsay Bjerregaard:
Great. So James, you'd mentioned supply chain issues. Could you tell us a little bit more about how supply chain issues are impacting Europe?
James Pozzi:
Yeah, of course. Much of it is centered on pricing, interest rates and inflation costs are rising from small percentages to double figures in some cases. This has led to material costs increasing as a start, which is adding to already existing problems related to shortages in supply of parts and materials. And that is having an effect right across the kind of ecosystem of the aviation industry. We mentioned Russia before, one of the big impacts there on aviation in Europe was, and globally I think, was Russia was a large producer and exporter of titanium, which of course is prominent in all kinds of aircraft and engines, et cetera. And the titanium market took a massive hit at the height of the Russian invasion of Ukraine.
James Pozzi:
So we've seen obviously over the course of this year OEMs commit to kind of reducing their reliance on that source for materials this year. And that's something that they're kind of still working on. For some airframes or engines, shops are just finding it difficult to get the parts they need quickly and this is expected to get better in the near term. The expectation is that parts and even traditionally maybe more pleasing price wise parts, such as USM, or material costs are expected to rise on those even into next year. At the moment, the expectation is 2023, it will be when these cost increases really start to bite and also to factor in as well across the supply chain. Logistics costs there increasing, transportation either by road or by air or by boats. There's more cost involved there. And of course energy prices, I mean we've seen those spike to ridiculous levels in Europe across the continent. So as mentioned, turnaround times are still too long with 100 days plus still being regularly seen across the continent as a timeframe.
James Pozzi:
However, these are smoothing over somewhat, especially in comparison to some of the kind of horror figures we heard in the first quarter of 2022 and in the latter parts of 2021 when they were just doubling in size typically or more and some really, really long turnaround times happening there. I've spoken recently to a couple of OEMs, they are still unhappy with the average times they're currently seeing and I know that is firsthand information, but they are vowing to kind of really focus on reducing those turnaround times or playing their part in doing so in the near future. So they'll be looking for kind of optimistically to 2023 in order to achieve that. But yeah, there's a lot of challenges and a lot going on around the supply chain at the moment, it's fair to say.
Lindsay Bjerregaard:
Thanks James. Well of course our conference runs alongside the exhibition at MRO Europe. I'll be moderating Thursday's Action On! panel about the Labor Shortage and Workforce Pipeline. You mentioned some of those issues earlier. We'll have speakers from Aer Lingus, Magnetic MRO and Vallair, all of which have had some interesting workforce developments and initiatives this year. James, which panels will you be moderating?
James Pozzi:
Yeah, well there's a couple coming up at the show. On the first day, on that Tuesday afternoon when the conference kicks off, I'll be moderating the Unpopular Opinions panel Tuesday afternoon at 4:00 PM, where I'll be joined by senior figures from ICF International, Atitech the Italian MRO and LOT Polish Airlines, one of the sort of major airlines in Europe. So that'll be a really nice balance of market dynamics. We've also got the MRO perspective and the view of an airline maintenance division, who get to see more than one side of things. This follows the unveiling of the new Aviation Week Commercial Forecast just prior to the panel. So it'll be interesting to see what data is produced there and how my panel reacts to this.
James Pozzi:
Often forecasts do paint pictures of hope for the future and give people a lot to sort of think on. But there is sure to be an air of caution optimism as well, I think, from my panel, from what I've gathered so far in our preparation calls. They're very aware of the challenges facing Europe at the moment. And as mentioned before, I think on the continent, the aviation industry is in a better state than it was last year, but there's no doubt in the challenges lying ahead for it. On day two as well, Wednesday morning, I'll be moderating an airline focused panel with senior maintenance leaders from Wizz Air, Vueling and EasyJet. So a real blockbuster line up there because it's essentially among three of the biggest low-cost carriers in Europe.
James Pozzi:
This will be interesting because airlines in Europe have been very up against it as well, it's no surprise to hear. While revenues are increasing and more people are flying, the staff shortages are impacting all areas of their operation. From the technical side to even the third party baggage handlers, you see airports that will typically work with the airlines to get bags off flights. There's been shortages there, areas such as security at the airport as well. And that's all having an impact on the airlines and their operations too.
James Pozzi:
Flight cancellations in Europe have been prominent all of this year. I mean we've seen a lot of that happening close to home. In the UK, where I'm based, some of the airports here have really kind of struggles with flight schedules. I myself have fallen victim to a couple of them actually for European flights this year. So it's a tough environment right now. And we'll be looking at how these airlines are strategizing in the face of these challenges and ultimately whether or not they see these challenges subsiding eventually and where does their optimism lie. And maybe going into next year and maybe that next summer when another big few months are expected.
Lindsay Bjerregaard:
Great. Well both of those panels sound really fantastic. I'm particularly looking forward to the Unpopular Opinion panel. And speaking of those travel issues with flight cancellations, I'm keeping my fingers crossed that our U.S.-based team will not experience that, but I guess we will see. And unfortunately that is all the time we have today, so thank you, James, for joining us.
James Pozzi:
Yeah, thank you Lindsay.
Lindsay Bjerregaard:
And then join us again in two weeks for the next MRO Podcast. Make sure you don't miss it by subscribing to Aviation Week's MRO Podcast on Apple Podcasts, Google Podcasts, Amazon, Audible and Spotify.
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