Aviation industry especially airlines bore the maximum brunt of COVID19 pandemic and most of them are still coping up with economic recovery. One of the biggest challenges before the airlines is deciding how much capacity to bring onboard and how to tackle the maintenance cost of airworthy fleet as well as parked aircraft. In our opening issue this season we discussed how the pandemic has affected the worldwide MRO sector and its recovery post-pandemic. In this article we will discuss about how airlines are dealing with the maintenance of their fleet post-pandemic and how will it affect the MRO sector worldwide.
In March 2020, as the virus hit the world, China was the first to act by parking over 300 aircraft. Gradually the rest of the countries followed suit and the size of global fleet shrank, In April 2020, the global fleet was 12,724 aircraft, 46 percent of the pre-COVID size. June 2021 dawned a new ray of hope with COVID-19 vaccines, re-opening of economies in various countries, airlines worldwide pulled over 2000 aircraft out of storage.
Airlines – Ways and Means of cost-cutting
Taking advantage of the situation many Asian carriers brought back more planes than needed, some carriers brought back older planes and cancelled the new aircraft orders to save cash. Prior to the pandemic, the order books at OEMs like Airbus and Boeing stood at a record high as aircraft demand was constantly increasing. However, as the pandemic hit, both the Airbus and Boeing announced production slowdowns of 30 to 50 percent. They now face hundreds of cancellations and delivery deferrals as cash-strapped airlines search for ways to cut costs.
This has in-turn affected the airlines MRO spendings. Most carriers are spending less and less on short-term maintenance as they are operating smaller fleets. But this is compensated by maintenance of older aircraft as they airlines are unwilling to take delivery of newer models to cut-costs.
Newer COVID-19 outbreaks in regions where the virus was believed to be contained and with large economies considering new restrictions, Airlines are faced with bigger and more bitter challenge. In the absence of meaningful passenger demand, air carriers around the world face extreme financial pressures with many already filing for bankruptcy, several simply shutting down, and all cutting back on capacity. Simultaneously, the pandemic has sent the global economy into a tail spin, with unemployment rates above 10 percent. The downturn will make the industry’s road to recovery that much harder.
Before we divulge further, let us have a look at the number of planes in and out of stock as per Oliver -Wyman predictions.
MRO spendings by Airlines
Naturally with domestic travel at the top of the list, most aircraft returning to service are the narrowbodies. Also, there have also been significantly fewer announcements on early narrowbody retirements by airlines. However, with aircraft returning to service, lets have a look at the demand. As per Oliver WymanInternational travel is not expected to match 2019 totals until mid-2023.
If we look at the MRO spendings, as per the Oliver Wyman studies, in 2020 spending on maintenance, repair, and overhaul was USD 50.3 billion, that represents 55 percent of the USD91.2 billion that was expected pre-COVID. In May, the outlook for spending was only USD42.7 billion.
The USM challenge
Apart from China, most of regions will experience a static decline in MRO spendings going ahead. Also, MRO providers are facing disruption in USM market as the retires aircraft are pulled apart for their parts. Hence it is all the more important for MRO providers to ensure reliable sources of used parts.
Access to a stable source of used parts, which are less expensive than new components, will be an advantage to MRO providers once air travel demand returns and airlines look to cut costs on operations. Because of this, MRO strategies need to focus on both supply chain resilience and fixed costs as they prepare for a long recovery period. Currently demand and prices on USM are relatively low, and it would not be surprising to see market players, such as aerospace manufacturers, buy up supply to limit their loss of revenue on new parts.
Less airworthy fleet and airlines delaying maintenance upgrades to cut costs has affected the sale of aftermarket parts and services. As this is a high-margin business, the impact of USM sale has inturn impacted the profitability of the entire MRO sector. One of the critical challenges impacting the aftermarket business is airlines taking advantage of excess aircraft to swap out parts that need repairs. Some parked planes have high running hours remaining on an engine or other high-value part before needing an overhaul. Airlines are swapping those onto aircraft currently in use, thereby deferring the maintenance. This demand erosion could lead to larger threats to the operations of smaller aftermarket providers.
Passenger to Freighter Conversion Market
The most lucrative business for OEMs and MROs in current times is the Passenger to Freighter conversion. The e-commerce boom will help aftermarket providers compensate the losses from reduced passenger flights.
Newer Airlines in the fray
Some of the best laid plans for the MROs is sprouting of newer airlines post-pandemic. Current market conditions have created an environment favourable for airline start-ups.Airlines like the ITA Airways is the new flag carrier of Italy, Breeze Airways, Eurowings, Flyr, Avelo, United Nigeria Airlines commenced their operations in 2021, post-pandemic. This served as a boon for furloughed aircraft maintenance engineers and pilots as the startups gave them an opportunity to return to full-time jobs.
The vast majority of startups are expected to focus on low-cost, short-haul models, but there are some carriers deploying low-cost long-haul services on routes where market capacity has been recently scaled back, or where other airlines have failed.
If a new airline intends to commence operations gradually with one or two aircraft on a specific route, it may not have all the required maintenance, repair and operations (MRO) capabilities in-house. This adds cost and can make operations vulnerable to the quality and availability of third-party MRO services.
Word of caution for the Airlines
Airlines need to make sure aircraft maintenance and workforce support remains top of mind as travel returns and security measures are relaxed. Pilots and other cabin crew who were furloughed need to be reactivated and, in some cases, retrained, and airlines need to adequately provision parts inventories so that they can operate efficiently. Also, post pandemic Airline hygiene is of top priority and obviously airlines can’t afford to compromise on passenger and crew safetythat extends from the cabin to the flight deck. OEMs like Boeing came up with thermal disinfection to deliver valuable tool to destroy COVID-19 on sensitive and difficult-to-reach components that protect pilots. Delta has paired with Lysol to enhance their safety standards and cleaning procedures across aircraft and at airports. In a sincere attempt at putting the passengers at ease when it comes to hygienic flight, Delta has advanced their disinfection protocols on the ground as well as air. Flight attendants are provided with Lysol Disinfecting Wipes to use on high-touch areas on our aircraft, including lavatories. ST Engineering has launched an anti-microbial coating solution with fusion resonance technology that fully meets aviation requirements. The solution called Plasma ResoShield is able to neutralise pathogens before they land on surfaces.Most of the airlines have installed High Efficiency Particulate Air (HEPA) filters on the recirculation system of its entire fleet. Duncan Aviation developed the Supplemental Type Certificates (STCs) and installation packages for Aviation Clean Air (ACA) ionization system for several aircraft. These changes will require OEMs and MROs supporting airlines for many years to come.
Read other features… MRO recovery Post Pandemic
Steps ahead for MROs
MROs across the world can use this time to improve their operations and prepare for the next growth phase. They can invest in digital initiatives, stock up their inventories and improve their product quality. Times ahead are brighter for the MRO industry as air travel picks up pace with the virus receding in darkness.
Courtesy – Oliver Wyman and Aerodynamics
