Covid 19 impact did not spare the commercial aircraft aftermarket parts sector. For instance, Airbus SAS deliveries dropped from 571 aircraft in 2019, to 341 aircraft in 2020. Globally one saw 40% of aircraft deliveries negatively impacted. This naturally had a chain reaction across MRO and commercial spare parts or aftermarket parts businesses, reflected by the sharp reduction in the demand for the above activities.
The good news is that the global aircraft aftermarket parts market is projected to grow from USD 31.22 billion in 2021 to USD 47.33 billion in 2028 at a CAGR of 6.12% in the forecast period. This rise in CAGR, can be attributed to a buoyant market, spurring demand and growth to return to pre-pandemic levels.
Driving this growth will be the instance of an increasing number of retired aircraft and the growing demand for MRO facilities. Importantly, businesses have adopted newer ways in their working processes like introducing use and analysis of Big Data and Digitization. Improvement from these changes in the aftermarket parts’ operational processes is expected to result in growth.
LEVARAGING BIG DATA & DIGITISATION
Demand for commercial aircraft spares/aftermarket parts has brought into sharp focus, accessibility and availability of parts. To circumvent this challenge, spares and parts companies have been quick to leverage advanced technology like use of Big Data and Digitisation, as mentioned earlier. This allows for implementation of cost-effective methods like predictive maintenance, especially when the supply chain capabilities keep spreading across a larger geographical expanse.
Collection of real time data and analysis thereof from Next-Generation aircraft became a reality because of the advance sensors fitted on these new aircraft. Again, data culled from the aircraft via its sensors, is being applied to use for predictive maintenance algorithms and creating processes.
Digitisation of the entire MRO process improves visibility of spares aftermarkets and systems. More importantly, big data are aiding companies to gain better understanding of uncertainties that abound the aviation business and aircraft order fluctuations, particularly. Now, better informed, logistics and supply chain providers can make strategic adjustments followed by necessary actions. Some of these positive steps towards ease of operations, have given the parts aftermarket business a healthy boost.
MRO DEMAND TO LEAD AFTERMARKET PARTS MARKET GROWTH
The MRO parts segment is expected to showcase considerable growth during the forecast period. The growth is due to the rising next-generation aircraft and their growing maintenance needs. Airbus SAS expects an increase in passenger fleet to double from 21,000 aircraft in 2019, to a whopping 45,000 by 2035. Such will be the scale of operations in the MRO and aftermarket spares spaces, going forward.
Again, in the near future, Airbus SAS estimates a 7200 plus demand for commercial aircraft over the next two decades. MRO services and commercial aircraft spare parts are expected to see a healthy rise mainly from the Asian countries.
Globally, the total MRO spend will see a jump from USD 81.8 in 2019, to USD 115.9 billion by 2029! Such expenditures will be seen mainly towards servicing and maintenance of engine and airframe parts.
Demonstrated here is an example of the importance and requirement of aircraft components manufacturing, given the demand. A 10- year agreement was concluded between GE Aviation and Barnes Aerospace for manufacturing LEAP engine components, in September 2020 during the pandemic years. Growth opportunity here.
GROWTH OF USED SERVICABLE MATERIAL (USM)
The pandemic and its negative impact have compelled airlines to resize their fleets by considering early retirement of aircraft. Thus, the commercial aircraft disassembly, dismantling, and recycling activity – an industry of its own, is growing steadily since 2020. This is the Used Serviceable Materials (USM) segment of the aerospace business.
For non-OEM (Original Equipment Manufacturers) MROs, the need to contain costs and better competitiveness will be even more important post COVID. Gaining access to USM markets can help reduce prices and/or improve margins on flying hour-based contracts. Better availability of USMs can at times, improve turnaround times and responsiveness, and it’s not always about just costs.
Several aircraft aftermarket parts providers find it cost effective to use USM parts other than costlier aircraft aftermarket parts. Thus, the increasing demand for USM parts will significantly contribute to the aviation parts market growth. Especially now, with airlines undergoing fleet rationalisation, they will try to derive maximum value out of using USM parts vis-à-vis fleets that are no longer economically feasible to operate but still do have viable life in them. The Boeing 777s and the Airbus A330s fleets are examples of this.
As (pent up) travel picks up, the demand in the USM parts business is expected to grow significantly at 68 percent per annum through 2022, with market forecast to hover around a whopping USD 7.9 billion.
EFFECTIVE COMMUNICATIONS AND INTEGRATION ESSENTIAL FOR OVERALL GROWTH
The airlines reach out to aftermarket parts and MRO service providers for their scheduled maintenance services. To deliver efficiency and timely service, both the MRO and aftermarket parts entities must communicate effectively, as also have well-integrated processes. This need becomes more acute with several aftermarket parts entities operating from remote locations.
BIFURCATION OF TYPES OF SPARE PARTS
Rotable parts and MRO spares segmentation of the global aircraft aftermarket parts industry, is appended in the infographic below. The rotable parts and spares form the majority and has seen the highest rate of growth vis-à-vis MRO parts.
The aftermarket parts market is classified into MRO parts and rotable replacement parts
The rotable replacement parts segment is anticipated to grow at the highest CAGR during the forecast period. The demand for scheduled checks on aircraft like A checks, B checks, C checks and D checks are conducted by airlines on a on a regular basis – the more comprehensive D checks (a complete check and components and systems replacement) happen every six years. This is yet another growth area for this market.
AIRCRAFT COMPONENTS GROWING THE AFTEMARKET PARTS SECTOR
Component – wise, aircraft aftermarket parts can be spread across main sections of an aircraft like engine, airframe, interiors, cockpit systems, and others.
In terms of market share, the Interiors Systems is pegged to see the fastest growth. The engine sections are estimated to hold the largest market share, due to higher cost of maintenance parts for engines.
The airframe segment is expected to grow during the forecast period due modernization programmes by airlines. Being high-cost and time-consuming, they are generally carried out every six years.
The interior segment too is expected to see a healthy growth during the forecast period. Aircraft interior components and systems are serviced and maintained here. Focus on passenger safety and comfort increasing over the years, have compelled airlines to upgrade their aircraft systems with technologically advanced interior systems.
The cockpit segment is anticipated to see far-reaching changes in the coming years, and grow in tandem, due the emergence and incorporation of artificial intelligence (AI) and Internet of Things (IoT) based systems and components.
The landing gear, wheels, and other components maintenance and servicing form other significant areas of activities involving aftermarket parts providers and MROs.
NARROW-BODY SEGMENT TO LEAD MARKET SHARE
Narrow- body aircraft fleets will lead the market, in market share, with domestic flights and low-cost airline fleets in the Asia- Pacific and European regions taking off. This would call for aircraft maintenance and services on these aircraft types for their engines, landing gears and smaller components to ensure safety and reliability of operations.
Wide-body aircraft fleets too will see a healthy growth during the forecast period, and so will their parts and components as a result of a large number of retired aircraft. This will in turn mean a demand for services in the areas of repair or replacement of aircraft components.
The regional jet segment is buoyed by the rise in demand for business and private jets, and the maintenance services for these fleets can then be assured of a steady growth rate.
AFTERMARKET PARTS REGIONAL MARKETS OVERVIEW
The global aircraft aftermarket parts market can be segregated into North America, Europe, Asia-Pacific, and the Rest of the World.
Taking the lead in the spares and aftermarket parts globally is the North American market at USD 11.45 billion in 2020, and will continue its dominance during the forecast period over the rest of the world. With key players located in the North American region, like the Boeing Company, Collins Aerospace and other entities, and investments by MRO service providers in the aftermarket facilities in United States and Canada, the region will remain a front runner. Robust supply chain networks for MRO services amongst U.S. firms, is a boon.
The European region is expected to see exponential growth, going forward. This can be attributed to export and import policy restructuring by respective governments. Challenges like the Brexit impact, high fuel cost and global trade war may hold back growth acceleration.
The Asia-Pacific market holds maximum promise for projected growth and at the highest CAGR during the forecast period. Investments in aftermarket parts hubs in Japan, Singapore, and Australia are testimony to the rapid growth in this market.
In January 2021 for instance, saw ST Engineering award a ten-year contract to Honeywell International Inc. for component MRO and warranty repair services to all Asia-Pacific operators. This agreement covers components installed on CFM International Leap engines.
Given the vast expanse that China is, the increase in narrow-body fleet and related services, will give the country’s aftermarket parts market a significant growth trajectory.
From the countries that comprise the Rest of the World, here too one can expect similar exponential growth like most regions. Spearheading the growth story will be the big-ticket orders for next-generation aircraft augmenting fleets of carriers from United Arab Emirates, Saudi Arabia and Israel.
Apart from the above, Brazil and Argentina have shown a healthy investment appetite in the areas of aircraft aftermarket storage infrastructure, which will no doubt give a fillip to the commercial aircraft spares market, in Latin America.
THE LEADING PARTS COMPANIES
General Electric Company is the foremost company providing top-of-the-line engine-based aftermarket parts, and services. General Electric invest significantly in research and development, and innovations, and have a strong presence in Singapore and India, outside of the United States.
Other key entities in this space are The Boeing Company, Honeywell International Inc., Eaton Technologies, UTC Aerospace Systems, as also Meggitt PLC and the AJW Group of the UK.
OPTION FOR GREEN-TIME ENGINE OFFERINGS
With the demand for green-time* engine offerings, OEMs will face competition from this alternate option available to airline companies, replacing engine shop visits. According to Oliver Wyman in a recent forecast, this shift could lead to a USD 1.75 billion reduction in engine MRO spend.
Read more stories… CHANGES IN AEROSPACE LOGISTICS POST COVID 19
CONCLUSION
An efficient and effective way of planning aircraft inventories can help carriers reduce maintenance costs that normally form 13% of the total operating cost. Therefore, excellence in management of inventory is essential for regulatory, financial and operational reasons. Aircraft inventory is not just of great value, it is a very expensive business to get into. Hence, handling of spares inventory must be done on quick turnaround times to keep a check on costs. With the use of new software solutions, radio frequency identification (RFID) and automation, inventory planning can be done right up to the minutest detail and level. In fact, that’s the way to go.
*‘Green time’ engines refer to older engines with limited life remaining that have been taken from aircraft that have been retired.
