Valued at USD 40.17 billion this year (2023), this whopping figure for the Defence MRO sector will only move northwards. This is projected to reach USD 46.21 billion with a CAGR of 2.78% during the forecast period (2023 -2028)
Defence MRO Industry
Defence hardware assets include Fighter jets, transport planes, helicopters, and trainers majorly. Drones and Remotely Piloted Aircraft are incorporated into the defence sector for their capabilities in Military operations. To ensure a high degree of efficiency and airworthiness, Defence MRO service providers have their tasks cut out. They include overhaul services, inspection, replacement, defect rectification, and the embodiment of modifications in compliance with airworthiness directives and repair.
Given the stressed geopolitical environment, defence expenditure by governments across the globe is on the rise. Importantly, according to the Modor Intelligence study, the growth is attributed to an increase in procurement contracts for fighter jets, as well as substantial military modernization programs.
Given the above causes, consequently, the Defence MRO market is on a healthy trajectory, due to the rising demand for maintenance, repair, and overhaul requirements for military aircraft. Defence MRO service providers are increasingly having to cope with expansion in defence aircraft fleet, as also catering to the lifecycle extension needs of existing aircraft to derive maximum value of assets for the owners. This requires reskilling and upgrading skills and knowledge because of the high level of sophistication incorporated in modern aircraft systems. Service providers must apply advanced diagnostics tools in their maintenance and repair practices of increasingly complex systems.
The Defence MRO services require structural repairs, and avionics upgrades, apart from engine overhauls, and system modifications. Furthermore, cutting-edge technology such as advanced materials, and mission systems, are areas that are contributing to the growth of Defence MRO.
Fixed-wing aircraft will contribute majorly to the MRO growth story, in the forecast period, given the demand as mentioned earlier, in fighter jets and the increase in spend on the latest technology to improve capabilities
Cross-border conflicts lead to galloping ‘spends’ on military prowess. As a result, massive budgets are allocated by superpowers who top the list in terms of owning the highest numbers of Military assets. The bar chart below gives a comparison. Here, the United States and Russia lead, with the acquisition of technically the latest fighter jets.
The United States has the highest military aircraft fleet of 13,232(2021 fig.) and is followed by Russia, with a fleet of 4,143 aircraft, given their need for quick deployment and readiness in mission-critical geo-political events. This calls for meticulous maintenance of aircraft, and upgradation where required.
For example, in April 2023, GE Aerospace signed a 4 – year agreement with Lockheed Martin Corporation to support avionics and electrical power systems on the F-35 military aircraft. This includes MRO services for GE Aerospace systems on the F-35 Lightning II aircraft.
Again, in April 2023: The Brazilian Air Force selected StandardAero to provide comprehensive maintenance, repair, and overhaul (MRO) services for the Rolls-Royce AE 3007 engines that power its fleet of Embraer ERJ-145 aircraft.
North America held the highest shares in the market and continued its domination during the forecast period. The major driving factor for the MRO in this region is the requirement to upgrade such a vast fleet with the latest technologies and systems.
The US Department of Defence (DoD) plans to spend USD 61.1 billion on aircraft and related systems in 2024.
MRO services expenditure in the US is in areas such as their large fleet of multi-role aircraft, transport aircraft, and surveillance aircraft that require high maintenance on engines and airframes, along with field and component maintenance services.
Leading Military Aircraft MROs
The major players in the military aviation MRO market are Lockheed Martin Corporation, Safran, The Boeing Company, Raytheon Technologies Corporation, and BAE Systems plc.
In India, Hindustan Aeronautics Limited (HAL), the Indian Air Force, and at times foreign OEMs have performed military MRO services. The Indian Army’s Army Aviation wing, Indian Navy, and the Indian Coast Guard maintain aircraft and their MRO services too are conducted by HAL and or OEMs.
Growth Strategy in Defence MRO
Strategic partnerships between the stakeholders, can bring in more business and help increase their footprint in the hitherto untapped markets. As most MRO contracts are for the long term, newer entities find it challenging to gain access to this critical but essential service sector. There is scope for civil and defence synergies, although both differ and needs and capabilities must be clearly understood by the players.
Adoption of New Technology & Digitisation
MRO companies are having to invest further in new and advanced technology to align with the latest techniques required for MRO jobs. Technology and digitisation are being quickly adopted by the industry like artificial intelligence for ease and accuracy during diagnostics and predictive maintenance, fault detection, as well as data collection and analyses. Today’s artificial intelligence (AI)-based predictive maintenance technologies are fast witnessing mass adoption during the forecast period. Potential investments would be required to enhance the IT capabilities of MRO operators for maintenance execution, supply chain management, enhancing mobility, and adopting e-signatures. Advanced data analytics are also being used by MROs for inventory optimization to plan, stock, and optimize spares as and when required at minimal procurement costs. Such tools enable operators to function efficiently, derive maximum profits, and support the digitization of global aircraft MRO operations.
Outsourcing MRO services by Defence in India
In recent years, a small number of companies have started performing MRO services for the Indian Air Force (IAF)- partially delegated or outsourced. These MRO service providers have developed a workforce competent enough and have the required calibre and experience to deliver jobs successfully. This opens the scope for more civil defence participation.
In general, line maintenance or regular maintenance is performed by the Indian Air Force and the aviation wings of the Army, Navy, and the Indian Coast Guard. On the other hand, complex MRO activities are outsourced to HAL and the rest is left to the Base Repair Depots (BRDs).
Military MRO
Defence MRO companies or on contract with defence departments need to deal with materials that are battle-hardy like withstanding extreme temperatures, stealth, and damage from the battle. Onboard systems are different from those in civilian aircraft, like fire control radar, electronic warfare (EW) systems, weapon control systems, and oxygen generators (OBOGS), to name some. Items like radars, communication systems, surface-to-air guided weapons (SAGW), specialised vehicles, specialised test equipment, ground equipment, and survival gear like parachutes and boats, all set them apart from commercial or civilian aircraft and therefore MRO practices. Adherence to written down OEM technology in manuals must be done without fail.
A long-term repair or annual maintenance contract with a foreign OEM may be in place. However, it makes business sense only if there are instances of technology transfer and sharing proprietary clauses. The high cost of spares and keeping a check on their usage are controlled by foreign OEMs. Non-availability of parts causes delays, and the resultant job delivery is less than satisfactory. This then does not bode well for the Indian MRO. Thus ‘Make in India’ is the right mantra to follow, as has commenced with the indigenisation policies of the Government of India’s defence sector. Matching raw materials, and the processes the foreign OEMs follow may pose to be challenging for a local service provider.
Opportunities
The ‘Atmanirbhar Bharat’ call for self-reliance will see more military assets made in India, entering all three defence services, allowing MROs to grow in tandem. While these would include Light Combat Aircraft (LCA “Tejas”), the Advanced Light Helicopter (ALH “Dhruv”), and the Light Combat Helicopter (LCH “Tejas”), on the anvil is the Advanced Medium Combat Aircraft (AMCA). There are also plans to roll out similar defence equipment for all three services.
Skilled Workforce
Executing these deliverables from the MRO side would require enough skilled workers. Drawing from highly skilled and experienced ex-servicemen, could stand an MRO in good stead. The Directorate General of Resettlement or the Directorate of Air Veterans can partly help fill the gaps and provide some of the necessary workforce. Again, the Government of India’s ‘Agniveer’ scheme, allows skilled technicians from the private sector whose services could be made available to fill up positions in defence/defence MRO roles, with sufficient and appropriate upskilling/re-skilling. MROs themselves train and provide skilled technicians through their in-house academies.
MRO companies will also get a chance to grow organically and can set up businesses like fabricating spares and selling consumables. These can then become profit centres. Other services they can additionally provide are service and repair and testing of ground equipment.
Self-sufficiency in defence manufacturing, MRO and allied activities has commenced no doubt, however, India’s security needs call for acquiring foreign assets to remain on par as much as applicable. However, the dependency on foreign supplies will hopefully see a decline going forward, thus cutting down precious expenditure. MRO planning happens in tandem with during foreign purchases, and during the contracting stage, and the OEM must be aware of the MRO capabilities of both private and defence companies. Most importantly, the OEMs must have implicit faith in the MROs that will service and maintain their assets and spares before work is forked out to indigenous entities.
