ENGINE AFTERMARKET ANALYSIS AND TRENDS.
According to Market Research firm Technavio, the global MRO industry’s size is expected to reach US$ 117.7 billion by 2031, from US$ 68.4 billion in 2021, growing at a CAGR of 5.6 percent. Amongst the four segments that comprise key MRO activities, the engine, and airframes section accounts for nearly 70% of the value of work. This makes the engine MRO aftermarket ripe for growth to pre-COVID levels, expected in late 2024.
The adjustments that will need to be made for this segment of MRO services such as the demand for fuel-efficient engines, newer aircraft deliveries, and updates made incorporating technological advancements. With air travel on a skyward trajectory, there will be a rise in demand for MRO services and the engine aftermarket.
Inflation has a crippling effect on Engine costs, especially double-digit inflation, with MROs reporting inflation to almost 11-30% in certain markets.
The above bar chart shows that the bulk (nearly 48%) of the global MRO market share is dominated by the overhaul of installed and spare engines. The engine aftermarket market too will be sizeable and present a potentially large business opportunity for Engine MRO Aftermarket services.
MROs and airlines have found novel ways of working together in terms of say, buying material, keeping in mind that there would be supply chain disruptions that may not last long. Buying directly from OEMs is not cost-effective enough for the MRO and Airlines together. An alternate materials procurement strategy has been to go for USM (Used Serviceable Material) which has gained much popularity, given the economic advantage. Engine part-outs coming into the market have raised the demand for specific types of assets, assets that consume the engine part-outs available in the market.
Strategic purchasing by both the Airlines and MROs is a strategy that is working. Transparency is key while planning procurement and purchasing.
Region-wise overview
In the mature markets of North America and Europe, the Engine MRO segment this year amounted to 45% of the total commercial aftermarket. China and the Asia-Pacific regions have been bullish and the immediate capacity availability has been a challenge, given the quantum of ‘shop visit’ requirements.
The return of China’s MRO market has been a boon for MRO providers in the Asia-Pacific region but has inevitably led to fresh concerns about capacity. Engine MRO visits are gradually picking up and will accordingly impact the engine aftermarket segment at a similar pace.
MROs are witnessing engine lead times increase especially with new-generation aircraft. Labour shortages, operating below par technically, and a general slowdown in production are seen due to the geopolitical crisis in Europe. Critical raw materials supply disruptions such as steel and titanium have compounded the problem further. This means slower new parts deliveries from OEMs.
To circumvent these challenges, in the current scenario, operators are looking at alternatives to MRO visits, such as opting for Parts Manufacturer Approval (PMA) parts, and Designated Engineering Representative (DER) repairs.
Mitigating Challenges
Expanding on engine shop capacity, strengthening their workforce, and aligning themselves with new-generation engine aftermarket networks, are some of the steps taken by MROs to deal with capacity challenges.
For example, CFM International recently has plans afoot to add 20 shops to support their Leap engine product. They are clubbed under Leap Open MRO Network.
Both GE Aerospace and Pratt & Whitney are recruiting staff to take care of their aftermarket businesses. Such is the strategic focus, especially on engine MRO aftermarket – that helps an entity to remain agile and resilient in a market that can be volatile at any given time.
It is not just manpower shortage but materials shortage that has had a debilitating effect on the industry. A skilled and technically qualified workforce is the need of the hour, apart from alternate sourcing of aftermarket parts. TAT or turnaround time will see improvements (and again a critical area for retaining businesses), with sufficient staff numbers, a robust supply chain, and a steady availability of raw materials.
Sustainability Remains in Focus
Conscious decisions adopted by airlines and aerospace industries are on the SAF and sustainability goals. The race towards net -zero by 2050, is real. Engine technology innovating towards Sustainability is key. However, in the engine aftermarket, cutting down waste with MROs switching to digitization, more of remote, virtual engine borescope inspections, paperless workflows, and predictive maintenance has stood this segment in good stead. The post-pandemic habit of hybrid or remote working has gained a lot of ground, and that has also helped the Engine Aftermarket markets.
Some of the Key Players in the Market:
Reference Credit
Technavio
MIT Sloane School of Management
Research Nester
