As the New Year approaches, the MRO sector will look into the immediate future with optimism as full recovery is expected by 2024, due to increased air travel – more than expected! As per market data, the current global fleet size is 27,000 and is expected to increase to 36,000 by 2030, and the demand for MRO services will naturally be directly proportionate with the rising asset numbers in the market. According to an Alton Aviation study, the MRO forecast is pegged at $657.23 billion by the end of 2024. The CAGR is estimated to be around 2-3% year-on-year growth.
Challenges before MROs:
MROs will be faced with the impact of high-interest rates and inflation. The situation would worsen should there be a likelihood of a recession, as naysayers predict. The given backdrop of Geopolitical conflict stresses the situation further, and quick diplomatic/political resolutions are essential to avoid deterioration of the situation, which can impact commercial aviation and all other allied activities.
Regional Snap Shots
As per the infographic above, the Asia Pacific region will generate the largest MRO services business, expected to notch up 36% in 2024, or an impressive one-third of the total global demand.
The second largest region by MRO spend is North America, with $24 billion for the year 2024. This is mainly driven by engine MRO demand. Innovation has led to efficient manufacturing processes and reduced MRO supply chain bottlenecks in a mature market like North America. MRO Service providers will need to incorporate technological upgrades in their budget allocations, upskilling the workforce to service new-generation aircraft and engines.
Western Europe will experience the slowest growth amongst the 3 major regions going forward, with 21% expected in 2024. Europe will also see reduced short-haul demand due to Sustainability considerations. MRO demand accordingly will see a slight contraction in such a case.
Therefore, growth drivers in 2024 will be the establishment of modern MRO facilities, undergoing digital transformation in their processes, efficiency, strong dependability in logistical support, and to match the digitalization an assured pool of the right-skilled workforce.
Image Credit: Beroe Inc
According to Beroe’s analysis, the main demand for MRO services will arise from digital transformation in an entity’s business processes. Leveraging the use of IoT, Big Data Analysis, Additive Manufacturing, and Blockchain technology has brought many advantages to the MRO growth story. End-to-end visibility right through the supply chain has been made possible with the application of technology.
Critical has been a slew of partnerships and associations where established players are reaching out to smaller suppliers to use the synergy to manage spare parts that have high demand but are of low value.
“Cost-saving can be effectively managed by MRO integration. MRO procurement strategy can be effective in creating end-to-end MRO storeroom management. Recent strides in B2B sourcing of tail-end spending in Amazon Business alone have been encouraging. Outsourcing is the key to growing and being effective in the MRO industry,” Vijith Bhargavan, Senior Analyst at Beroe.
For a fragmented sector, there will be more instances of financially sound players coming forward to hoist up businesses, thus forecasting a robust Y-O-Y growth up to 2024.
The sector will consolidate further with strategic mergers and acquisitions across regions to strengthen and expand networks.
MRO providers can expect almost 2/3rd of their business to arise out of servicing narrowbody jets, through to 2033. This segment of aircraft will fetch MROs a growth of about 3.7% p.a.
Engine MRO Services Forecast
The largest contributor is engine MRO. The current-generation engines replacing current and mature engines will contribute to engine MRO spending from now and right through 2030. This is also due to the lack of USM parts availability for these newer versions. With a wave of new-generation engine technology (CFM Leap, Pratt and Whitney GTF, Rolls Royce XWBs, Trent 1000s, GE GEnx) will start to replace less fuel-efficient engine technology in use currently.
New or Next-generation engines will require overhauls more quickly compared to mature engines as newer engine variants may develop teething troubles initially. OEMs with their learnings will produce more reliable engines and hence overhaul events will stabilize over time.
In America’s mature market, the following trends will play out, according to Alton Aviation:
- Growing demand for fuel-efficient and lightweight aircraft engines
- Increasing investments in the aerospace industry
- Advancements in aircraft engine technology
- Rising demand for low-cost carriers
- Expansion of airline networks
Modifications are the Fastest Growth Segment
MRO activities will have ‘Modifications’ on top of the list in terms of growth as is depicted in the bar chart. A large percentage of the airline industry’s expenditure will be allocated towards passenger-to-freighter conversions, inflight connectivity, cabin interior upgrades, and investments in newer customer-centric enhancements, airlines will continue to introduce modification programs as airlines invest in customer product enhancements.
The modification rate will continue to grow faster than the overall MRO growth rates, with airlines vying with each other to offer the best-in-class customer enhancements. These include inflight connectivity/entertainment, and modern cabin interiors/retrofits, that will help MRO providers with quick business generation.
Modification spending is tipped to grow, upwards of the current $7.0 billion, with Cabin Interiors leading in the demand for MRO services. Connectivity is a smaller segment but will be bullish in growth pegged at 5.5% CAGR. With greater customization rollout by airlines to attract customers, these offerings by airlines will be seen as brand differentiators. Inflight connectivity includes in-flight Wi-Fi availability on passengers’ personal devices as well. Ground to Inflight Cabin connectivity, as well as Onboard connectivity and Inflight Entertainment, come as an integrated whole.
As Premium Economy offerings by airlines are in vogue, seating comfort being the USP, carriers are undergoing cabin modifications at a faster pace to keep up the competitive edge on product quality. This means a steady income stream for the MROs offering modification services.
