The future of the MRO industry holds promising growth opportunities for shareholders and employees, fueled by the value potential to be unleashed with the integration of new technologies and digitalization. Yet, the sector must first confront and overcome numerous systemic challenges to thrive further.
Alton Aviation Consultancy has performed extensive commercial aviation market analysis and macro-economic stress testing to make sense of current trends in our updated 2023 Global MRO Demand Forecast.
Combining this data with our understanding of the latest efforts in digitalization, we can gain a clearer picture of the growth opportunities and how the sector can effectively face new challenges for decades to come.
Increasing MRO demand
OEMs are struggling to scale up production to meet the surge in demand brought about by post-pandemic air traffic recovery. As a result, older, more maintenance-intensive aircraft will stay in service longer and retire later, accounting for a larger, ever-increasing proportion of the active fleet and MRO demand.
Meanwhile, the escalating cost of materials and labor is translating to increased total MRO spend and shop visit inflation. Alton forecasts MRO spend to increase from US$112 billion in 2023 to $139 billion by 2033, at a CAGR of 2.2%.
The material challenge
With OEMs facing supply chain bottlenecks, airlines have responded by postponing aircraft retirements. This has created a severe shortage in the availability of lower cost used serviceable material (USM), especially for the most popular previous generation narrowbody engines such as the CFM56-5/-7 and the V2500. Consequently, airlines and MROs often have no other option than to purchase new OEM parts, which significantly increase shop visit costs.
There has also been a major incident of alleged fraud – in which UK-based aviation parts trader AOG Technics is said to have sold used parts as new, using forged documents. This has resulted in thousands of potentially bogus parts impacting the commercial MRO ecosystem, mandating an unprecedented global review of shop visit records and procurement documents by airlines, MROs, OEMs, and other USM part traders.
Diverting their limited labor resources to scrutinizing paperwork and verifying aircraft and engine configurations is the last thing the already overstretched MRO industry needed when facing record industry backlogs.
While aviation remains highly regulated and one of the safest modes of transportation in the world, a vast majority of industry participants still rely on paper-based systems and processes to manage their aircraft part inventories and maintenance records. This huge paper-based administrative burden presents a significant opportunity to expose the value of transitioning to digital-based records systems and processes, significantly reducing the labor requirement.
A digital future
The shift to digitalization for aircraft maintenance records, inventory management, maintenance programs, and task cards is one of the ways in which airlines, OEMs, and MROs can rise to the productivity challenges they face. However, the real game-changer will be how they can integrate the burgeoning artificial intelligence (AI) technology revolution.
AI has the potential to transform the way aircraft are maintained. Today, operators and MROs use the generic OEM maintenance programs designed to manage maintenance at the macro-fleet level. By harnessing the power of AI, they will soon be able to efficiently create customized maintenance programs that are tailored to the individual aircraft, including its engine, components, age, utilization, maintenance history and more. The resulting labor and material cost savings from this would be transformational.
Geopolitical and economic disruption can introduce uncertainty for all industries, which could impact the future growth of MROs. Despite this, current trends suggest that embracing innovative technology and digital solutions may no longer be an option, but could become a business requirement in order for MROs to effectively compete.
By Jonathan Berger, Managing Director, Alton Aviation Consultancy
