Since the 2008 recession, the global aircraft fleet has remained relatively even at around 25,000 craft. The 2007 census numbered 27,047 aircraft while the latest numbers for 2018 total 26,307. But these numbers are likely to grow dramatically.
Demand for air travel is at an all-time high and is growing. North America and western Europe are still the biggest hitters, but Latin America, China and eastern Europe citizens are flying in greater numbers. Coupled with that, for the first time in history, airlines have recorded profits for three consecutive years, largely due to lower fuel costs and greater efficiency.
The present fleet largely represents the two major OEMs. There are more than 10,000 Boeing commercial jetliners in service with Airbus close behind at just under 6,000. In the past 10 years, both OEMs have produced about 5,000 new craft, and the next decade looks to be booming.
Single-aisle aircraft are the bread and butter of the airline manufacturing industry. In the past decade, the OEMs have surreptitiously locked about half of those customers into integrated MRO contracts. So a large portion of the OEMs’ largest sectors include airframe/component maintenance contracts, rotable logistics and/or fleet management options under the careful eye of the OEM.
This clever tactic leverages the OEMs’ key strengths of distribution networks and aircraft health management to reduce competition in the MRO market. Following the CFM International/IATA agreement, manufacturers realize their need for allowing some competition – but are attempting to keep proprietary control as long as possible. This also keeps PMA threats at bay. But don’t be fooled. OEMs still control greater than 50 percent of the engine overhaul market.
During and following the ’08 recession, many MRO sectors had to adjust accordingly. As airlines disappeared or were absorbed, contracts were lost or not renewed. Many major internal MRO facilities in the years since have either divested or spun-off. Now, the opposite seems to be true. Greater demand for air travel means greater need to keep older aircraft around longer. Airlines are willing to pay for upkeep and retrofitting – meaning aircraft are being retired later and later. The demand for the MRO market is larger than it has been in more than a decade.
Certain aspects of the MRO market are seeing larger growth than others. Engine MRO and components are expected to grow nearly 5 percent next year. Engine MRO is expected to do $800 million more in business than this year where it ended at around $32.7 billion. Components are projected to surpass $13 billion for the first time ever.
Line maintenance work should remain steady at $13 billion while modifications look to surpass $6 billion in 2019 (a nearly 3 percent growth). Overall, the MRO market is presently greater that $77.4 billion and could hit $100 billion by 2025.
Outsourced MROs are contributing to one large shift. For example, companies dealing in heavy airframe are all-in for outsourcing. Nearly 75 percent of airframes in the US come from Asian and Pacific countries, along with 40 percent for Europe. India is a burgeoning market in nearly all areas of aerospace manufacturing. But rising labor costs and capacity constraints will likely make this option less attractive in the future.
Around 90 percent of engine MRO, 30 percent of line maintenance, 85 percent of component support and 75 percent of heavy airframe maintenance support is outsourced. In the past decade, outsourcing has devoured more than 25 percent of the MRO market.
The outlook for 2019 and the next decade look incredibly positive for the MRO industry. Not only are airlines keeping aircraft around longer, they are ordering new aircraft in record numbers. Many of the newest trends are new narrow-body aircraft, which will add a new wrinkle to the industry.
This next decade will require proactive teams looking for the best for their customers. Lead times will become more crucial. Service and reliability will be increasingly important. With an ever greater number of possibilities, the MRO companies that are looking ahead for their customer will come out on top.
Aereos is already planning for these new trends. Looking ahead helps us maintain our adaptable nature and pioneering values. Aereos is proud of its over 100 years of combined experience in the MRO market, but is even prouder of each and every on-time commitment we make to our customers. If you need to have an MRO company in your corner for 2019 and beyond, let’s talk. You won’t be disappointed.