The new maintenance, repair and overhaul market is presenting its own set of challenges, mostly in the form of intense competition among diversified global giants. The trick now is to gain share fast enough to compete with rival MROs or to partner on favorable terms with OEMs. 

“The big keep getting bigger,” consulting group CAVOK VP David Marcontell noted. “2017-2018 will likely see more consolidation as the biggest MRO and OEM firms continue to acquire smaller, niche players.”

“Aircraft OEMs are entering the aftermarket more aggressively either directly or through existing providers,” Gavin Simmonds, general manager of AJW Technique, said. 

Scale is increasingly necessary in this market. MROs and OEMs now do more than simply facilitate repairs; they must manage assets. Whether providing part pools or offering pool-backed flight-hour programs, the more aircraft that are supported the fewer spares are needed as a portion of operating assets. A lower spare ratio allows an MRO provider to offer more competitive rates and to make further market gains. 

Major airlines want worldwide support, so global stretch is also essential to growth. The biggest growth in air transport — in passenger numbers and in terms of fleets — is still in China and Asia, so MROs in mature markets must have an Asian presence. It is no accident that the two biggest airframe shops, ST Aero and HAECO, are located in Asia-Pacific and have expanded from there. The Middle East and Latin America have also grown fast, and a presence in these regions is deemed valuable.  

Nose-to-tail

The third critical competitive element is the breadth or scope of services a firm can offer. “More suppliers now offer a one-stop solution, streamlining repair support through nose-to-tail offerings across all ATA chapters,” Simmonds explained.

It’s not enough just to do traditional maintenance. For example, heavy checks are low margin and subject to capacity gluts in slow years. But modifications are growing fast for services such as winglet installation, cabin reconfigurations, IFE installations and the avionics upgrades that are coming around the world. The MRO provider that can offer long-term customers well-designed modification programs that fit into the maintenance program stands to earn more revenue and be more profitable.

MRO providers must also be more flexible in today’s fast-changing market. 

 “Lots of aircraft are changing hands,” Marcontell noted. This challenges North American airlines and MROs especially to meet aggressive schedules for inductions, lease returns and interior reconfigurations. Those MROs that can meet tight time requirements can charge premium rates.

The ability to extract maximum value from data on both new aircraft and legacy models is yet another trend that MRO providers must stay on top of to be competitive. Engine OEMs led the health monitoring revolution, but now component and airframe OEMs are doing the same, and top MROs like Lufthansa Technik (LHT) and AFI-KLM E&M have begun offering their own analytic tools.

Data revolution

Just as internet capability is a passenger revenue opportunity in the cabin, broadband links to aircraft and cockpits can economize on maintenance and operations. But exploiting big data in maintenance is much more complicated than double-clicking a consumer website. Communication tools must download precisely the right data at just the right intervals. This data must be processed and analyzed. Finally, it must be used to make smarter maintenance decisions and act on these decisions. Acting on data also requires mobile MRO applications. 

Doing all this right requires collaboration among OEMs, MROs and airlines. The most effective MROs will have ace data scientists, but also need smart business skills to encourage their partners to pull it all together.

And the scope of new MRO skills stretches beyond data. 3D printing has long been used by airframe OEMs for plastic parts. MROs will use it to print cabin replacement parts faster and cheaper than could be obtained from OEMs or distributors. Additive manufacturing of metal is tougher and newer. But just as major engine OEMs are using additive manufacturing to build more efficient engines, MRO providers can exploit the technique to repair metal parts that would otherwise have been scrapped and replaced.

Reducing part prices

Part prices are a killer in maintenance, and finding ways to economize on them is another skill found among the best MROs. Used parts are increasingly important, and most now come from tear-downs, not old airline stocks. How should an MRO best tap this supply; with its own disassembly or by relying on OEMs?

An LHT manager noted that “innovating the MRO value chain” was his big challenge and that meant keeping supply chains taut and lean. MROs have persuaded airlines to not overstock parts. Now MROs must go a step further and ensure their own stocks are just right and correctly located.

New-gen aircraft

Another area of market change is the introduction of new-generation airlines, which have been designed to require less maintenance less frequently. That argues for outsourcing checks for many mid-size fleets. It also means shops need more aircraft to keep nose-to-tail lines running. So again, size counts.

Similarly, technicians need to learn new skills faster. New training tools, online, virtual and augmented reality are being employed by MROs to ensure they have the smartest training schools as well as the best production managers.

But are all these new tools, technologies and business strategies really helping the airlines? At first glance, no. The latest IATA data shows narrowbody maintenance cost per aircraft, flight hour and flight cycle increased significantly from 2013 to 2015. But CAVOK’s Marcontell sees a favorable payback in operational reliability, which turns into dollars for the airlines. US on-time arrivals, for example, have been increasing since January 2014, despite higher aircraft utilization. If more expensive maintenance is delivering more reliable aircraft with less downtime and greater fuel efficiency, then everyone benefits.