in Maintenance

2020 MRO spend expected to drop by more than 50%

Posted 4 August 2020 · Add Comment

With MRO industry revenues directly related to aircraft utilisation, 2020’s total MRO spend will be less than half of the approximately $90bn forecasted, according to the leading aviation data and advisory company IBA.

 

In its Changing Landscape of the Aftermarket Industry Webinar, IBA said Covid-19 has driven a mix of airline failures and administrations, early lease returns and accelerated retirements, all of which inform IBA’s analysis which draws on data from IBA.iQ, the leading platform for aviation intelligence.

 

IBA estimates that of around 800 aircraft it has identified as subject to exit from their current fleets in the short term, around 450 of these face permanent retirement. Around half of expected retirements are aircraft over 20 years old whilst younger retirements expect to feature types including the A380, A340-600 and 777-200LR.

 

Along with unprecedented early retirement, IBA’s view is that pre-Covid aftermarket supply chain challenges remain alongside a list of variables that are capable of disrupting supply and demand. These include fleet utilisation, new fleet introduction, OEM production rates and aftermarket strategies and labour migration, as well as pricing pressure affecting the threshold of material becoming beyond economic repair (BER).

 

Revisions to MRO spend will be made in the long term, although at present narrowbody aircraft utilisation is increasing whilst the widebody fleet is lagging behind. Early retirement is set to disrupt the supply chain due to the increase it will drive in aircraft part outs until saturation occurs, along with reduced engine shop visits as a result of low utilisation rates.

 

IBA expects engine shop visit demand to collapse for the next two to three years as both utilisation and maintenance expenditure see massive reductions. Later stage shop visits on mature engines are most vulnerable but all engines are seeing significant maintenance offsetting. Some will never now occur but IBA expects many will and could lead to a new ‘Bow Wave’ of concurrent shop visits in the mid 2020’s.

 

World fleet developments will impact supply and demand for and hence the pricing of aircraft parts, which could impact both the market or trading value and the residual value.

 

Suppliers will be compelled to assess their current and future inventories for interchangeability and flexibility across new aircraft platforms, and may have to accept a more realistic view in light of both lower demand and increased retirements.

 

Aircraft in the pipeline for part out prior to Covid, or currently in a stub lease prior to part out, will see their residual values impacted by supply and demand uncertainty.

 

Phil Seymour, company president of IBA, said: “The MRO industry needs to take a more creative approach to maintenance solutions. That includes OEMs and regulators devising safe and flexible ways to prevent aircraft having to undergo such extensive and expensive checks, so that savings can be made at a time when cash preservation is vital, without safety being compromised.

 

“Whilst we expect the market to rebound by the start of 2022, we expect high levels of redundancies of between 35% and 70% in the interim, and so a flexible approach by the MRO industry will be crucial to working through future uncertainty.”

Other Stories
Advertisement
Latest News

IATA warns governments on high cost of testing

The International Air Transport Association (IATA) called on governments to take action to address the high cost of COVID-19 tests in many jurisdictions and urged flexibility in permitting the use of cost-effective antigen tests as an

Gulfstream exceeds 500 in-flight connectivity service installations

Gulfstream Aerospace has surpassed 500 installations of the Inmarsat Jet ConneX in-flight connectivity platform on large- cabin aircraft. The Wi-Fi solution is available on new aircraft and can be retrofitted on qualifying existing

Embraer delivered 34 jets in Q2 of 2021

Embraer delivered a total of 34 jets in the second quarter of 2021, of which 14 were commercial aircraft and 20 were executive jets (12 light and eight large).

ICAO SG highlights African aviation's growth potential

Addressing Africa’s aviation leaders last week, most notably through her opening of the 2021 AFI Aviation Week, ICAO Secretary General Dr Fang Liu highlighted the tremendous potential future for aviation in Africa that could be

Single-engine Denali aircraft joins Beechcraft turboprop family

Textron Aviation is realigning its turboprop aircraft lineup as the single-engine Beechcraft Denali (previously branded the Cessna Denali) to join the legendary twin-engine Beechcraft King Air 260 and King Air 360/360ER as part of

Rostec starts developing hydrogen-powered aircraft engines

United Engine Corporation of Rostec has started a programme to develop hydrogen-powered engines for both aviation and ground applications.

WDS SK2601090322
See us at
WDS BT1202090322Aviation Africa 2021 BTOCAviation MENA 2022DAS21_BT