The good, the bad and the ugly: the shape of things to ... - AviTrader

Cover Story - 2012: The MRO Outlook
geared turbofan and CFM International’s Leap-
X high-bypass turbofan, which both boast fuel
consumption savings of up to 16%.
Diebold-Widner believes that future demand
for engine MRO will strongly depend on fuel
prices. “Should prices spike up again, as in
2008, there could be another wave of retirement
of fuel-hungry aircraft with the highest
MRO demand, which would immediately reduce
the overall MRO market size.
MTU’s internal engine MRO forecast, based
on a normal oil price scenario, estimates the
size of the commercial engine MRO market
at $16.9bn in 2011, growing to $24.5bn by
2021 in constant dollars (CAGR 3.8%). Nevertheless,
engine MRO is, unlike airframe, subject
to strong material price escalation, so that
escalated growth should amount to a 7.5%
CAGR, meaning a $34.9bn market by 2021.
“At first instance,” explains Diebold-Widner,
“this looks like a strong increase. However,
shop visits should only grow with a 1.8%
CAGR, from approximately 8,200 in 2011 to
9,800 in 2021. This is linked to the fact that
while newer engines will experience far longer
on-wing times, the actual shop visit cost will
increase, compared to older engine types,
once the visit is due.”
MORE OR LESS CAPACITy?
Overcapacity in the MRO market is a subject of
some debate. While most professionals in the
business would agree that
it is widespread, it is clear
that it depends on your
regional perspective. European
MROs executives
agree that there is the
persistent overcapacity in
the market. Walter Heerdt,
senior vice president
of Marketing and Sales
at Lufthansa Technik, said
that although the MRO
Walter Heerdt
LHT
market is growing, “we see new capacities
outgrowing the need. Overcapacity will therefore
persist.” Lufthansa Technik is tackling the
situation head-on by providing optimized tailored
service packages and constantly monitoring
processes and key performance indicators
(KPIs). “Adding value to our customers’ operation
and balance sheet makes the difference,”
says Heerdt. “We believe that we are well set
for this since we have the value chain in-house,
and we don’t have to combine services from
different sources - something which leads not
only to surcharges, but to delays.”
Overcapacity appears to be less of a concern
11
(continued from p10) debate to be had as to
PMA parts in 2012 as
an increasing number of more modern aircraft
are available for teardown, increasing
the supply of refurbished parts on the market.
If this increase in supply is coupled with
surplus stock from parts that may have been
produced and bought up in anticipation of
a higher level of checks during 2010/2011
which didn’t happen due to the reduced
utilisation, then pricing competition versus
PMA may well be closer than expected.
Something that is rarely directly touched on
in regard to MRO outlook is customer service,
and although this can mean how polite
the person on the end of a phone is, it can
equally mean how well the MROs are matching
the changing demands of the operators
as they themselves adapt to the changing
market they operate in, and the changing
attitudes of the shareholders and interested
parties who they find themselves reporting
to. Without wishing to light the blue touch
paper, I think this is probably to do with
the adoption of real time visibility on cost,
turnaround times, parts availability and how
to best create transparency when delivering
good, cost effective, MRO services, which
are also profitable.
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