MRO growth in 2016 and beyond


Recent estimates suggest the maintenance, repair and overhaul (MRO) market is growing and will continue to do so in 2016.

Much of this growth in the next few years could be due to the narrow body engines and the expected growth in the Asia-Pacific region. Currently the MRO market is valued at close to $56 billion. The market is huge but is also highly fragmented. There are over a hundred different players who have all carved out their own niche in the market and gathered their share of the pie.

Some of the players include The Atlas Group, Abu Dhabi Aircraft Tech (ADAT) and Air France Industries KLM Engineering & Maintenance Components China. All players in this sector of the aerospace industry have benefitted by the growing outsourcing of aircraft maintenance and repair work. Currently, over half the repair and maintenance work on aircrafts operated in North America are outsourced to some of these players. That number rises to almost 100% in the case of regional jets and business airlines.

The North American aircraft market is huge and currently accounts for 41% of the global market share but experts in the field expect Asian economic growth will increase the share in these regions over the coming years.

All things considered, the industry itself is expected to grow at an average annual compound rate of 3.1%. That means the market will expand from the $56 billion currently to over $76 billion in 2023, as per Team SAI, a consultancy firm. The firm also believes the market is far from saturated and has the potential to grow tremendously. Key factors are the growing acceptance of the outsourcing model and the rising demand from airlines over the years.

Some of the fastest growth in the segment has come in the engine MRO services. Growth in this part of the sector has been close to an average of seven percent a year. The helicopter business is also experiencing high rates of growth. Demand for these services on helicopters is remarkably strong.

With the price of oil dropping drastically over the past few years, it seems airlines and operators will have more money to invest and the air traffic is likely to spike in the coming years. But terror threats and supply consolidation continue to remain negatives for the industry as a whole.

Low-cost carriers and the demand for cheaper flights in different parts of the world is another major positive for the industry. Low-cost carriers have to keep their overhead down in order to pass on savings to the customer and to do so they need to outsource a lot of their activities. This means outsourcing growth and growth in demand for cheap travel is highly correlated. Other aspects of the growth outlook are the rising levels of aircraft in the backlog. The backlog of aircrafts is at record highs. To deal with this backlog will require a massive boost in aircraft carrier numbers.

Air cargo, which is another key indicator of future growth for MRO, is showing positive signs of recovery. The business fleet throughout the world will increase from 31,000 at the start of 2016 to close to 38,000 towards the end of the decade. That means the growth rate of this segment is also higher than 2 percent. Overall, many experts believe the demand for the services offered by the MRO industry to total close to $121 billion over the same decade.

North America is still a major portion of the market, but Western Europe and China in particular are also catching up. North America will see more than eight thousand aircrafts delivered while 3,400 will be retired over this period. Western Europe is considered to be the second biggest market for these services and Latin America comes in at third, despite its economic problems over the past few years.

Meanwhile, KING AIR 300/350, PILATUS PC-12, GULFSTREAM G650, CHALLENGER 300/350 and PHENOM 300. are all expected to be the most frequently delivered aircrafts.

Around the world, China along with Eastern Europe will gain fleet share while Africa and Latin America lose some share. 12.5% of the world’s fleet is expected to be part of Western Europe and in-fleet service share will be dominated by North America that commands over 63% at the moment.

While North America is the largest market, it is expected to grow the slowest. At barely 2.3%, the growth rate is not nearly close enough to the 9% expected in China. This could be because of the relatively small base fleet in the country. Finally, very light jets will grow to over 1,500 aircrafts and Ultra Long Range jets will grow the fastest of any other category, closing 2025 with an estimated 3,200 jets.