Air Transport World

Balancing act: rising demand for MRO services occurs against a backdrop of steady evolution.(MRO)(maintenance, repair and overhaul)

THE FORCES THAT ARE HELPING to reshape commercial aerospace continued to influence trends in the maintenance, repair and overhaul segment over the past year as MRO providers benefited from a rising tide of airline earnings that is lifting all boats.

Passenger and freight demand hit a 16-month high in August, according to IATA, which is forecasting consecutive years of profitability for 2007-08, something that has not occurred since 1999-00. Despite the order boom of the past three years, the world fleet is aging, and with load factors topping 80% in many parts of the world, airlines are flying their aircraft as much as possible, contributing to higher demand for maintenance services. Seasonal and regional variations may be present; nevertheless, the consensus among MRO suppliers with whom ATW spoke is that the market generally is in balance.

Providers also are benefiting from the fact that with profitability comes a renewed focus on customer service that translates into increased spending on cabin interiors, IFE upgrades and related modifications. "Airlines are very aware of passenger requirements for items such as sleeper seats on long-haul. It seems the belief is that if you don't have [them] you're not going to be able to be successful on your routes," SR Technics Executive VP-Sales, Marketing and Business Integration Declan O'Shea points out.

According to AeroStrategy, air transport spending on MRO totaled $40.8 billion in 2006, up from $38.8 billion in 2005. The consultancy forecasts spending will rise at a compound annual rate of 3.6% over the next decade to $58 billion in 2016.

"What we can obviously see is a huge aircraft order book, a huge increase in numbers of aircraft flying and forecast to be flying and coming out of retirement and generally more available seat miles for operators," O'Shea observes.

"All the US majors are out of Chapter 11 and by and large to different degrees they are reporting improved positions and profits. I think that is one important indicator for the whole industry and that definitely affects MRO," states Singapore Technologies Aerospace President Tay Kok Khiang.

But the factors affecting MRO go beyond the rise in utilization and traffic, O'Shea and others believe. "I think it's coupled with another trend that has not been there in the past when we've seen that sort of growth and that is intense competition and intense pressure on yields," he says. "We're getting to the point where there are a lot of airlines feeding out of the same trough. …

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