Air Transport World

Recovery in sight? MRO providers think 2011 will be the year things turn upward.(MRO Market Review)(Company overview)

AFTER AN EXTREMELY DIFFICULT 2009 IN which industry revenues declined 14%, airlines came roaring back this year owing to better-than-expected traffic and yield recovery. Total revenues are forecast to grow 16% compared to last year, according to IATA. The same cannot be said, however, for the maintenance, repair and overhaul aftermarket. Service providers continue to face a challenging business environment characterized by anemic demand for parts and services and weak pricing power.

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A small sampling of some major MRO companies' recent revenue performance reflects this reality. Lufthansa Technik, which defied the market trend in 2009 by posting 6.6% rise in revenue for the year, saw a 4.8% drop in the 2010 first half. Singapore Technologies Aerospace's turnover declined 3.3% in 2009 and 1.2% in the first semester of 2010 compared to the respective year-ago periods. AAR Corp. reported a 3% fall in sales for its MRO segment in the fiscal first quarter ended Aug. 31 following on a 13.6% slide in its fiscal year ended May 31.

For the commercial air transport market as a whole, MRO revenues peaked at $45 billion in 2007 and declined 5.1% to $42.7 billion in 2009, according to AeroStrategy/OAG Aviation, which estimates that the recession has cost the segment three years of growth (see chart, p. 52).

"I don't think that we've seen the recovery in the MRO marketplace the way the airline industry as a whole has. On a year-over-year basis, we're kind of down slightly," Delta TechOps VP-Marketing and Sales Jack Turnbill tells ATW, adding, "Airlines certainly are adding more flying and bringing back some capacity but they still have very tight cost controls on the maintenance side of the business and are trying to defer as much as they possibly can to the right."

ST Aerospace President Chang Cheow Teck states, "Despite the global airline recovery, we have not seen a similar recovery in terms of the MRO market." Jeremy Chan, CEO of Abu Dhabi Aircraft Technologies, also cites a decrease in demand "in target markets," while SR Technics COO Andre Wall says, "MRO activities have not recovered yet. …

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