Reposted from MRO Business Today. You can read the original article here (https://www.mrobusinesstoday.com/inching-towards-air-traffic-recovery-boosting-the-global-mro-ecosystem/)
Analysts have predicted that the MRO market will grow from some USD 13 billion to over USD 18 billion by 2028. “Technology and (digital) innovation will be the drivers of this market growth. Data analytics and AI will become commonplace. Supply chains however will struggle to keep up. Even the OEMs will suffer from material shortages. Manpower, which has been neglected by a lack of training and investment in young talent, will become ever more critical”.
The COVID lockdown saw many young people choose a career outside aviation and thousands of mature and experienced people took early retirement. There are interesting times ahead for aviation and MRO alike. As the industry grows and struggles to keep up with the pace of growth post-COVID, as the air traffic recovers, let us find out how the different MROs are coping with the post-pandemic stress?
Global passenger traffic forecast
Passenger traffic is on an upward climb since the lifting of international restrictions and the drastic fall in COVID19 cases across the globe. Apart from these, the upcoming summer holidays have led to families, tourists, and backpackers flocking the airports left, right, and center. Domestic or short-haul traffic is seeing headwinds with pent-up leisure demand. Many passengers have suspended trips over the last two years leading to pent-up demand. This could also lead to ‘front loading’ this summer as consumers may consider these travel freedoms to be temporary. This suggests the recovery could lose strength later on.
This year, however, is meant to be the year of delayed but sustained recovery, despite new scars. Global passenger traffic (RPK) recovered to 50% of pre-pandemic levels in the first months of 2022, but intercontinental traffic still has a long way to go.
As per Oliver-Wyman, a slower return of international travel will lead to fleet recovery in the narrowbody aircraft segment, which will make up about 64% of the fleet by 2032 versus 58% in January 2020. While narrowbodies are expected to recover to pre-pandemic levels by midyear, much of the increase initially will be from aircraft being brought out of storage or the delivery of aircraft in manufacturers’ inventory.
Source – IATA
As per IBA, the recovery of global passenger flights has been static from December 2021 to February 2022, with flight capacity remaining at 74 percent relative to pre-pandemic levels.
According to Boeing, demand for domestic air travel is leading the recovery of the commercial market, with intra-regional markets expected to follow as health and travel restrictions ease, followed by long-haul travel’s return to pre-pandemic levels by 2023 to 2024. Boeing’s commercial market outlook (CMO) projects 10-year global demand for 19,000 commercial airplanes valued at $3.2 trillion.
In addition, projected demand for dedicated freighters has increased, including for new and converted models. With sustained demand for air cargo tied to expanding e-commerce and air freight’s speed and reliability, the CMO projects the global freighter fleet in 2040 will be 70% larger than the pre-pandemic fleet.
“The aerospace industry has made important progress in the recovery, and Boeing’s 2021 forecast reflects our confidence in the resilience of the market,” says Stan Deal, president, and CEO, of Boeing Commercial Airplanes. “While we remain realistic about ongoing challenges, the past year has shown that passenger traffic rebounds swiftly when the flying public and governments have confidence in health and safety during air travel. Our industry continues to serve an essential role of bringing people together and transporting critical supplies.”
According to Oliver-Wyman, global demand for domestic travel is expected to reach and exceed its 2019 pre-pandemic peak by the start of 2023. From there, the outlook is for steady growth through the rest of the decade at rates that even exceed expansions in gross domestic product.
Passenger growth directly proportional to MRO growth
With the steady growth and a gradual boom in passenger traffic, naturally, the close-knit MRO industry is also expected to flourish along with airline operators. Boeing forecasts a USD 3.2 trillion market opportunity for the MRO industry in the coming decade. Digital solutions, including analytics offerings, interiors modifications and freighter conversions, have proven to be bright spots in the long-term services landscape as customers adjust to leaner operations for future growth and meet strong cargo demand.
“Our customers are preparing for growth, and we see fleet modifications and continued parts consumption going hand in hand with the global fleet expansion,” said Ted Colbert, president, and CEO, of Boeing Global Services. “This demand will be coupled with the continued adoption of digital tools and services to enhance fleet readiness, reliability, and efficiency.”
Oliver-Wyman predicts that for the maintenance, repair, and overhaul (MRO) sector, the market is being redefined by a fleet in transition, in part because of higher numbers of retirements of aircraft due to entering a period of intensive MRO expenses. MRO demand should recover to pre-COVID levels by 2024, but annual growth in the second half of our 10-year forecast period will be 2.8%. By 2030, MRO demand is expected to reach USD 118 billion, 13% below the pre-COVID forecast of USD 135 billion.
The slower growth projections won’t apply everywhere around the world. For instance, the active China-based fleet and its MRO demand had already exceeded pre-pandemic levels by the end of 2021. Other regions like Western Europe will not see MRO demand recover until 2025.
According to Brian Prentice, Partner at Oliver-Wyman, “As unimaginably bad as COVID-19 has been for aviation, the challenge of the next decade may be almost as disruptive. The industry needs smart strategies to get itself in a better position by the 2030s.”
Where is the skilled workforce to meet anticipated growth?
However, with the recovery in passenger traffic and the MRO sector, one of the looming challenges before the aviation industry is the lack of a skilled workforce to support this anticipated growth. Already many airlines across the world are experiencing disruptions and even cancellations due to pilot or staff shortages. Prior to the pandemic, the industry was already looking at a potential shortfall mid-decade in the number of key aviation workers — pilots and aviation mechanics chief among them. At the time, the pressing problem was baby boomers reaching retirement age and not enough candidates to take their place. The pandemic has exacerbated those demographic trends by encouraging early retirements among airline and aerospace workers uncertain about their career prospects in a sector that COVID-19 almost entirely shut down for months.
Likewise, two years of pandemic also is likely to have discouraged many would-be pilots and mechanics from entering the industry. With demand lagging, the industry hasn’t had to fully confront the problem yet, but that won’t be the case for much longer. Over the next 20 years, Boeing estimates, the industry will need 612,000 new pilots, 626,000 new maintenance technicians, and 886,000 new cabin crew members.
Boeing claims training services will see a near-term increase in demand as personnel transition to new aircraft types, maintain certifications and return from pandemic-related pauses in active service. Demand for services dependent on aircraft utilization, such as maintenance, parts, and supply chain is projected to follow the market recovery.
Looking at such strong headwinds, many MROs across the globe are already in process of robust expansion, increasing spares inventory, and maximizing profit margins through strategic investments, acquisitions, and partnerships. Let us look at some such MROs.
MROs – Growth, Success & More …
Aero Norway an independent engine MRO provider and trusted partner for customers operating CFM56-3, CFM56-,5B, and 7B enginesis focusing its energies on a dedicated strategy that will see stability and investment deliver tangible customer benefits. The plan is underpinned by a rigorous evaluation of processes and procedures, covering all areas of the business from the development of its team to the augmentation of its industry-renowned capabilities. They have put extensive measures in place during 2020/21 to ensure that they were well placed to flex with prevailing market forces and able to sustain its commitment to fast turn-around times.
Commenting on the pandemic outcome CEO, Glenford Marston said, “The volume of material for the CFM56-3 engine has fallen over the past five years. Yet in 2021 Aero Norway completed workscopes on over forty CFM56-3 engines. Pre-pandemic it was believed that the number of CFM56-3 engines passing through our facility would decline as the impetus moved towards the CFM56-5B/-7B series. However, a significant uptick in utilization rates by many 737 CL freighter operators translated to an urgent requirement for the completion of several maintenance tasks on the legacy engine type.”
Aero Norway’s focus on CFM56-5B/-7B engines is only partially driven by the high number of upcoming A321 and 737-800 P2F conversions. The effect of the 737MAX delay has also meant that many -5B/7B engines have remained on-wing for longer than planned and these will soon require a variety of shop visits. Apart from this, they have made significant investments in upgrades to the equipment with the addition of high-speed grinding and plasma spraying machines.
APOC recently expanded its local services for the Americas region by opening its new US headquarters in Miami.APOC views the US as a strategic market and is shaping the business to align with future growth in the region. APOC is currently exploring many options through cooperation, joint venture, investment, or acquisition, and the reaction from the market to APOC’s presence in the US has been very encouraging. Doing business is simpler with a local presence and flexible local solutions can be devised for customers.
Kevin Wall, APOC, VP, Business Development said, “Being close to your customer base and forging productive relationships with business partners are key elements for success. While we are in a truly global industry, there is no substitute for an experienced and professional local team that is willing and able to help. We see great potential to expand this business. We have already performed several teardowns in the region and see big potential in developing this further. If we source candidate aircraft in the US and ultimately sell the material here, it makes a lot of sense to tear down here too.”
According to Naveen Chawla, CEO, of Epsilon Aerospace, the Last two years had been a unique learning experience for the entire Aviation & MRO Industry. He said, “We stood firm in providing a safe & quality service to all our aircraft customers. Despite frequent disruptions, our team remains dedicated to serving the customer demands for aircraft cabin refurbishment at all times. We were prompt to serve the cabin requirements such as those related to Seat Covers, Carpet & NTF for lease redeliveries for our customers during these trying times. Our Team & their wealth of knowledge in this unique Component MRO space is poised to provide stellar support to the industry in the coming years. Our certifications of DGCA 21G, CAR 145, and our unique positioning with the UK and EASA 21J & 21G partnership will ensure safe and quality services for aviation customers in India. We are looking forward to being a strong link in the Aviation MRO value-chain.”
Castle Air Group has recently doubled the size of their London Biggin Hill Airport facility with the addition of a 20,000-sq ft adjacent hangar and office space. The large hangar will provide space for 23 additional helicopters encompassing engineering, management, and sales as well as the addition of a state-of-the-art VIP lounge and office space. Ross Bunyard, Managing Director said, “Due to the huge success of our busy London Biggin Hill facility we decided to expand, by purchasing the hangar next to us which will double the size of our facility as well as much needed apron space. As well as supporting our large client base of AW109’s owners, over the last 10 years, we have been expanding our support and maintenance of the Leonardo AW139 model for which we are an authorized service center.”
Spirit Airlines recently opened an aircraft maintenance facility at George Bush Intercontinental Airport (IAH). This facility, located along John F. Kennedy Boulevard, will serve as a large aircraft maintenance hangar with offices and warehousing for the Spirit Technical Operations team. Spirit plans to staff the facility with more than 50 Houston-based Team Members to maintain and service Spirit’s growing fleet, which is planned to gain 24 new planes this year for a projected fleet-wide total of 197 by the end of 2022, and 33 more planes projected for delivery in 2023. As Spirit’s network expands, this additional maintenance capacity will be located a short flight away from several of Spirit’s busiest stations.