Growth in the commercial aircraft and engine MRO

Citation

(2006), "Growth in the commercial aircraft and engine MRO", Aircraft Engineering and Aerospace Technology, Vol. 78 No. 4. https://doi.org/10.1108/aeat.2006.12778daf.011

Growth in the commercial aircraft and engine MRO

Growth in the commercial aircraft and engine MRO

Keywords: Commercial aircraft,Aerospace industry

The tremendous growth in air traffic, characterised by the proliferation and emergence of new low-cost carriers (LCC) in Asia Pacific, has garnered the interest of foreign investors. Also, an increase in domestic and international fleet movements as well as fleet utilisation has hiked aviation stocks. These factors are supporting growth in the commercial aircraft and engine maintenance, repair and overhauling (MRO) markets in Asia Pacific.

Frost & Sullivan (www.aerospace. frost.com) finds that the Asian Pacific Commercial Aircraft & Engine MRO Markets totalled $8.71 billion in 2005 and can reach $12.90 billion in 2011.

“Governments in Asia Pacific are striving hard to liberalise this sector by introducing open skies policies and permitting domestic airlines to fly abroad,” explains Frost & Sullivan Industry Manager Subhranshu Sekhar Das. “This has created a rush of low- cost airlines entering the domestic market with competitive pricing in line with rising consumer disposal incomes, fuelling increased air travel demand.”

Air traffic has made a rapid recovery following the September 11 terrorist attacks and has registered tremendous increase in revenues per miles (RPM) due to customer patronage of large commercial and cargo carriers. To meet this growing demand, airlines are commissioning new aircraft to expand their fleet. This is likely to have a significant impact on the engine MRO markets as an increase in air travel/ aircraft utilisation hours directly correlates to a rise in aircraft maintenance to include major overhauls.

Although air traffic is increasing, these markets are likely to register a moderate compound annual growth rate of 7.2 per cent. The possibility of additional terrorist attacks, the cost of increasingly sophisticated air travel security measures and the impact of future oil prices will contribute to this modest growth rate. In addition, airline affiliates are being pressured to offer high-quality, cost-effective MRO services to attract foreign airlines by offering lower labour rates.

“The emergence of LCCs caused a shift in the balance of power and as a result, original equipment manufacturers (OEMs) should now provide round-the-clock services in line with operators' MRO requirements,” notes Das. “In addition, OEMs need to form joint ventures and partnerships with local participants and properly utilise lower costs of labour as well as cater to different customer groups with higher value-added proposition.”

Moreover, significant capital investment with risk costs and extended return on investment (ROI) make setting up an independent world- class total MRO in Asia a challenge. Despite these challenges, the first airframe heavy checks and engine overhaul during 2006 and 2007 will contribute significantly to the growth of these markets. In addition, LCCs have forced legacy carriers in Asia Pacific to rethink and slash airfare dramatically by up to 30-40 per cent as well as assess and acquire in-house low-cost maintenance. A combination of these factors and the predicted tripling of air cargo traffic are likely to encourage steady revenues in these markets.

Asian Pacific Commercial Aircraft & Engine MRO Markets is part of the Maintenance Repair & Overhaul subscription and it evaluates the competitive scenario of these markets to forecast potential business opportunities for participants. In addition, this study also analyses the present and future demand for the MRO markets by studying the revenues. Executive summaries and analyst interviews are available to the press.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services, and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit www.frost.com