With MRO industry revenues directly related to aircraft utilisation, 2020’s total MRO spend will be less than half of the approximately US$90 billion forecasted, according to the aviation data and advisory company IBA in its Changing Landscape of the Aftermarket Industry Webinar, which took place in August 2020.
Covid-19 has driven a mix of airline failures and administrations, early lease returns and accelerated retirements, all of which inform IBA’s analysis. Along with unprecedented early retirement, IBA’s view is that aftermarket supply chain challenges – which were already present pre-Covid – remain, alongside a list of variables that are capable of disrupting supply and demand. These include fleet utilization, new fleet introduction, original equipment manufacturer (OEM) production rates and aftermarket strategies, as well as labour migration and pricing pressure, all affecting the threshold of material becoming beyond economic repair (BER).
Taking all the above into account, then, IBA expects engine shop visit demand to collapse for the next two to three years as both utilization and maintenance expenditure see massive reductions. Later stage shop visits on mature engines are most vulnerable, but all engines are seeing significant maintenance offsetting.
Rikkert Vos, CEO of Canadian MRO provider Aeromni, told AirMed&Rescue that during the first quarter of 2020, work slowed immensely, but that the company was able to cope despite the changing rate of supply and demand: “The last few years we have been expanding internationally and focusing beyond our domestic market. Supply chains from the major manufacturers and larger companies were affected greatly and many shut down. Since we are a small company and nimble, this allowed us to capitalize with quick service and less delays. We increased our presence with existing customers and attracted new ones. Our reach internationally increased as a result of the ongoing shutdowns worldwide and operators not having many options for MRO in the marketplace.”
Adapt to survive in Covid’s new world order
Phil Seymour, Company President of IBA, said: “The MRO industry needs to take a more creative approach to maintenance solutions. That includes OEMs and regulators devising safe and flexible ways to prevent aircraft having to undergo such extensive and expensive checks, so that savings can be made at a time when cash preservation is vital, without safety being compromised.
“Whilst we expect the market to rebound by the start of 2022, we expect high levels of redundancies of between 35 per cent and 70 per cent in the interim, and so a flexible approach by the MRO industry will be crucial to working through future uncertainty.”
Brian Hughes, Vice President of Sales & Marketing for the StandardAero Helicopters Business unit, says that 2020 had been a difficult year, and with the disruption caused by Covid-19 not yet behind us, aviation firms, and the companies that service them, must ‘maintain our attention to a safe work environment and setting the business to the appropriate size and structure for the resulting aerospace market’.
we expect high levels of redundancies of between 35 per cent and 70 per cent in the interim, and so a flexible approach by the MRO industry will be crucial to working through future uncertainty
Adapting to fit the new, more streamlined version of the aviation market that we are seeing in 2020, and will likely continue to see for the next year or so, is key to the ongoing viability of MRO businesses. Twelve months ago, industry reports such as Oliver Wyman’s Global Fleet & MRO Market Forecast Commentary 2019-2029 stated with confidence: “With the expansion of business in the commercial aviation industry, the maintenance, repair, and overhaul (MRO) market that supports it is also expected to grow. Total MRO spend is expected to rise to $116 billion by 2029, up from $81.9 billion in 2019.”
Nobody foresaw the global shutdown of travel. Where before the challenge was to ensure there was enough capacity in the market to meet the demand of operators, now, the question is how to scale back operations in a sensible way, which will allow businesses to continue their operations, and scale services back up as and when clients are demanding it.
Hughes said: “Capacity is not an issue right now in the MRO market. The issue is centered around reduced volumes and the challenge in our industry is resizing operational capacity to meet the lower demands. Operational efficiency and utilization are key in our MRO facilities and matching current capacity to current workload volumes is the biggest challenge. The recent integration of our Helicopter Centre of Excellence in Winnipeg increases StandardAero’s ability to respond more effectively to evolving customer needs and the new challenges in the global MRO market.”
Aeromni has utilized the power of digital applications to scale up and down in response to market demands and to ensure it can offer customers the services they need for some time, so while the rest of the world was grappling with sudden moves to online meetings and service provision, the company was well placed, according to Vos: “We were already using many online platforms for business and have virtual assistants in other countries handling our advertising and sales. Zoom has been a great business tool and we have been using it consistently for interviewing, pre-purchase inspections and parts acquisitions.”
Companies have embraced adaptations
In September 2020, Rolls-Royce offered a great example of resilience and adaptation to the needs of customers when it introduced virtual reality maintenance training software for engineers in the US Air Force who needed to carry out work on the C-130 J fleet. It was a bold move by Rolls-Royce, and signaled the first such training system to enter service with the US Air Force’s 58th Maintenance Group, part of the 58th Special Operations Wing, which flies HC-130J and MC-130J aircraft.
According to Rolls-Royce, the software enables students and instructors to practise on a virtual AE 2100 engine, replicated in form and function. US Air Force Col JB Baquet, the 58th MXG Commander, says the innovation would enhance the evolution of training, pointing out that while the pandemic continues to wreak havoc on travel for any reason, different ways of learning must be applied: “We must transform the way we learn,” Baquet explained. “The VR maintenance system will enhance training efficiency, shorten the learning curve, accelerate skill levels, and improve fleet readiness.”
Having a wide enough scope of business operations has allowed many companies to survive the economic challenges brought by the pandemic
Having a wide enough scope of business operations has allowed many companies to survive the economic challenges brought by the pandemic. StandardAero has been designed to cope with the cyclical nature of the aerospace industry, according to Hughes: “Our multi-sector balance of aerospace businesses provides a natural hedge to protect our company in times like this. Despite the challenges, we have been able to stay open and serve our customers, while many of our competitors have not. As a result, we have even gained some new customers and this will serve to support future growth when we recover from the pandemic.”
In August, Canada’s WinAir announced its Virtual User Summit, an online client conference event series. Previously supposed to take place in Canada and Australia, the move gives customers increased flexibility to choose which events they attend. The company noted: “By hosting its 2020 WinAir User Summit online, WinAir maintains its commitment to assisting its clients in achieving operational success. With these online conference events, WinAir clients will receive the same benefit as attending our in-person Summits, but through interactive online presentations that will help them with accelerating and improving their processes.”
The MRO sector was predicted to boom over the next few years, as special mission operators invested in their fleets, either through upgrades or new airframes. So, does Rikkert Vos think that 2020 will signal a sea change for the MRO sector as a result of budget cuts, etc.? He commented: “Many operators have either shut down until conditions improve or ceased operating completely. Some of our customers were planning upgrades for 2020 and followed through. Although lots of potential MRO projects have been shelved until business conditions improve. With so many airframes for sale and pricing at a fraction of new, I don’t foresee a demand for new helicopters. Unless of course you are a government agency for example, search and rescue, medevac or police.”
Hope for the future of MRO service providers?
Really, the hope for so many industries – not least aviation service support providers – is for a vaccine to halt the spread of coronavirus, and open the world back up to the travelling public. While MRO service providers have worked hard to adapt to the new norm or everything going online, there remain improvements that can be made.
Taking MRO digital has led to improved accuracy in services, but there is still some way to go, Hughes told AirMed&Rescue. “It is slowly creeping into our industry,” he said, “but we are still way behind other industries. Engine data and analytics have always been important in our industry. Faster, more accurate and predictive technology can and will be applied as it is proven and cost effective.”
Once there is a vaccine, said Vos, the world can begin its recovery: “Aviation should get back to business and demand should pick up. Hopefully oil prices and commodity prices rise and capital flows enter undervalued sectors in the economy and spur helicopter demand and investment.”