MRO Survey 2013: Thrive Rather Than Survive

For independent aviation maintenance, repair and overhaul providers, the world is shrinking as original equipment manufacturers muscle into the maintenance market.

In our annual MRO Survey, Oliver Wyman confirmed this competitive imbalance is deepening. To thrive rather than survive, MROs must bid for long-term maintenance contracts during aircraft selection. They could do so by forming partnerships with aircraft lessors and airframe manufacturers. As the maintenance industry churns, another dynamic could offer hope for US MROs. After years of sending airframe maintenance work overseas, U.S. airlines are quietly considering moving maintenance work back home.

More than half of North American airline survey respondents said they would consider moving airframe maintenance work back to the U.S., even if it cost more. We think this shift could represent more than 5,000 new jobs.

Is it time to consider bringing some overseas aviation work back home?

1Why is the world shrinking for MROs?

Engine and component manufacturers have captured most of the maintenance work on new aircraft over the last several years, effectively blocking independent maintenance, repair and overhaul companies from landing long-term contracts and growing their customer base. This has left MROs to care for aging airplanes that are quickly being retired.
2What does this deepening competitive imbalance between MROs and OEMs mean for airlines?

To counter the control of manufacturers over maintenance, airlines are now negotiating long-term maintenance contracts as they select aircraft and equipment, rather than waiting until after the planes are delivered and flying. Airlines get a better deal from manufacturers, but doing this leaves out MROs and the cost competition they could bring.
3What are airlines doing to counter higher maintenance costs?

Airlines are using more serviceable material, or repaired parts, to control costs. More than half of our survey respondents said they have increased their use of serviceable material during the last three years.
4What are MROs doing to stay in the game?

MROs are trying to partner with manufacturers, with limited success. More than 70 percent of our survey respondents reported reaching at least one partnership with an OEM in the last three years. However, 80 percent of those said that partnership is a licensing agreement, which simply formalize the dominant position of OEMs.
5What should MROs do to thrive rather than survive?

MROs must find a way compete for long-term maintenance work when airlines are selecting new planes and equipment. MROs should consider forming partnerships with airplane lessors and airframe manufacturers. Lessors often represent airlines that could become customers of an independent MRO, and have access to the fleet selection process. And airframe makers haven’t had the same success in the maintenance market as their engine and component peers, making MROs attractive partners.