MRO Survey 2014

Original equipment manufacturers won the market for high-value, aftermarket aviation services, leaving independent maintenance, repair, and overhaul providers scouting for paths to evolve and grow.

In our annual aviation survey, we found engine and component MROs are preparing to fortify their remaining footholds through strategic partnering and by accelerating development of unique services. Airframe MROs, meanwhile, seek to capitalize on shifts caused by rising labor costs in emerging economies.

We expect:

M&A in the sector to heat up.
U.S. MROs to step up hiring.
3-D printing to be used to make expendable parts, but not proprietary materials.

3-D Printing on the Horizon

Survey respondents expect additive manufacturing, or 3-D printing, could reduce the cost of replacement parts, but is less likely to affect higher-end spares.

1What kind of strategic partners do MROs need to grow?

MROs seem to be running short on new types of collaboration with OEMs, so they are looking for ways to work with lessors and considering M&A deals to broaden their reach. Working with lessors is key to bidding for engine and component maintenance contracts on new aircraft, as major OEMs almost universally lock up the maintenance business before aircraft are delivered.
2What sort of investors are buying MROs?

Interest in the segment appears to be emanating from all corners, with MROs themselves among the most active investors. Private equity investors are also among the bidders, as well as being active on the sell side.
3What is the hiring outlook for aviation mechanics?

Good. While a few MROs are cutting jobs, most are hiring at least at the pace of turnover. Thirty-two percent of North American, and 18 percent of Western European, MROs are adding jobs.
4Are North American airlines repatriating their maintenance, repair and overhaul work?

Yes, the repatriation trend is clearly gaining momentum. In this year’s survey, 60 percent of airline respondents say they are willing pay up to 5 percent more for MRO services of a domestic provider, and 20 percent indicate willingness to accept up to a 15 percent deficit. Anecdotally, we are seeing investment dollars flowing into building domestic capacity.
5How could new additive manufacturing technology change the aviation industry?

Survey respondents largely expect 3-D printing will reduce the cost of replacement parts and ease investment in inventory. But respondents say the near-term impact will be mostly on expendable parts, while proprietary parts could be excluded from the new manufacturing technique by OEMs seeking to protect their spare parts after-market.