Insights

Jet fuel prices may be less volatile than a year ago, but airlines should not be lulled into a false sense of security. What airlines are experiencing now is the quiet before another storm. Large fuel price swings will return. The only question is when and which airlines will emerge from the turbulence in the strongest position.

Maintenance, repair, and overhaul (MRO) suppliers have been squeezed to unsustainably low levels of profitability. In the long run, that hurts everyone, including airlines. Part of the problem is the dominant outsourcing model of aggressive, price-focused contracts. A shift to true partnerships will lead to renewed investment and a focus on improving performance, not just cutting costs.

As North American airlines struggle to boost liquidity, one promising source of cash is tapping the component pool, either through an inventory sale-leaseback or through rotable/repairable pooling. European carriers have a broader experience in component pooling, from which North American carriers can learn and create substantial value.

Private equity investors are showing strong interest in the aviation maintenance, repair, and overhaul (MRO) market. But before the deals get sealed, both sides should be more systematic in mapping out strategies for success. This commentary discusses four specific strategies private equity investors may leverage in this industry.

Component maintenance can account for up to one-fifth of total maintenance costs for an airline, yet many airlines still purchase component repair services inefficiently on a part-by-part basis. This white paper details a more effective approach for airline executives, one that leverages supplier capabilities and thereby reduces costs and risk while also improving performance and reliability.