Aircraft deliveries to airlines will total about 20,000 over the period, so retirements of older technology will accelerate to about 10,000 during that time. The accelerated rate of new aircraft deliveries will result in a massive technology shift over the period. By 2027, 58% of the fleet will be new-generation aircraft.
The MRO industry will need to evolve significantly over the next 10 years to meet changing demand driven by growth, geographic shifts, fleet mix trends, and new technology.Tom Cooper, VP, CAVOK
Meanwhile, the retirement of aircraft will remain brisk. Small regional jets and narrow-bodies have been the predominant source of aircraft retirements, resulting in a surprisingly young retirement age of about 18 years. However, with many of these smaller-capacity aircraft now purged from the fleet, the industry can expect retirement ages to climb again as retirement selections will naturally revert to older, larger-capacity aircraft. The significant increase in retirements will continue to fuel the growing Used Serviceable Material (USM) market. Increased USM has the potential of reducing material costs for airlines and the Maintenance, Repair, and Overhaul (MRO) sector.
Net fleet growth by world region will be uneven, resulting in changes in regional size rankings over the period. The major growth engine will be Asia, especially China and India, which will become the largest region, nearly doubling in in-service fleet and related MRO demand. By contrast, North America will experience little absolute growth, although there will be a significant upgrading of the fleet over the period. North America will slip to the third-largest region, behind Asia and Europe.
Fleet mix will change appreciably over the period. Narrow-body aircraft will grow faster than the other classes. The regional jets and turboprop fleets will shrink in their share of the fleet, while wide-body aircraft will hold flat. By 2027, the shifts will result in a narrow-body share of 65 percent and wide-body share of 21 percent, while the smaller regional jet and turboprop fleets will slide 10 points to a combined 14 percent share.
New-generation aircraft (designed and built after 2000) are introducing improved operating costs and new technology that will require significant investment. The technology includes new construction materials (carbon fiber composites, hybrid alloys, and special coatings) as well as new data collection and measurement tools designed to provide advanced prognostication capability. Properly harnessed, the capability for maintenance organizations to take action before a component fails promises to improve reliability and reduce costs. The challenge is that there are not yet proven systems to accept and analyze the data for proactive decision-making.
During this period, each of the fleet complexities translates to significant changes and challenges for the MRO sector. Commercial airline MRO growth will be healthy at 3.8% compound annual growth rate (CAGR) over the 10-year period, growing from the current demand of $75.6 billion to just over $109 billion by 2027.
Similar to fleet growth, Asia will experience the bulk of the increase and will be challenged to build the infrastructure and new facilities as well as train a workforce to keep up with the rapidly rising demand. At the same time, the North American MRO industry will stagnate as its growth comes from stealing share or attracting business from other regions.
The up-gauging of aircraft, coupled with the fast growth of new-generation aircraft, presents some very real challenges for the MRO industry worldwide.
In the MRO space, the original equipment manufacturers (OEMs) will increase their share of the aftermarket with shrewd strategies that have proved successful to date. The shift will definitely squeeze the independent MRO sector, particularly the smaller businesses.
To read more about changes across the ten year horizon, read our summary edition of the Forecast Commentary.
About the Forecast
Oliver Wyman’s 2017 assessment and 10-year outlook for the commercial airline transport fleet and the associated maintenance, repair, and overhaul (MRO) market marks the 17th year of supporting the industry with informed, validated sector-specific data. The forecast is one of the most credible go-to reports for many executives in the aviation industry as well as for those with financial interests in the sector, such as private equity firms, investment banks, and investment analysts.