Unprecedented Airline Industry Growth Creating Bullish Market For Airline Maintenance Sector According To Oliver Wyman

Apr 8, 2019

Aftermarket spending to increase more than $30 billion by 2029

New York…The global commercial fleet will grow to more than 39,000 aircraft in 2029 compared to 27,492 today and the service industry supporting the fleet will grow from $81.9B today to $116.0B in 2029 according to Oliver Wyman’s annual 10-year Global Fleet and Maintenance, Repair & Overhaul (MRO) Market Forecast.

“With the expected growth in the industry, we are seeing participants in all sectors of the market evaluate their positions and many are making investments,” said Tom Cooper, Vice President, Oliver Wyman. “This ranges from original equipment manufacturers (OEMs) acquiring and building out aftermarket services, to independent MROs expanding capacity, to airlines re-entering or building up repair and overhaul capabilities.”

A decade of strong economic growth, combined with a growing middle class around the world, has resulted in the highest ever increase in  aircraft flying expanding schedules. In fact, aircraft are remaining in operation longer than they have before and we see that in lower retirement rates in the past several years.  This trend of older aircraft combined with all the new aircraft being delivered is driving an even greater need for maintenance.  Since the mid 1990’s, many airlines have trended towards outsourcing this maintenance to third parties, however, this trend may be reversing.

“Airlines are expanding in-house maintenance capacity after years of outsourcing it,” said Brian Prentice, Partner, Oliver Wyman. “They are recognizing the need for these capabilities to assure adequate capacity to support their fleet and also the potential to drive commercial activity in a growing market.”

While the aftermarket is bullish overall, Oliver Wyman’s Annual MRO survey, which is a companion study to the forecast, identified some potential aviation aftermarket disruptors.  The prevalence of the OEMs in the aftermarket was one of the biggest disruptors for the MRO industry, followed by labor shortage in the maintenance technician field and finally, industry consolidation.

Over the past decade, larger aftermarket suppliers and OEMs have grown through acquisitions. Over two-thirds of survey respondents believe that a slowdown in the market would add fuel to these activities, as companies would be pushed to find new sources of market and revenue growth.

In a downturn operators and non-operators would act differently.  While both would temper investments and new programs, operators report they would protect their workforce, focusing on negotiating with suppliers and parting out retiring aircraft to reduce costs.  Non-operators, on the other hand would also stop investment but OEMs, in particularly, report they would reduce headcount which may be good news for operators and third-party independents in a labor constrained environment.

About the MRO Survey

The Oliver Wyman annual MRO survey is an industry standard that samples the attitudes and strategies of executives from across aviation as they address key trends and emerging issues in the maintenance, repair, and overhaul (MRO) sector. More than 130 global aviation professionals responded to the 2019 survey, drawn from a cross-section of airline operators, captive airline MROs, independent MROs, and original equipment manufacturers (OEMs). Representatives from leasing organizations, financiers, parts distributors, and advisors rounded out the ecosystem of respondents.  Almost half of respondents were senior executives – either in C-suite posts, vice presidents, or above; nearly 80 percent were director level or above. More than half of respondents’ companies headquartered outside of North America and three-quarters reporting primary bases of operations outside of North America and Western Europe.

About the Global Fleet & MRO Market Forecast

Oliver Wyman’s Global Fleet & MRO Market Forecast Commentary 2019–2029 marks our firm’s 19th assessment of the 10-year outlook for the commercial airline transport fleet and the associated maintenance, repair, and overhaul (MRO) market. We’re proud that this annually produced research, along with our Airline Economic Analysis (AEA), has become a staple resource of aviation executives—whether in companies that build aircraft, fly them, or work in the aftermarket, as well as for those with financial interests in the sector through private equity firms and investment banks.

This research focuses on airline fleet growth and related trends affecting aftermarket demand, maintenance costs, technology, and labor supply. The outlook reveals significant changes that are important to understand when making business decisions and developing long-term plans.

About Oliver Wyman

Oliver Wyman is a global leader in management consulting. With offices in 60 cities across 29 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has more than 5,000 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.