// . //  Insights //  Turbulence In MRO Growth

The global aviation maintenance, repair, and overhaul (MRO) market has made considerable progress in recovering from the impact of the COVID-19 pandemic, reaching 98% of the pre-COVID 2019 spending peak in 2023. This year, MRO spending is expected to set a new record of $104 billion. Looking ahead, we predict the MRO industry will expand by an annual rate of 1.8% through 2034, reaching $124 billion.

Exhibit 1: Global MRO spending forecast through 2034

Outlook for top MRO industry disruptors

For the third year in a row, when asked what they expect to be the top disruptors for the MRO industry over the next five years, respondents to our 2024 MRO survey cited cost management and labor shortages as the top two disruptors. Coming in third was a newly added category: inflation and/or economic slowdown. After three years of rapid post-pandemic recovery, the industry is concerned about future growth and returning to historic cost increases. Overall, we see an ongoing “back to basics” shift in industry concerns – more focus on cost management and less on emerging technologies.

Exhibit 2: Top disruptors, 2019-2024
As ranked by survey respondents

Note: No ranking available for 2020

MRO labor cost and attrition trends

The magnitude of labor cost increases for MRO has become unsettling, jumping by a hefty 7.3% on average worldwide last year. For 2024, survey respondents expect overall labor costs increases to slow to 5.8%. This is still high compared to pre-pandemic labor rate increases of 2-3% a year, but will be welcome if it holds true.

Exhibit 3: How much do you expect your company's maintenance labor rates to grow over the next year?

Despite wage increases, the industry is having trouble holding on to the talent it needs. More than half of survey respondents saw frontline labor attrition of 5-10% last year. By geography, North America had the highest attrition (11.5%). For 2024, about half of respondents expect attrition to stay the same, and nearly a third expect it to decrease, which could signal that a period of labor stability is nearing.

To combat the high cost and scarcity of labor, respondents are using various strategies to increase frontline productivity. The most popular include better planning/workforce allocation, eliminating paper, optimizing maintenance programs, and increasing focus on continuous improvement. Operators are looking to make use of Integrated Aircraft Health Management (IAHM) – which is likely to be adopted as an industry standard in the future – to improve maintenance programs.

Navigating MRO supply chain and material challenges

Similar to labor, supply chain issues and material costs are weighing heavily on the industry. Material costs climbed by about 8.3% last year, according to survey respondents, well above pre-pandemic inflation of 3-4% a year. Survey respondents are hoping next year will be better, anticipating material cost inflation to fall to ~6.5% in 2024.

About half of industry participants expect it to take 1-3 years to resolve current supply chain challenges. One complicating factor has been the ramp up of new engine platforms, which are expected to save fuel but are experiencing durability and reliability issues. We also asked respondents about supply chain strategies trending in other industries: Nearly 20% of operators said they might insource more, including airframe and component maintenance. About 40% of MROs/OEMs expect to outsource more, particularly components and engines. And nearly 30% of operators expect to nearshore more, while half of OEMs/MROs expect to do so. Respondents are particularly interested in nearshoring airframe and components.

Progress in MRO technology adoption – despite challenges

In our experience, the speed of technology adoption is slower in the MRO industry than in other areas of aviation and comparable industries. Nearly all survey respondents agreed. Around half cited as reasons regulatory hurdles/worries and the lack of a clear business case to justify investment. But the industry still is investing in new technology: The top ranked in our survey overall were frontline mobility, paperless operations, and MRO system/information technology modernization. This makes sense in light of increased labor costs and a need to improve new worker productivity.

Operators also cited a high level of interest in predictive maintenance for their fleets, while MRO/OEM respondents ranked both virtual and augmented reality as well as additive manufacturing/3D printing highly. Across all technologies where investment is being made, three-quarters of respondents said they are receiving value that is on par with or exceeding their expectations.

We also asked about trending artificial intelligence (AI) as part of this year’s survey: 85% of operators and 46% of MROs said they are investing in AI, but 80% said they have seen little value so far – not surprising so early in the technology cycle. Respondents recognized the potential for widespread application of AI, including in inventory forecasting, engineering, and supply chain functions. Currrently, however, respondents see less value in high profile, critical tasks like hazard identification/warning, auditing, and inspections, where human input/intervention is the default approach.

Exhibit 4: Where do you see the application of artificial intelligence being the most useful in future MRO activities?

About the MRO survey

In its second decade, our annual maintenance, repair, and overhaul (MRO) survey is an industry standard that samples the attitudes and strategies of executives from across the aviation industry, as they address key trends and emerging issues in the MRO sector. 

Nearly 150 global aviation professionals responded to this year’s survey. Survey participants were drawn from a cross section of airline operators, airline and independent MROs, OEMs, and others. More than half of respondents were senior executives (C-suite or vice presidents) and 82% were director level or above. Three-quarters of respondents’ companies are headquartered outside of North America.