Increasing Aircraft Utilisation and Expanding Fleets Look Set to Drive MRO Demand in Europe

Frost: Persistent growth in intra-European air traffic between Eastern and Western Europe as operators capitalise on growing world trade activities and air transport liberalisation, coupled with the outsourcing trend led by the low-cost operator business model, will underpin steady growth in the European commercial airframe and engine maintenance, repair and overhaul (MRO) market.The European Commercial Airframe and Engine MRO Market earned revenues of $10.6 billion in 2005 and estimates this to reach $15.2 billion in 2012.

A robust air traffic outlook, combined with the shifting of the airline business model and the anticipated surge in demand for heavy maintenance, looks set to drive significant growth in the European airframe and engine MRO industry .

The enlargement of the European Union (EU) will continue to play a role in stimulating intra-European air passenger growth over the long term. Increasing aircraft utilisation and expanding fleets will parallel this trend thus, in turn, translating into growing demand for MRO services.

Further, the MRO outsourcing trend is expected to increase as legacy carriers continue to streamline their business models with the objective of slashing costs and focussing on core activities in response to the proliferation of low-cost carriers.

A significant number of A320 family and B737 New Generation aircraft, which constituted circa 70 per cent of total deliveries over the peak of the delivery cycle between 1997 to 2002, will experience their first airframe heavy maintenance checks and engine removals and correspondingly create a short-term spike in demand during the forecast period.

However, the increasing vertical integration of OEMs into the aftermarket as well as the opening up of lower-cost MRO facilities in Eastern Europe and the Far East have been fuelling the hyper-competitive climate as the industry continues to recover from various adverse external events. Simultaneously, intensifying demands for flexible commercial/technical solutions in line with operators' re-aligned business models suggest that price is no longer the sole criterion for success, rather perceived value for money is becoming as important.

Establishing and sustaining competitive positioning is fundamental to longer-term organisational growth and profitability. MRO providers must be proactive in identifying the life cycles of their service offerings and continuously exploring opportunities to better fulfil customer requirements in what is largely perceived as a commodity market.

There exists a definite scope to leverage IT across the MRO value chain in in-bound logistics and operations with respect to inventory management and maintenance planning to optimise reliability and quality of delivery. In addition, increasingly sophisticated customer demands warrant the need for firms to seek cooperative agreements with one another with the aim of extending their product portfolios and market coverage. European Commercial Airframe and Engine MRO Market

Publ 20060424