Bernie Baldwin reports on the outlook for MRO in Europe over the next couple of years, including current and expected challenges and the ways they may be overcome.
Assessments of the MRO market in Europe in recent years have almost always incorporated an element relating to the emergence of the industry from the effects of the Covid-19 pandemic. However, reference to that period is decreasing, as the traffic figures reported by airlines are mostly now ahead of 2019’s figures.
To get an overarching assessment of the current position of the MRO market in Europe, it is necessary to take account of many factors, including one in particular which was exacerbated by the pandemic, namely supply chain pressures. Adam Guthorn, managing director at Alton Aviation Consultancy, offers his take on how Europe’s MRO departments and independent providers are being affected by such factors and how they addressing them.
Maintenance personnel
“Across the MRO industry – and particularly in Europe – a shortage of skilled labour is adversely impacting the growth ambitions of MRO suppliers,” he begins. “Continued strong demand for air travel coupled with supply chain challenges for aircraft OEMs is leading to lower than expected deliveries of new aircraft. As a result, airlines are flying older, more maintenance-intensive aircraft longer, and therefore require more maintenance personnel to support operations.”
Guthorn continues: “Airlines and MRO suppliers are competing for the same pool of skilled labour, and airlines often win on compensation and benefits, leading MRO suppliers to invest in digital technologies and expand operations into relatively less labour-intensive segments such as engine and component maintenance (vs labour-intensive airframe heavy maintenance) as well as investing in training to secure a pipeline of skilled labour.”
Older aircraft, flying longer
Daniel Hepworth, senior sales director for Western Europe at Lufthansa Technik (LHT), highlights two major elements to the European maintenance arena. “On one hand, the MRO market is still experiencing a challenging supply chain situation in many areas, affecting turnaround times (TATs) and disrupting planning windows,” he notes. “The pressure results from several factors – a lack of material in the system, a lack of people, the retirement of highly experienced staff, longer OEM delivery times due to longer lead times on raw materials and a supply competition between new production aircraft and the aftermarket.
“On the other hand,” he continues, “older aircraft are flying for longer, leading to higher maintenance demand. New generation aircraft, however, also have significant in-service issues, especially on the engines, but also on some airframe component systems, causing huge disruption and affecting aircraft availability.
“At the same time, significant cost pressures on labour and material are eating away at margins and driving higher prices. OEM consolidation has not helped as now there is often a lack of competition and choice. There are many instances of single sources for certain critical parts which needs to be looked at by the airframe OEMs,” Hepworth advises.
“At Lufthansa Technik, we are tackling these challenges head-on with a wide range of actions. First, we have initiated a huge recruitment and training drive that is already bearing fruit. Globally, we recently surpassed the 23,000-employee mark again and are planning to employ at least another triple-digit number of people by year-end.
“In doing so, we put strong emphasis on making aviation an attractive industry to work for all generations and genders – from the more than 300 young apprentices that have just recently started their career with us to our ‘senior experts’, the retirees helping us to retain precious knowledge in the company by regularly getting back to share their enormous experience with younger colleagues,” he adds.
“Secondly, we put strong emphasis on our repair development and in-house repair capability; we are the leading repair developer, harnessing our vast experience and skills to find cheaper, faster, more reliable alternatives to the original OEM repair. In fact, many OEMs partner with us for exactly that reason, helping to improve their products.
“Thirdly, the advancement of information technology is paramount, and we continue to invest significantly in digitalisation, process management and efficiency, predictive maintenance and connectivity,” Hepworth emphasises. “Finally, we leverage our size. With our know-how and experience, we make sure that we are at the forefront of all major new engine and airframe types with the most comprehensive licensing agreements, such as our CFM Branded Services Agreement with CFM International on LEAP engines.”
Growth vs challenges
Mikail Akbulut, chief executive of Turkish Technic, believes Europe’s MRO market is currently characterised by both opportunities for growth and significant challenges. “Market growth is being driven by steady demand for maintenance activities due to increasing numbers of aircraft, passenger traffic, airline operations and ageing fleets. However, all these opportunities bear potential challenges,” he points out.
“Among the biggest challenges for MRO providers are the supply chain issues, such as late delivery of new parts, increasing TATs, increasing cost of material and longer logistic days,” Akbulut explains. “One of the most significant challenges is OEM-related problems. We are seeing bottlenecks, especially on the production side, having a disruptive effect and negatively affecting airline operations.
Akbulut continues: “In response to these issues, MRO companies are implementing several strategies. Working on alternative methods to reduce dependency on a single source, investing in advance technologies to provide better management of MRO operations, local sourcing of related parts or services to reduce TAT, operational costs and logistics to name a few.
“Investing in advanced technology is a must in order to be competitive. Technologies such as IoT (Internet of Things), AI (artificial intelligence) tools, predictive maintenance, parts repair and management tools and real-time data tracking tools are helping MRO providers.”
This article continues after the below picture…
(L-R) Scott Symington, chief commercial officer at AJW Group, Adam Guthorn, managing director at Alton Aviation Consultancy, Mikail_Akbulut, chief executive, Turkish Technik, and Daniel Hepworth, senior sales director for Western Europe, Lufthansa Technik
Strategies to overcome pressures
A major player in the supply chain sector is AJW Group. Chief commercial officer Scott Symington offers the strategy his company is taking to counter supply chain pressures. “We’re adopting a multifaceted approach and addressing both immediate concerns and longterm sustainability. We’re investing in inventory and enhancing collaboration among stakeholders,” he begins. “By expanding our European MRO facility, AJW Technique Europe, and growing our regional support hubs, we have mitigated many of the issues that have arisen to offer our customers reduced TATs and improved efficiency while facing the challenges related to geopolitical unrest in the region.”
Also working on responses to the supply chain situation is MTU Maintenance, according to Andreas Kalina, the company’s vice president of marketing and sales Europe, Africa, Baltics and CIS. “We have a number of solutions to counter volatile supply chain dynamics,” he confirms. “Our procurement departments and our leasing and asset management outfit in Amsterdam, MTU Maintenance Lease Services, have the task of trawling the market for new and used material on an ongoing basis. Whenever necessary and possible, we collaborate with industry partners to purchase decommissioned aircraft in order to harvest the engine parts.
“We also aim to conduct repairs in-house as much as possible, because it beats replacement. While MTU Maintenance Hannover has a broad range of repair capabilities and leads the network as the centre of excellence for the development of new repair procedures, MTU Maintenance Serbia (our latest location just outside Belgrade) specialises in seven repair clusters for high-value parts for several engine models. Having repair capabilities both in Europe and throughout our global network mitigates our dependence on the supply chain,” Kalina remarks.
Teardown and USM market
Related to the supply chain, and already mentioned by the MTU vice president, is the teardown market and used serviceable material (USM) supply. He assesses the market’s vibrancy and the expectations for aircraft and engine availability for future supply.
“There is a lot of competition on the used parts market, with a lot of buyers but too few parts to fully satisfy demand. The scarcity has driven up prices, especially for current and older generation engines, such as the CFM56, V2500, CF6-80 and GE90-110/115B,” Kalina observes.
“In the wake of slower than expected deliveries of new aircraft, current generation engines are not being retired at the rate that was originally anticipated. Engine operators now avoid teardowns by having their existing assets rebuilt with serviceable parts. That way, they can still squeeze out as many flight hours out of the engines and cover the demand.
“Despite this situation, MTU is still in a very good position because we prefer to strategise and forecast our USM stock levels well in advance. By doing so, we can compensate for market volatilities. Action is, of course, always better than reaction,” Kalina states.
Alton’s Guthorn has a similar observation. “The teardown and USM market continues to be white hot, with demand for assets outstripping supply, and prices being bid up with fierce competition on any sales, particularly for current generation narrowbodies (737NG and A320ceo),” he comments.
“Years of low retirements (around 300-350 aircraft per year 2021-2023, down from 460 in 2019) due to growing air traffic demand and service/delivery issues with next generation aircraft, have restricted teardown feedstock and USM supply, so parts traders are having to look for creative sourcing solutions. This includes moving up the value stream to purchase lease attached assets or making future purchases to lock-in supply of assets,” Guthorn adds.
At Turkish Technic, Akbulut also sees the teardown market in Europe as very dynamic. “It will continue its growth in the coming years thanks to aircraft retirements, as airlines update their fleets with new generation aircraft and retire their aging aircraft. This enables retired aircraft to enter the teardown process, which will provide a very valuable source for USM,” he notes, adding a more confident note about the sector. “As the number of retired aircraft is increasing, USM supply is getting strong. High-demand components from widely used aircraft have a more dynamic market while less common components may be harder to find.”
LHT’s Hepworth takes a somewhat different view. “The teardown market continues to be constrained due to passenger growth demand on one side, and new aircraft production delays or prevailing new engine troubles on the other, meaning that older aircraft are flying for longer,” he argues. “Here again, we use our size and buying power to make ourselves a very attractive proposition for anyone selling used aircraft. We do not expect the constraints to ease dramatically in the next two to three years.”
AJW’s Symington, too, believes there is a USM shortage for similar reasons. “The bottleneck situation at the repair shops is another key factor in the supply and demand equation and since USM prices are primarily pinned to the OEM CLP (catalogue list price), they are following the market and rising,” he explains. “While nobody can predict when the market will rebalance, basic economic theory dictates that prices are trending higher in line with increased demand, and it will take some time to alleviate the situation entirely. “The European MRO sector is experiencing high demand for engine spare parts, particularly affecting the narrowbody engine market,” he continues. “Engine availability is expected to remain constrained due to ongoing supply chain disruptions. Operators are increasingly turning to leasing and extending the use of existing engines to manage costs and to meet their operational needs. The market for CFM56-5B, CFM56-7B and V2500-A5 engines is set to expand, with around 1,500-2,000 shop visits expected, as half of the 20,000-strong fleet has yet to undergo major maintenance.”
Setting the immediate challenges aside, Symington offers a view of the overall market in Europe over the next 12-24 months. “Aircraft delivery delays and in-service issues are contributing to longer TATs, making it crucial for MROs to prioritise inventory strategies,” he stresses. “There is also a growing demand for USM as operators are looking for ways to overcome the OEM manufacturing delays. This trend suggests the market will continue to expand, despite the challenges.”
Demands and expectations
Giving the analyst’s view of the next 12‑24 months, Guthorn believes that strong air traffic demand will continue to drive fleet growth, utilisation and MRO demand. “As supply chain challenges gradually improve, airlines and independent MRO suppliers will focus on improving operations, with airlines looking to bring certain activities in house and independents exiting markets in which they can no longer compete – such as the recent acquisition of SR Technics’ Malta heavy maintenance base by easyJet,” he observes.
“Increased production of next-gen aircraft will allow airlines to continue their fleet renewal programmes, freeing mature aircraft for retirement and part-out, replenishing USM stocks and easing cost pressures for airlines. Well capitalised MRO suppliers – such as Lufthansa Technik through its announced ‘Ambition 2030’ – will continue to invest for growth on future platforms through facility expansion, strategic partnerships and joint ventures,” Guthorn forecasts.
For LHT’s Hepworth, the worst for the supply chains is over. “The overall material situation is starting to stabilise to a new normal level, albeit less optimised than the world we knew pre-pandemic,” he says. “At the same time, airline expectations and maintenance planning are also adjusting to the new reality of scarcer resources.
“Europe is adjusting its capacities, supply chains and maintenance strategies to the post‑pandemic world, although its fleets are growing at a slower pace compared with other geographical regions. Moreover, we are now seeing some consolidation on the airline side. Some consolidation is also likely among MRO providers, and we do not expect a lot of new entrants to the market,” Hepworth predicts.
“Europe remains the home and largest market for Lufthansa Technik. Not surprisingly, our global Ambition 2030 programme also entails plans for ‘inorganic’ growth, for example through acquisitions. We also plan to grow on our own in Europe, for example by establishing a whole new facility for component MRO and engine parts in southwestern Europe,” he announces, adding that details will follow soon.
This article continues after the below picture…
Drone inspection is becoming more and more popular
Turkish Technic’s Akbulut is optimistic about the near future for MRO in Europe. “The demand for MRO services is booming. Airline fleet expansions will require higher maintenance needs, affecting the market in a positive way,” he declares. “Merger and acquisition activities are expected to take place. For the next 1-2 years, larger MRO companies may acquire smaller or different service companies to gain competitive and also geographic advantage.”
Akbulut adds: “The continuous evolution of technologies will also play a significant role in the surge of the MRO sector, directly enhancing maintenance operations. As MRO providers compete to improve efficiency, reduce TATs and explore sustainable practices, the market will continue to flourish.”
Kalina at MTU Maintenance is more circumspect about the coming years, arguing that the growth rate in commercial flying has cooled somewhat recently. “From an MRO service provider perspective, there are a number of challenges with which we will be dealing over the next year or two. The supply chain is still a problem, though recently it has been tending towards a better place. Because there are fewer retirements and new aircraft are behind delivery timelines, currents assets are being operated longer than originally desired. This has the effect that MRO shop capacity is under pressure while demand for maintenance is on the up,” he opines.
Beyond the overarching scene, Europe’s providers of MRO are constantly improving their support programmes and capabilities, and Kalina notes some trends there too. “Today, it is all about flexibility, and one way to increase that is by harnessing the potential of large sets of engine data. That allows us even more insight into the workings of a customer’s engine and enables us to tailor our services even better than before,” he reports.
“On the operational side, on-site work has been very popular as an alternative to shop visits, especially for smaller on- and near-wing workscopes. MTU operates a global network of seven ON-SITEPlus facilities, including a range of level one shops, and staff are on call 24/7. Whenever possible, we carry out repairs on-wing or at the customer’s site. This reduces downtime as well as total cost. It also extends the on-wing times of our customers’ engines,” Kalina states.
Alton Aviation Consultancy’s Guthorn concurs. “Mobile engine support and engine hospital shops are proliferating amongst major MRO providers as mature engine platforms begin their phaseout and next-gen engines work through technical issues and shorter time-on-wing intervals than their predecessors,” he notes. “As airlines look to avoid costly overhauls and associated months of engine downtime, targeted repairs can be performed on-wing or lighter workscopes carried out in a hospital shop to maximise engine time-on-wing.”
Digitalisation and sustainability
According to Symington, MRO providers like AJW Group are focusing on offering tailored maintenance services. “This reflects the growing demand for more customised solutions, such as our power-by-the-hour-type programme,” he elaborates. “More predictive maintenance is another trend, allowing airlines to enhance efficiency and reduce downtime by anticipating issues before they arise. Workforce challenges, however, remain a significant concern as the industry struggles to attract and retain skilled technicians.
“There is a big focus on sustainability across all global industries, not just aviation. As such, AJW is incorporating eco-friendly practices and solutions into its operations, and we have embraced innovation and technology to improve our service delivery and operational capabilities,” Symington reports.
Turkish Technic’s Akbulut sees several key developments shaping the MRO landscape. “Currently, MRO companies tend to offer comprehensive packages, which include predictive maintenance implementations, real-time data tracking, complete support and so on. The main reason is to provide tailor-made solutions to customers from A to Z and also being more flexible,” he remarks.
“This highlights how digital transformation is another important trend. MRO providers are consistently investing in advanced software solutions to streamline processes, optimise inventory management and enhance supply chain visibility,” Akbulut adds. “Automation is also becoming a prominent trend in MRO operations. Robotics and automated systems are gradually being used for tasks such as inspection, repair and parts replacement. This not only improves accuracy and efficiency, it helps in reducing labour costs and minimising human error.”
Akbulut continues: “Strategic partnerships are more critical than ever, and companies will be seeking these in aircraft maintenance, engine maintenance and component maintenance. Merger and acquisition activities are also widely expected. Last, but not least, technician education and training will play a crucial role in the market. In the coming years, the demand for technicians is expected to exceed the number of technicians available. MRO companies are therefore leaning towards training their own technicians.”
While emphasising the need for MRO providers to keep doing the basics well, Lufthansa Technik’s Hepworth foresees an increase in digitalisation, enabling associated efficiency improvements in the workflow as well as in planning and decision making. “At LHT, we aim to enhance our MRO solutions to give our customers even greater transparency, and a greater level of detail about the progress of an asset within its MRO process. This will enable better planning and quicker adjustments in customers’ own operations,” he concludes.
This feature was first published in MRO Management – October 2024. To read the magazine in full, click here.
The post MRO in Europe: Predominantly positive predictions appeared first on Aviation Business News.
