Home' Asian Aviation : AAV June 2017 Contents 28 AsianAviation | June 2017
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 ex-
perience 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. Narrowbody
aircraft will grow faster than the other classes. The regional jets and
turboprop fleets will shrink in their share of the fleet, while widebody
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.
Cooper also believes that aircraft retirements will remain brisk
as older, larger-capacity aircraft reach their operating ends. This in
turn will fuel an increase in the Used Serviceable Material (USM)
market, which in turn has the potential of reducing material costs
for airlines and MROs.
“Similar to fleet growth, Asia will experience the bulk of the in-
crease 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 report said.
Cooper ’s report pointed out that 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 OEMs will increase their share of the aftermarket
that could squeeze independent MRO providers.
“I don’t know if they ’re going to (totally) squeeze out independent
providers, but it will be increasingly difficult to be an independent
provider if you are not aligned with an OEM,” Cooper told AAV. Coop-
er explained that “a few years ago” engine manufacturers were the
first to recognise they could beef up their margins by selling parts in
addition to selling engines and could make more as well by selling
engines as almost like a service with power-by-the-hour contracts.
Cooper said component manufacturers are now tailoring their offer-
ings along those same lines and in the years to come “you’re going
to have to be an OEM or affiliated with the OEM” through a licence
agreement or a joint venture or some other affiliation to survive.
Over the next 10 years, Oliver Wyman forecasts a “significant shift”
of spend away from regional jets and turboprops toward narrowbody
aircraft. Narrowbody MRO spend will see a nearly US$21 billion in-
crease to US$57 billion by 2027, with its overall market share rising
to 52 percent. This share is taken almost entirely from regional jets
and turboprops, as their combined share decreases to just 7 percent
with a total MRO spend of US$7.4 billion. The widebody MRO mar-
ket share remains stable at 41 percent with a total market of almost
US$45 billion by 2027.
Cooper said not only are regional jets and ATRs taking a hit in terms
of popularity, but the “total MRO market is expected to become
increasingly concentrated within a handful of aircraft platforms as
illustrated by the mounting sales of a few platforms like the Airbus
A350 and A320 and Boeing’s 787 Dreamliner and 737 Max .
“ The production rates are incredible” for those platforms Cooper
said, “and the challenge to other manufacturers, the gap is signifi-
cant. Boeing has stopped 757 production and developed the 737 in
a great range of sizes and capabilities and so much (of the market)
is covered by the capabilities of those airframes. There is a market
for a significant number of regional jets and Embraer has been
successful, but the lion’s share was sold into the North American
market for use on feeder services into hubs. We’re seeing general
up-gauging of narrowbody sizes...look at the average seat counts
for A320s and 737s...the trend is to get larger.”
TOTAL MRO SPEND BY REGION
Source: Oliver Wyman Global Fleet & MRO Market Forecasts
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