In an interview with MRO Management, Joshua Ng discusses the APAC region’s current and future impact on the global MRO market.
How does Alton Aviation Consultancy assess the current state of the MRO market across the APAC region, and are there any notable trends or patterns emerging?
The APAC region is currently the largest region for MRO demand worldwide. Valued at $39 billion in 2023, MRO spending in APAC comprises over a third of the global total. We expect this to remain the case over the next decade, with the compound annual growth rate (CAGR) of APAC MRO spending at 2.5 per cent, outpacing the CAGR of global MRO spending of 2.2 per cent.
China, which comprises almost half of APAC MRO demand, was one of the last countries to relax its Covid travel restrictions. However, this has not translated into a step increase in MRO demand as the Chinese fleet continued to operate domestic flights throughout lockdown, albeit at lower utilisation rates. Continued growth in the near-term reflects the widespread reactivation of aircraft across the region, coupled with so-called ‘revenge travel’ propelling aircraft utilisation upwards and generating spend for utilisation-driven MRO activities such as line maintenance.
In line with global trends, engine MRO constitutes the largest segment of MRO category spend in APAC, at 54 per cent in 2023. The transition from current generation engines to new generation engines will continue to bolster engine MRO spending, owing to a lack of used serviceable materials (USM) availability and technical issues driving early removals in the latter group. Supporting our forecast, we already see engine MRO providers across APAC rapidly boosting capabilities to meet growing demand.
Furthermore, narrowbody aircraft comprise 59 per cent of APAC MRO spend, approximately 5 per cent more than the global figure. Our forecast indicates that spend on narrowbody aircraft will continue to grow at a CAGR of 3.7 per cent over the next decade, supported by a growing narrowbody fleet size.
What are the main challenges for APAC MRO operators, and do these challenges differ from those in other regions?
MRO facilities in the region are struggling to replenish skilled labour that exited the industry during the pandemic. This problem is compounded by a shift in preferences toward white-collar work. Combined with the above average growth rates expected in the region, APAC will have the greatest need for additional aircraft maintenance technicians in the world.
Nevertheless, we believe that APAC MRO operators are relatively well-positioned to tackle these challenges. Rather than a crisis, the tight labour market presents a vital opportunity to rebuild a skilled workforce. Other players are exploring the integration of digital technologies that increase efficiency and reduce the workload for technicians, while enhancing the attractiveness of this line of work.
How do you anticipate the MRO market adapting to support the maintenance and repair needs of eVTOL aircraft?
How the MRO market adapts to the needs of eVTOL aircraft is directly informed by the several major differences between MRO for eVTOLs and traditional aviation. Firstly, eVTOLs will require a significantly lighter depth of maintenance, meaning that we will not see the labour-intensive, costly overhauls of vehicle or vehicle subsystems prevalent in traditional aircraft MRO. Secondly, MRO costs are substantially lower for eVTOLs, largely due to their substantially less complex vehicle structures and systems.
Thirdly, eVTOLs will employ novel vehicle technologies distinct from conventional fixed and rotor wing aircraft, which in turn may accelerate the digitalisation of MRO operations. Key OEMs are already incorporating advanced sensor and analytics technology into aircraft. To the extent that the market for eVTOL grows, we should expect to see these differences reflected in the broader MRO market.
Faced with the opportunity to potentially double their total addressable market (TAM), eVTOL OEMs are expected to maintain a tight grip on the aftermarket. Existing MRO players may be limited to line maintenance and very light on-site work, such as inspection, diagnostics or direct part replacements for defect rectification. They should not count on attractive opportunities to enter this space via traditional supplier agreements with eVTOL operators; exploring collaborations with eVTOL OEMs or entering the nascent inventory management and supply chain solutions space may prove wiser choices.
What are the opportunities in the APAC region regarding eVTOL developments and new aircraft MRO facilities?
We anticipate tremendous opportunity in both eVTOL developments and new aircraft MRO facilities across APAC.
Although the eVTOL aircraft market is still nascent, we are already seeing activity in the region. For example, Seletar Aerospace Park in Singapore has signed two MoUs with Skyports and Volocopter. Per these agreements, the aerospace hub will explore the possibility of establishing an air taxi vertiport terminal and an MRO facility for eVTOLs. Another arrangement between EHang and HAECO was also signed in 2022 to explore opportunities to develop continued airworthiness and after-sales maintenance services in preparation for the launch of EHang’s EH216-S vehicle.
In traditional MRO, many countries continue to invest in the immense opportunities latent in the MRO market. We see firms like AirAsia affiliate Asia Digital Engineering (ADE) rapidly expanding their MRO presence in Malaysia. Other countries to watch are India and China, which are both making significant moves to expand their MRO footprint.
How do these opportunities impact the economy of the APAC MRO market?
eVTOL MRO opportunities are likely to be a net positive for the overall MRO economy as they bring variety, choice and innovation to the market. Firms should consider the first mover advantage they stand to gain by pursuing these opportunities and recognise the need to be agile and flexible in incorporating novel technologies, such that they are not left behind.
As new MRO facilities are being constructed across the APAC region, there is always the risk of overcapacity in the market. The supply chain challenges observed today are temporal and, if the trend of near-shoring maintenance continues, some MROs may not have the scale required for sustained profitability.
Near-term macroeconomic challenges also impose substantive risk to the pace of recovery and present the potential for additional downside pressure to our forecast.
This feature was first published in MRO Management – August/September 2023. To read the magazine in full, click here.