A multitude of challenges are facing companies involved in the MRO sector, primarily relating to supply chain issues and labour shortages. But the sector is resourceful, as Emma Kelly finds out.
The entire aviation industry is on an excessive growth path,” says Sven Taubert, head of corporate strategy and market analytics at Lufthansa Technik (LHT). “The significant down-scaling during the crisis is creating major challenges in the current scaling-up phase,” he says, with the most prominent being supply chain disruptions and skilled labour shortages, as well as a recent addition involving new generation engines.
LHT is focusing on solutions for the resulting pain. Taubert says: “We have adjusted our stock of materials to buffer extended supply times for piece parts, we utilise our smart work scoping and repair methods, and seek opportunities from used serviceable material [USM].” He also adds that increased USM harvesting has improved its resilience.
Allen Neufeld, Ascent Aviation Services’ senior director of business development, says: “A lot of us were a little surprised by the increased demand. The downturn came quickly during the pandemic, but the process of deceleration is slow.”
The shortage of skilled aeronautical engineers is exacerbating and in some cases is directly contributing to global supply chain issues, he says. “The result is a shortage of key aerospace parts and logistical challenges that have caused lead times for some components to skyrocket, more than a year in some cases. A lot of buffers have been removed along the chain because no one is holding spares anymore, at least not like before.”
Ascent has a multi-faceted approach to supply chain issues, including risk assessment and management; understanding issues like fluctuations or raw material issues; contingency planning; diversifying the supply chain; and having back up suppliers for critical components, says Laura George, director of materials and purchasing, emphasising that strong supplier relationships, cooperation and communication are vital.
Supply chain issues are having a cumulative effect, increasing repair turnaround times, driven largely by manpower shortages and piece part/ raw material production delays, says Mat Punter, AerFin’s vice president repairs. He says, “This in turn is resulting in a longer out of service time for component service providers and operators, resulting in increased stock holding to accommodate and to cover extended out of service time.”
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Punter believes that 2022 and 2023 have seen unprecedented increases in repair costs as OEMs seek to insulate themselves from increased production costs caused by global and local cost escalations, with contributory factors including energy and fuel price spikes, post-Covid recruitment driving up new employee salaries, national interest rate and inflation increases, and the impact of the Ukraine crisis. He says: “Future macroeconomic challenges at a national level will have far-reaching effects across the industry, therefore we must continue to work around the current challenges… and also take pre-emptive measures against future challenges.”
With some parts for new platforms having more than a 12-month lead time from OEMs, AJW has had to invest in increased inventory, says Scott Symington, chief commercial officer, AJW Group. He says: “By holding a larger stock pool, a company can provide a cushion against extended shop processing time, but one must have the size, scale and customer focus to make that investment.”
It is also crucial to have the right systems to monitor customer demands, trends, inventory, outstanding core returns and supplier shop performance in real-time in order to anticipate the market and deploy capital into the right parts, says Symington. “We have contracts with all the large component manufacturers and have layered in multiple third-party MRO suppliers to address vulnerabilities in the supply chain,” he explains. AJW is also vertically integrating the supply chain by further developing repair capability in-house at its London and Montreal MRO facilities.
Like others, AAR is dealing with parts availability related to production disruptions, transportation delays and lingering pandemic effects, all creating shortages, delays and increased costs; supplier reliability issues created by a growing dependence on a limited number of suppliers; non-optimised inventory management stemming from improper ordering and stockpiling of parts, not having enough visibility into parts usage and real-time data; and the rising cost of raw materials, transportation and labour, according to vice president strategy, planning and innovation, Ryan Campbell.
He says: “Addressing these challenges requires a proactive and strategic approach. MROs need to diversify their supplier base, invest in digital technologies for improved visibility and predictive analytics, implement robust contingency plans for disruptions and engage in closer collaboration with key stakeholders to ensure a more resilient and efficient supply chain. AAR is doing this, developing solutions and partnering with external providers to improve inventory management, project variability in part usage and demand, and obtain deeper clarity into parts lifecycle using higher fidelity data.
AerFin’s Punter says: “Inventory metrics and parameters are now further scrutinised and adjusted with even more insight and diligence to ensure maximum availability, utilising not just reactive statistics, but also industry insights and OEM updates to anticipate future challenges at a macro level.” AerFin is placing additional resources and focus on digital inventory solutions to ensure it always has available critical components.
To address labour issues, LHT’s response includes leveraging training capabilities within its Lufthansa Technical Training subsidiary; opening a dedicated engine training and qualification centre in Hamburg; and adding 321 apprentices. It is also focusing on increasing the proportion of female project leads and managers to drive diversity.
Meanwhile, AAR is trying to grow the maintenance technician pipeline through its EAGLE Career Pathway Program; working to increase enrolments at airframe and powerplant schools; creating short credential programmes; and encouraging former military technicians to transition through its Skillbridge partnership with Embry-Riddle Aeronautical University, explains Ryan Goertzen, vice president, aviation workforce development.
Challenges are not going away any time soon. AJW’s Symington says: “We could be looking well beyond 2026 before we see an alleviation of this situation. By then, shop visits would have peaked, and a more regular situation will resume – these things are cyclical.”
“Gazing into my crystal ball, I estimate that the supply chain issues will continue for at least two years,” says LHT’s Taubert, although labour issues will last much longer, especially in the US and Europe.
AAR’s Goertzen sees the labour crisis tightening further as major airlines hire certificated technicians straight from school. He says: “This is almost unprecedented in our industry and shows just how challenging the hiring process has become.” And despite 14 new airframe and powerplant maintenance technician schools starting up in the US since 2018, the population remains relatively flat at 21,000 students.
“We do not have a capacity problem, we have an enrolment and willingness to grow problem that we must collectively work together and solve,” Goertzen says, highlighting the Choose Aerospace programme, launched in the US in 2020, which provides a high school curriculum designed to increase enrolments in maintenance training. It operates in 26 high schools with 550 students, aiming for 10,000 students by 2027. Goertzen says the workforce challenge needs to be addressed nationally – regulations are needed to allow the smooth transition of military aviation technicians to FAA certificated technicians; and immigration must be encouraged in order to attract international talent.
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AJW’s Symington says while the industry is being challenged, it is driving change. “Aviation is always cyclical, and this has created a bubble for all solutions and parts suppliers, but the real positive for me is that AJW is now investing in digitisation to position itself to optimise efficiencies.”
Symington adds: “The ability to quote faster, have dynamic market pricing, improved inventory management, advance visibility of when and where a component is going to be removed, and then allow the customer to track the shipment in real time will allow us to offer levels of service that have a material improvement on our airline customers’ operations.”
AJW’s digitisation includes predictive maintenance to contracted power-by-the-hour customers, trialling RFID tags to track AOG shipments and developing a predictive inventory modelling system for rotable components and a system to predict and manage consumables and expendables. At its Montreal MRO facility, AJW is using dynamic forecasting using AI-supported digital tools that capture historical parts using information at the lowest level, allowing it to construct a detailed forecast using a macro-level demand forecast at a component level. Symington says: “We feed this data to our supply chain team to ensure parts are provisioned as early as possible in the process to build efficiency into shop processing time.”
Taubert says LHT has been at the forefront of digitisation, establishing its Digital Fleet Solutions unit in 2017 and launching the Aviator platform, combining fleet management solutions, data science and engineering expertise with digital services and products. This was followed by integration of flydocs, the digital records and asset solution, and Swiss Aviation Software’s AMOS maintenance and engineering software, creating the Digital TechOps Ecosystem. LHT’s Digitize the Core programme, combining Digital TechOps Suite with fully digitised core MRO processes, will allow LHT “to climb the next step of the MRO industry evolution ladder”, says Taubert.
At AAR, initiatives planned to drive efficiency and increase productivity will “revolutionise how we conduct maintenance”, says Campbell, including potential applications for accessing maintenance manuals using a hands-free, voice-activated interface with intelligent decision-making augmentation.
Ascent is also on the digitisation path, with processes assisting in the diverse and complex daily flow of data. Neufeld says: “Ascent Aviation has begun a transformation in terms of adopting cloud-based system software to coordinate, monitor and improve all aircraft MRO processes, human resources management, sales and marketing activities and hangars, enhanced by analytics.”
Digitisation can provide significant knock-on benefits, says Ben Pinnington, AerFin’s PMO director, pointing to the automation of repetitive tasks allowing staff to focus on higher value activities requiring critical thinking and expertise. He says: “This shift in focus can lead to increased innovation, improved decision-making and the development of more strategic initiatives.”
Digitisation also brings with it data privacy concerns and cybersecurity threats, but Pinnington adds: “Striking a balance between technological advancement while addressing the challenges is key to maximising the positive impact of digital technologies.”
This feature was first published in MRO Management – October 2023. To read the magazine in full, click here.