After how 2020 turned out, who would dare predict what 2021 might hold in store for the MRO industry? Step up Alton Aviation Consultancy’s managing director Jonathan Berger (pictured below).
As the commercial aviation industry begins to transition from survival to recovery mode – with Covid-19 vaccinations providing the glimmer of light and hope at the end of the tunnel that the world has patiently been waiting for – 2021 presents the opportunity to start anew, to be optimistic, complete with the anticipation of tailwinds and blue skies ahead. That said, I offer the following eighteen not-so-bold predictions for the coming year.
1. Welcome to the “roaring ‘20s”. Beginning in the summer of 2021, once a majority of the travelling population have been vaccinated, expect passenger demand to recover stronger and faster than conventional wisdom may suggest.
2. The isolation and dislocation caused by the pandemic has pleasantly enabled thoughtful introspection and a re‑prioritisation of what is truly important in life. Hence, the passenger sector with the greatest pent-up demand will be visiting friends and family, followed by vacations and leisure, with business travel as the laggard.
3. A new passenger segment called “vaccination tourism” will become a real thing – and will drive international travel with wealthy passengers from emerging markets flying to wealthy countries with excess vaccines.
4. The airport hassle factor will return. As corporate management are typically much faster decision makers when it comes to employee reductions versus hiring, airlines and airports will struggle to ramp-up staffing fast enough to meet increased passenger demand. This will lead to the return of long wait times at airport check-in and security.
5. After a decade of stagnation for international alliance groups (SkyTeam, OneWorld, Star Alliance), in order to more cost-effectively maintain their global network footprint for their most valuable business travelling customers, airlines will double-down on their commitment to their respective international alliances.
6. There will be numerous additional airline bankruptcies and further consolidation before the year-end.
7. The end of the “roaring teens”. After a decade of historic growth, which included record backlogs, production rates and ever-increasing MRO market share, the era of maximising leverage with airlines and suppliers has come to an end – enter the great OEM humbling.
8. OEMs will reassess their business model with a back-to-basics theme focused on their core competencies of engineering design and manufacturing.
9. Many recently announced OEM vertical and horizontal growth strategies will be unwound and/or sold-off.
10. OEM new part sales will continue to underperform even the most conservative forecasts as clever surplus parts traders and distributors thrive for the foreseeable future.
11. OEMs will begin to exit many of their airframe and component MRO investments (engine OEMs will continue to dominate the aftermarket).
12. The Airbus A220 (formerly Bombardier CSeries) will be a market winner and will garner several significant airline customer orders this year.
13. Boeing will announce the launch of a new, clean-sheet aircraft in order to (a) better compete with the A321XLR; (b) maintain a strong engineering design team; and, perhaps most importantly, (c) restore its confidence/mojo which has been shaken to its core by the 737 MAX debacle.
For MRO suppliers
14. As OEMs pursue their back-to-basics business model, and airlines further accept the value of having maintenance as an outsourced variable cost, at long last independent MRO suppliers will be viewed and respected as critical strategic partners by their airline customers.
15. Given the inevitable growth of the surplus parts market, the highly fragmented parts trading, distribution and on-line B2B platform markets will see consolidation and increased private equity merger and acquisition interest.
16. At least one major airline will monetise its airline-affiliated MRO and will sell a minority stake to an external investor.
17. Several major MRO suppliers will leverage technology to go 100 per cent paperless, causing a domino effect as airlines begin to require MRO suppliers to integrate paperless technology.
As I enter my third decade in the MRO industry, I believe I can comfortably speak for most colleagues when I say “good riddance” to 2020 and welcome 2021. While no one can know for sure how quickly the global economy will recover, we do know commercial aviation and the MRO industry will play a critical role in the transportation and dissemination of the vaccine. And as I’ve written about in the past, MRO is a team sport. 2021 presents us with a unique opportunity to once again demonstrate that when airlines, OEMs and MRO suppliers work together – with a common mission and sense of purpose – everyone wins.
Accordingly, my eighteenth and final prediction for this year is that our MRO industry will successfully play a leading role in expediting the global economic and aviation industry recovery.