MRO demand optimism back but road ahead still uncertain, says VZM market outlook

Etihad Engineering, MRO management, fleet

Global MRO volume may return to 2019 levels in two years, but it is “a path full of uncertainties”, according to consultancy VZM Management Services in its ‘2022 Market Outlook’.

MRO demand optimism is back after an unprecedented decline due to the Covid crisis, VZM said. Increased traffic will boost demand but “very much depends” on airline recovery speed in coming years, it noted, and with most MROs “hit hard during the pandemic”, the ramp-up “increases the risk of bankruptcies”.

The rapid MRO recovery will exacerbate labour shortages and supply chain constraints, the company forecasted. “There might be insufficient people for the ramp-up with labour shortages driving up wages”, while “already disrupted supply chains must deal with lack of materials while aircraft production increases”.

VZM also noted that the challenges of a changing environment have pushed MROs to be more resourceful to adapt. The company said MROs would need to invest and develop initiatives to attract new people to the industry, while smart apprenticeship programmes and creating an “attractive and innovative” work environment would also help.

The MRO market outlook for 2022. Cartoon by VZM Management Services

Narrowbody aircraft will continue to lead the MRO recovery “although probably at a slower pace”, VZM said. During the Covid crisis, deliveries exceeded retirements which meant the global narrowbody fleet increased by one per cent. The North American market showed the strongest growth, while only in Europe did the narrowbody fleet decrease. In the coming years, VZM expects Asia Pacific to lead the narrowbody MRO growth, as it did pre-pandemic. The region already has the largest narrowbody fleet and holds almost 40 per cent of the new aircraft backlog.

VZM also noted that airlines will rejuvenate their fleets, driven by environmental pressures, which will result in slower maintenance growth.

The widebody MRO market “took a hit” from the accelerating retirement of older aircraft, VZM said in its market outlook. Some 10 per cent of the global widebody fleet has been retired in 2020-21 while deliveries dropped 60 per cent, it said. Europe and Asia Pacific showed the highest retirements, led by 747-400s and A380s. A330s, 767s and 777s will partly return as converted freighters thanks to the booming cargo market, VZM noted.

“The widebody MRO market will be significantly smaller in the coming years than pre-corona expectations,” said VZM. “The maintenance volume will be lower due to a five per cent smaller fleet and a lower fleet growth in coming years.”

Engines will constitute the strongest MRO growth segment, with shop visits picking up. “Work scopes are narrowing to save cash although a tsunami of engine shop visits looms on the horizon,” VZM said. The consultancy expects a trend towards in-situ maintenance, ad-hoc hospital visits and smaller work scopes. Reactivating the narrowbody fleet will see a flurry of engine shop visits with airlines jockeying for pole position, it added. Costs should also increase as engine manufacturers “raised spare part prices by 6-7 per cent to plug revenue shortfall”.

The full VZM Market Outlook 2022 can be downloaded from the VZM website.

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