Widebody MRO: Navigating uncertain times

The drastic cuts in long-haul international passenger travel resulting from the Covid-19 crisis will resonate throughout the widebody MRO market for years to come, but growth ultimately will return. The important question is, when? Chris Kjelgaard reports.

[This article first appeared in MRO Management September 2021, which you can read in full here.]

Never previously having faced a global traffic crisis like the one which the Covid-19 crisis forced on the air transport industry in early 2020, the world’s airlines and their MRO providers are facing the future with some anxiety.

For no sector of the industry is this truer than for the long-haul passenger travel market and the associated widebody MRO business. Even the most optimistic forecasts predict that long-haul international passenger travel won’t return to pre-Covid-19 levels until at least 2023 or 2024.

While all passenger air travel practically ground to a halt in early 2020, domestic travel in a number of major country markets – notably China and the USA – rebounded quite quickly. Today those two domestic markets, the two largest in the world, are recording passenger numbers nearly as high as they were in the pre-Covid peak of late 2019. As a result, utilisation of the single-aisle aircraft that operate the vast bulk of the flights in those domestic markets has returned to levels close to those achieved in 2019.

Similarly, the numbers of single-aisle aircraft – particularly regional jets – flying in those markets has bounced back rapidly. Temporarily parked narrowbody jets have been returned to service en masse and new deliveries are immediately being pressed into service to bolster available capacity. That is so much the case that some major carriers – particularly in the USA – have experienced widespread operational issues as they have tried to ramp up capacity very rapidly to meet returning demand.

However, the same isn’t true for the bulk of the world’s widebody aircraft fleet, particularly the aircraft configured mainly to carry passengers rather than cargo. The near-complete disappearance of long-haul travel almost overnight in 2020 led the world’s airlines to store well over 1,000 of their passenger widebodies at airports and airfields with available parking space.

Quite a few of these aircraft were on leases due to end in 2020 or 2021 in any case, according to Phil Seymour, president of aviation technical consultancy IBA Group. Where airlines could terminate the leases early, they did, and took the widebodies out of service as soon as possible. The widebodies’ lessors immediately put the aircraft into storage and deferred as much maintenance on them as they could.

Soaring freighter utilisation

The mass parking of widebody aircraft quickly created scenes of vast fleets of widebody jets grouped at various unlikely locations throughout the world – such as at the usually quiet airport serving the famously hot Australian desert town of Alice Springs, which is hundreds of miles from the nearest large city and isn’t on any major non-Australian carrier’s normal route network. At times in 2020 and 2021, more than 120 widebody jets at a time – many of them operated by Cathay Pacific Airways and other Hong Kong-based carriers – have been parked at Alice Springs, the airport having had to clear large new areas of flat ground to accommodate them.

Meanwhile, however, the sudden removal of much of the world’s supply of belly cargo space in passenger widebodies and the equally sudden requirement for vast amounts of personal protective equipment to be shipped throughout the world created a boom market for widebody freighter capacity. Freighter utilisation levels soared to well beyond what had been the norm in 2019 and utilisation-driven MRO requirements for those aircraft increased accordingly. Capacity on production freighters and converted freighters such as 747-8s, 747-400s, 777s and A330s became as hard for shippers to find as gold. Forwarders which already had long-term whole-aircraft or blocked-space capacity agreements benefited in competitive terms.

Some airlines quickly decided to put a few of their passenger widebodies back into service purely so the carriers could fly the aircraft on long-haul routes to make use of the belly-cargo capacity the big jets offered. Although this kept those aircraft operating, their utilisation rates overall were generally less than they would have been had the aircraft remained in normal passenger service. Consequently, the need for utilisation-driven engine and component maintenance on such aircraft fell somewhat, according to Yann Cambier, a principal in ICF International’s MRO consulting practice.

Another similar tactic some carriers adopted was to remove the seats from a few of their passenger widebodies and quickly rig the jets’ passenger cabins with nets and cargo restraints to allow the aircraft to carry main-deck bulk and/or palletized cargo. This practice – often focused on larger twin-engine widebodies such as 777-300ERs and A350s – created what came to be known as the “preighter” (passenger freighter) market, according to Seymour.

Deferred maintenance

While the higher utilisation levels that production and fully converted freighters experienced from early 2020 quickly drove an increase in line maintenance and other utilisation-driven MRO work on those aircraft, it could not compensate for a major downturn in widebody MRO work overall as airlines deferred engine and component work on their stored passenger widebodies. Decisions by some airlines to put passenger widebodies into deep preservation also allowed them to defer calendar-driven airframe MRO on the aircraft until the point the widebodies were de-preserved.

All of this – and particularly the fact that many of the widebodies put into storage in the early months of the pandemic are likely never to return to service at all, but will be parted out instead for the green time in their engines and components – has created a complicated outlook for widebody MRO throughout the next few years, according to Seymour.

One point is very clear, Seymour and Cambier agree. This is that the widebody types worst affected by the Covid-19-driven passenger-traffic downturn were the fuel-thirsty and maintenance-intensive four-engine aircraft still in passenger service – the Airbus A340-600, the A380 and the Boeing 747-400. Most airlines very quickly grounded their entire fleets of the three types. For instance, notes Seymour, British Airways decided to accelerate by three years its planned retirement of its 23 remaining 747-400s and permanently withdrew them from service in 2020. It isn’t likely that any parked passenger 747-400s will ever return to service other than as freighter-converted aircraft.

Many of the A380s that airlines grounded as the pandemic intensified were approaching 12-year calendar checks on major airframe items such as landing gear units, says Seymour. At this stage it looks likely that very few A380s other than those in Emirates’ big fleet may not ever have those checks and will never return to passenger service, he says. He adds that because the A380 has “a great lower deck for volume cargo”, it is possible that “a handful” of now-stored A380s might eventually return to service “for Combi-type use – but there is so much other choice with the [converted] A330 or 777, why use an A380?” he asks.

The widebody deferred-maintenance picture is complicated further by the fact that many (if not all) major international carriers decided to operate with their most efficient or smaller widebody types what remaining long-haul passenger services they kept during the Covid-19 crisis, according to Cambier. In many cases this meant, for instance, that a carrier would replace a 777-300ER on a long-haul passenger route with a more efficient, lower seat-capacity 787-9; or use an A350-900 in place of an A380 or 747.

As a result, although in peak pandemic periods the utilisation levels of 787s and A350s fell well below what they had achieved in 2019, those two types in particular managed to record high utilisation levels in 2020 and 2021 compared with other passenger-widebody types. In Air France-KLM service in 2020, the 787-9 achieved 70 per cent of the utilisation rate it had recorded in the previous year, before the pandemic began, AFI KLM E&M executive Flip Martens told MRO Management recently.

A330 and 777 MRO

The Airbus A330ceo family and the 777 family present slightly unusual cases in terms of assessing utilisation-driven and calendar-driven MRO requirements in the next few years. Utilisation rates for A330ceos and 777s were falling even before the Covid-19 pandemic began, as some operators started storing examples of those types and replacing them with more-efficient 787s and A350s in passenger service, says Seymour. Some A330s and 777s, particularly older A330-200s and A330-300s and all members of the 777 family except 777-300ERs and 777Fs, face a future of being parted out for reclamation of any green time in their engines and components or (in the A330’s case) for conversion to freighters.

The A330-300 P2F conversion programme and – to a slightly lesser extent – the A330-200 P2F conversion effort are rapidly gaining momentum as the Airbus family is increasingly being seen as the natural and even more capable successor to the highly successful 767-300ER in the freighter-conversion market. As the supply of 767-300ERs suitable for conversion gradually dries up, there are many suitable A330ceos available as conversion candidates and also ample used supplies of all of the three engine types available to power them, according to Seymour.

However, says Cambier, many younger A330ceos now in storage are likely eventually to see a return to passenger service. “I don’t believe six-to-eight-year old A330s will stay parked forever,” he says. “The values of the aircraft are reduced, but given the right deal they will be put back into operation.”

Some “right deals” for young used A330s for passenger service might not be too far away, according to Seymour. If these deals close, they will soon increase the short- and medium-term requirements for line maintenance and utilisation-driven MRO for A330s generally. Several of the deals hinge upon the ability of planned low-cost long-haul start-up airlines to navigate today’s difficult market conditions and enter service successfully.

One such planned start-up is Flypop, which hopes to fill the long-haul capacity gap left by the demise of Jet Airways and the withdrawal of financially troubled Air India from many of its long-haul routes. Seymour says Flypop initially planned to operate new A330s on its route network, but it may well have changed its mind given that “you can probably get four used aircraft for the price of one new one” nowadays.

The air transport industry faces a future in which environmental sustainability is becoming ever more important and in which the Covid-19 crisis has wrought other changes, and this might well put businesses “under pressure not to have people travel the world”, particularly in business class and first class, Seymour thinks. Premium-economy travel might become much more the norm for long-haul business travel, a possibility which might affect airlines’ bottom lines quite adversely.

Reasons for hope

That said, Seymour thinks there are some “glimmers of hope” for the widebody MRO market in the next few potentially difficult years. One glimmer is a continuing demand for widebody reconfigurations as the Covid-19-stimulated freighter market continues to expand and as the growth of online retail purchasing worldwide continues to soar.

Another glimmer is the possible emergence of various start-up long-haul carriers which might be able to take advantage of the low prices and lease rates for which they can acquire relatively fuel-efficient, highly range-capable twin-engine widebodies such as young A330ceos.

A third glimmer of hope, focused on the 777-300ER, is that the combination of the current long-haul passenger market environment and Boeing’s continuing delays in certificating the 777X might keep many 777-300ERs in passenger service longer than originally planned – particularly with Middle East-based carriers, which are responsible for the bulk of the 777X orders placed so far.

On the macro scale, ICF forecast earlier this year that airline passenger-traffic levels for domestic and intra-regional flying globally would take an average of 3.8 years from the end of 2019 to return to peak 2019 levels – with Chinse domestic traffic taking only 2.9 years to return to its 2019 level, US domestic traffic 3.5 years, intra-Asia regional traffic 4.0 years and intra-Europe regional traffic 4.1 years.

However, ICF doesn’t see long-haul international traffic getting back to its 2019 level anywhere near as quickly. The firm predicts it will take 5.1 years on average for long-haul traffic throughout the world to return to its 2019 peak, with Asia Pacific-China traffic taking the least time to return at 4.5 years and Africa-Asia Pacific traffic taking the most at 8.3 years.

This in turn implies that the widebody MRO market won’t return to its 2019 level until 2024. However, from 2025 on it will continue to grow above its previous 2019 peak as the world’s population continues to grow and as economic growth globally makes long-haul air travel affordable for more people, according to Cambier. At that point passenger-widebody demand will come back strongly.

Global fleet and MRO forecast

However, in its ‘Global Fleet and MRO Market Forecast 2021-2031’, published earlier this year, Oliver Wyman’s CAVOK MRO consulting practice has some cautionary words for the widebody MRO sector before it again achieves the peak it saw in 2019.

Compared with MRO demand for regional aircraft and narrowbodies, “widebodies, primarily used on international routes, should see the greatest reduction in 2021 demand, at 39 per cent,” CAVOK writes. “In 2021, as the widebody fleet share declines to 19 per cent and utilisation on in-service widebodies remains below traditional averages, the class’ share of MRO spend will drop to 37 per cent. Once the widebody fleet recovers, widebodies’ share of MRO will return to its historic average of roughly 40 per cent and remain there through 2031.”

Elsewhere in the report, in discussing airframe MRO in the context of CAVOK’s forecast shift in the global fleet in favour of more narrowbodies, it states: “One potential consequence of the shift of the global fleet toward narrowbodies and away from widebodies is an imbalance in the supply and demand for airframe MRO among regions. Asia Pacific, typically the region to which widebody heavy maintenance is most outsourced, could see an abundance of supply while hangar space would be much tighter in other regions of the world.”

CAVOK forecasts that 2021 MRO demand for widebodies will be US$25.1 billion. Of that total, engine MRO will account for $13.8 billion, while airframe MRO will account for $5.8 billion, component MRO for $3.0 billion and line maintenance for $2.5 billion.

The consulting practice also forecasts that, by 2026, widebody MRO demand globally will have grown to $46.3 billion and by 2031 it will have increased again relatively slightly to $47.0 billion, as new, less maintenance-intensive aircraft and engines increasingly enter service. In 2031, CAVOK forecasts widebody engine MRO demand reaching $27.5 billion (more than the entire 2021 total for widebody MRO demand of all types), with airframe MRO accounting for $8.2 billion, component MRO for $7.0 billion and line maintenance for $4.3 billion.

In the years from 2021 to 2031 the Oliver Wyman/CAVOK report forecasts the global widebody fleet growing from 4,446 aircraft this year to 6,289 in 2026 and 6,805 in 2031. Widebody aircraft numbers will grow 1.6 per cent annually on average through the period, it estimates.

“By the end of the decade, the average age of the extra-large widebody fleet will increase, from 16 years old to 22, because of low demand and production rates, as well as the availability of more popular new, smaller and flexible aircraft models,” the report states. “The 777 and A330, considered large widebodies, are the most popular widebody platforms, making up almost half of the in-service widebody fleet [in 2021]. This will change over the next 10 years, with the 787 and A350 comprising most new deliveries.”

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