The Impact of the Top 3 Strategic Imperatives on the Airline MRO Industry

Internal Challenges

Why:

• In contrast to the robust pace of technology adoption by aircraft OEMs, MRO service providers tend to lag in terms of digitalization. This is because they require substantial capital to obtain certifications from aviation regulators to develop components using emerging technologies.

Frost Perspective:

• MRO providers must strike a delicate balance between investment in new technologies and control over overhead costs. In the next 5 years, increased collaboration between technology companies and MROs will play a vital role in contributing to the cost-benefit analysis to support sustainability efforts.

Transformative Mega Trends

Why:

• The commercial aerospace industry is developing electric-powered aircraft to promote greener flights and curb carbon emissions. Eviation's all-electric aircraft, Alice, completing its first test flight, demonstrates the future path of electric aircraft application in commercial airline operations.

Frost Perspective:

• Electric vertical take-off and landing (eVTOL) aircraft are expected to enter service in the next 1 to 3 years.
• MROs need to prepare themselves for the future by upskilling their staff, upgrading hangars, and forging alliances with eVTOL aircraft battery and component suppliers to provide the required aftermarket services.

Competitive Intensity

Why:

• The clean sheet regional jet ARJ21 and narrowbody aircraft C919, developed by the Commercial Aircraft Corporation of China, Ltd., have entered service. These fuel-efficient aircraft will generate demand for sustainable MRO services.

Frost Perspective:

• Chinese-built aircraft generally attract orders from China-based airlines. China will likely focus development on indigenous MROs to cater to the rising regional demand for aftermarket services, as they do not require certification from Western aviation regulators (e.g., Federal Aviation Administration).

Growth Drivers

Industry Collaboration:

Airlines partner with aircraft OEMs to increase the usage of sustainable aviation fuel (SAF). MRO providers collaborate with technology, chemical, and additive manufacturing companies to promote sustainability in their work operations. Industry partnerships incorporating sustainable technologies and innovative processes facilitate compliance with environmental laws and set a framework for sustainability in MRO operations.

Market Demand and Customer Expectations:

Sustainability enhancements help MRO providers achieve their net zero emission goal and provide an edge over competitors. Positioning themselves as environmentally conscious builds a positive brand image and increases customer retention and acquisition opportunities.

Cost Savings and Efficiency Gains:

Reducing energy consumption and waste, streamlining processes, and using advanced technologies to replace manual tasks and paperwork with digital tools boost MROs’ process efficiency and profitability.

Growth Restraints

Initial Capital Investment:

The benefits of sustainable initiatives are clearly visible in the long term. However, the initial upfront capital cost poses an implementation barrier for MRO providers. This barrier could slow down the progress toward sustainability, especially for smaller MROs with limited financial resources.

Complex Supply Chains and Technology Integration:

The aviation MRO industry supply chain is highly complex and presents significant challenges. Integrating advanced technologies with environmentally friendly materials requires restructuring the supply chain process. Process inefficiencies could delay aircraft delivery and lead to revenue loss for airlines.

Skilled Workforce and Training:

Globally, there is a lack of standard training programs on sustainable practices in MROs. To mitigate skilled workforce shortages, leading MROs need to work with training institutions to develop and regularly update training methodology on green technologies.