Maintenance Repair and Overhaul Industry Key Strategic Imperatives, Trends & Challenges

The Key Strategic Imperatives for Maintenance Repair and Overhaul organizations include Reduce Cost of Operations while Yields decline, Accelerate Growth and Increase Margin.

Reduce Cost of Operations while Yields decline

• Increase Asset Utilization via increased daily AC usage, younger fleets, fewer AC models, & higher employee productivity.
• Drive continued usage of common processes & Lean MRO.
• Outsource non strategic MRO services while maintaining safety standards.

Accelerate Growth

• Consolidate operations and expand into other carriers businesses.
• Offer MRO services to Low Cost Carriers.
• Pursue “Power by the Hour” contracts, and grow share of MRO.

Increase Margin

• Drive Personnel Expense Lower (maintain Benefits status at lower costs).
• Morph best practices of Low Cost Carriers while maintaining key Network strengths of Brand Awareness and Core Hub/Secondary City assets.
• Aggressively manage operating costs and process efficiency.
• Incorporate innovative technologies such as RFID, Condition Based Maintenance & Item Health Monitoring.

What are the Airline Maintenance Repair and Overhaul Ecosystem?

What are the Airline Maintenance Repair and Overhaul Ecosystem

• Definition
  • Maintain aircraft, engines and components in compliance with regulatory requirements.
• Characteristics
  • Highly regulated business, reliability is key è with highest possible business flexibility.
  • Very expensive inventory.
  • Top five MRO organizations in the world, servicing more than 1000 aircraft.
• Key Trends
  • Leading Airlines try to establish MRO org as “profit center” – but lagging behind smaller airlines in Europe / Asia.
  • Increasing competition between Airlines’ and OEM’s MRO Organizations.
  • Suffering from airlines’ weak business.

What are the Maintenance Repair and Overhaul Industry Trends & Challenges?

What are the Maintenance Repair and Overhaul Industry Trends & Challenges

Government Regulations

• Air Travel Safety and FAA regulations through Airworthiness Directives (AD) and Federal Aviation Regulations (FAR).
• Airlines have to ensure compliance with regulations or run the risk of aircraft or whole fleets becoming ‘grounded’.
• A good reliability image is also an important factor in ticket sales.
• Regulators are keenly interested in ensuring Operators are on top of Configuration Management, Traceability and Compliance Control.

Macro-Economic Environment

• Fuel Prices are now highest cost category.
• Several major carriers in Bankruptcy, with consolidation likely.
• Little or no pricing power, with yields continuing to fall.
• Increased focus on Safety and Compliance.

Intense Competition

• OEM’s gaining strength in MRO business, adding competition and changing MRO landscape.
• Outsourcing (China & India) will most likely accelerate in upcoming years.
• Yields continue to slide in domestic US market.
• Increasing deregulation has brought new entrants, and massive industry changes well underway.

Transformation Continues

• Relentless restructuring have taken 4-5% out of non-fuel costs.
• Labor costs being attacked across the board, with Union based contracts being re-written to face new reality.
• Since 9/11, Labor Productivity has increased 34%...with more room for cost reduction & efficiency gains.
• Environmental & Safety records at all time highs, yet concerns over limited MRO/M&E funding/moral growing
• Exceptionally high potential exists for liquidations & bankruptcies in 2020.
• Reduction in Turn-around times (TAT) and SCM initiatives are key to transformation.