MROs Face Prospect of Significant Drop in Global Demand for Services

By Frank Wolfe | April 23, 2020
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Although companies that provide aircraft maintenance, repair and overhaul are facing a major drop in demand, some are still working and even introducing new products or services, such as the aircraft disinfection service introduced by Lincoln, Nebraska-based Duncan Aviation, one of the largest business jet avionics modifications providers in the United States. Photo: Duncan Aviation

Maintenance, Repair, and Overhaul (MRO) providers are facing the possibility of a steep drop in global demand for MRO services this year because of the COVID-19 pandemic although commercial MROs may face greater declines than MROs that have a higher proportion of business aviation clients.

“Assuming our baseline scenario that anticipates recovery later this summer, the current trajectory for fleet reductions and lower aircraft utilization would reduce global MRO demand in 2020 by over $26 billion, or almost 30 percent,” according to “Impact of COVID-19 on Commercial MRO,” a March 26 study by consulting firm Oliver Wyman.

“North America and Western Europe would suffer the largest impact,” the forecast said. “Where possible, operators are strategically selecting aircraft to be parked based on their maintenance status and will likely defer non­-essential visits like cabin re-configurations and certain component upgrades. Should COVID-19 extend beyond our baseline scenario, suppressing travel further and creating more severe, long-lasting economic consequences, the impact on MRO demand could top $35 billion in 2020, with an additional $15 billion in 2021. Conversely, if our rapid recovery scenario is realized and the number of COVID-19 cases peak earlier than expected, the MRO impact could be as low as $17 billion, or 19 percent.”

Last month, Germany-based Lufthansa Technik reported record earnings for 2019, but Johannes Bussmann, chairman of the company’s executive board, cautioned that “the maintenance industry is already suffering from the decline in air traffic” due to COVID-19.

“The full extent will hit us with a delay, which means a forecast is currently not possible, but first impacts are massive,” he said. “Everything depends on the duration of the crisis and how our customers will recover from it. We have prepared ourselves with a very comprehensive package of measures, also, to be able to deliver at any time. Especially now, our customers need a reliable technical partner.”

Wolfgang Reinert, a spokesman for Lufthansa Technik, wrote in an Apr. 24 email to Avionics International, that the company has implemented “all required health measures in our shops based on recommendations of the German Robert Koch Institute to ensure an adequate working environment from the health perspective.”

“We have put cost saving measures in effect, such as a massive reduction of business trips and internal events, etc.,” he wrote. “In addition, we have imposed a full hiring freeze and terminated the contracts for almost all temporary workers who hence had to return to their respective agencies. We also have introduced short-time work at our German facilities. In addition to these measures we have set up a special organization to secure and continue our business operations for our customers around the world, not only with regard to MRO services but also with regard to a stable supply chain. Our international network with our diversified portfolio is paying off in this situation.”

Reinert wrote that “the last few months have clearly shown how volatile and vulnerable the aviation industry is.”

“Travel restrictions, the massive cancellation of business and private trips have forced many airlines to reduce flight connections by 90 percent and more,” he wrote. “Many aircraft are parked or will even be storaged in the coming weeks and months. Under a cost view this fact brings many customers to the brink of survival. Therefore, the airlines currently reduce expenses wherever they can. They cancel or delay all services which are not absolutely essential for them. Consequently, we already see a massive negative impact in many areas of the MRO business, too.  Also in our own shop floors we are currently facing a significant decrease of workload. This also includes our component business, with avionics services being one part of it.”

In an email to Avionics, the Independent Aircraft Modifier Alliance (IAMA), whose founder and managing director recently appeared on the Global Connected Aircraft Podcast, said that “the uncertainty many airlines are currently facing regarding the duration of the crisis, the length of recovery for travel to return and – depending on the region – about financial support of their governments, leads to the suspension of non-mandatory modifications like cabin upgrades.”

Some business aviation operators are choosing to use the aircraft downtime to perform mandated ADS-B modifications or connectivity upgrades that were already contracted prior to new travel and work-related restrictions being implemented as a result of the COVID-19 pandemic. Photo: Duncan Aviation

“That certainly affects our members directly and leads to re-scheduling resources e.g. to provide special crisis related services within the modification field or to bundle resources for mandatory upgrades like the ADS-B modification. IAMA supports with establishing a virtual think tank to understand and solve the very special challenges of airlines and lessors those days,” IAMA said. “The integration of already approved modifications like ADS-B Out solutions goes on with remote communication between the STC supplier and the MRO – which is a usual process for already certified packages. Cutback might appear for prototype layovers.”

June 7 this year is the deadline for ADS-B installations in Europe.

IAMA members include Lufthansa Technik, Fokker Services, Envoy Aerospace, Eclipse Technics and Etihad Engineering.

“During COVID-19 lock-down testing and installation on aircraft may provide a problem with accessibility e.g. for prototype layovers,” Marco Wagendorf, business development manager at Fokker Services, a Netherlands-based provider of maintenance and modifications for commercial airliners, wrote in an email to Avionics.

Nate Klenke, the modifications sales manager at the Nebraska-based Duncan Aviation, an MRO which focuses on business jets, wrote in an email to Avionics that “the implementation of social separation and shelter in place have had a significant impact on aviation and the amount of work being completed, especially work related to discretionary spending.”

“However, there is still a mindset with several operators to complete upgrades on systems that may become obsolete in the near future or complete those ‘wish list’ items they have been thinking about but couldn’t fit the necessary downtime into their previous flight schedules,” he wrote. “Some operators have chosen to hold off on all discretionary spending regardless of which system is being discussed.  The more savvy flight departments aren’t deferring upgrades, they are taking advantage of the low utilization of the aircraft to get ahead of aging systems.”

Duncan Aviation is also seeing revenue from business aviation operators that had not yet installed ADS-B (Out) by the Federal Aviation Administration (FAA) deadline of Jan. 1 this year.

“The beginning of 2020 brought to an end to the push to comply with the ADS-B mandate,” Klenke wrote. “However, we are still seeing some aircraft that weren’t compliant able to complete the upgrade. As a company with 39 installation locations across the country, we install a plethora of systems ranging from complete flight deck upgrades to connectivity and cabin management systems. The environment that has been created by the pandemic has caused several to limit discretionary spending which has impacted the volume of opportunities over the past three months. One thing that should be considered when comparing this, though, is that the last three years have all been very busy years as a result of the ADS-B mandate so a decline in volume should have been anticipated even without this additional hurdle.”

MRO business is likely to take a significant hit because of COVID-19, but business aviation MRO, West Star Aviation, said that it continues to see bookings, including for the Gogo AVANCE L5 pictured here.

Marty Rhine, the vice president of sales at Illinois-based West Star Aviation, an MRO that has significant corporate aircraft business, wrote in an email to Avionics that the company “has remained busy and so far we have not had a lack of work. “

“Gogo installations are holding strong,” he wrote. “Some operators are bringing in planes early since they are not currently flying, which also helps if an aircraft needs to be quarantined.   We are seeing a good mix of cabin and cockpit updates, but we are cautious because the discretionary work usually slows down first, which is paint, interior, and avionics. However, we remain in good shape.  We currently have several [Gogo AVANCE] L5 upgrades scheduled for later in the year. These represent signed projects post COVID-19 and current, plus we are working a few L5 upgrade projects that arrived and once in-house decided to do the upgrade.  We are still seeing a decent amount of activity on L5/L3.”  

While West Star Aviation has seen some indefinite postponement of operator-ordered work, “there are others that are taking advantage of the time to get their upgrades done now so they are ready when their flight schedule picks up,” Rhine wrote.

“We have had some major projects push out until the COVID-19 issues are calmed down…very large CMS [cabin management systems], along with a few that have cancelled because of the uncertainty of their situations,” he wrote. “We are seeing hesitation from some customers in signing future work because of the uncertainty in this market.”






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