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Airline Reductions Shrinking MRO Industry by $1.3B

Written by thomas · Filed Under Commercial 

July 11, 2008

thomas

DENVER, CO–(Marketwire – July 11, 2008) – Based on mid-year airline announcements to reduce capacity and to park aircraft, coupled with reductions from ceased operations, TeamSAI Consulting has determined that total spend for Maintenance, Repair & Overhaul (MRO) in the commercial airline industry will be down $1.3 billion in 2009 compared to earlier estimates.

In its annual industry forecast produced in the 1st quarter, TeamSAI projected 2008 total global spend of $45.1 billion. 2009 spend was expected to reach $46.8 billion. The announced reductions in airline operations reduce the 2009 forecast to $45.5 billion, $1.3 billion below the original forecast for the year.

David A. Marcontell, TeamSAI’s Executive Vice-President, reported that “the 2009 reduction in outlook is driven by over 500 older, less fuel efficient commercial jets being parked during the year, the majority involving North American operators. While the global spend is still expected to nominally increase from 2008, due to continued growth in Europe, Asia, and Latin America, the major impact will be felt in the North American market which will see a decline from $16.6 billion in 2008 to $15.9 billion in 2009.”

North America accounts for $1.0 billion of the $1.3 billion reduction for 2009. Most of the announced capacity reductions will occur following the peak summer season.

The announced parking of aircraft, along with aircraft parked due to some airlines going out of business, is expected to ground over 250 of the classic Boeing 737 aircraft, 110 of the DC-8, -9, MD-80 and MD-90 family and 50 CRJ-100/-200 aircraft. The balance of the aircraft to be parked is smaller quantities of older, less fuel efficient aircraft. Engines powering the parked aircraft include the CFM56-3, various JT8D models and CF34-3 engines.

TeamSAI’s President & CEO, Christopher Doan, added, “As the aviation industry makes significant adjustments to deal with the prolonged high oil prices, particularly in North America and to a lesser degree in Europe, the ripple effects radiate out to the suppliers and almost certainly to the manufacturers before we see any sign of equilibrium. Interestingly, there are a couple of counterbalancing forces at work. With the weak dollar relative to currencies in Europe and Asia, North American labor rates are becoming more attractive alternatives… and for those operators considering sending work to Europe or Asia, the cost advantage may have all but disappeared when factoring in higher transportation costs due to fuel increase. These factors are clear levers of new opportunity for those focused on new opportunities in the midst of current crisis.”

TeamSAI is a Denver-based practice of strategic & tactical management and operations consulting, serving all aspects of the aviation community including airlines, airports, manufacturers, MROs, and corporate/fractional operations. TeamSAI also produces the annual World MRO Forecast, and is a partner with McGraw-Hill’s Aviation Week Group in their new MRO Prospector web based market development tool for the MRO industry.

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