Can OEMs Lose the Battle for the Aftermarket?

Locatory.com says: As the demand for new aircraft is very unlikely to shrink any time soon, the increasing concern among independent MRO providers with regard to staying competitive is justified.


Locatory.com raises the question: Can OEMs lose the battle for the aftermarket? and offers the following thoughts:

There is no secret that modern carriers are constantly seeking for ways to minimize operational costs. As most airlines tend to approach their cost-cutting objectives through the growth and development of their fleets the optimization of aircraft maintenance remains on the top of the priority list. With the financial benefits stemming from the "total care" programs, it's no wonder that more and more carriers turn to providers offering integrated services and power-by-the-hour support. Needless to say, such a trend enables OEMs to put additional pressure on other players in the MRO market. After all, contacting a manufacturer for maintenance of new technologies seems rational. However, the potential supply chain problems with the new generation of aircraft may in fact contribute to the increasing competitiveness of independent MRO providers.

The demand for total care programs creates new opportunities for OEMs

Industry specialists unanimously agree that it is only a matter of time until the global fleet of commercial aircraft is completely replaced by the new generation. With great savings related to decreased fuel consumption carriers are naturally interested in optimizing their MRO expenses as well. The increasing popularity of total care programs should raise no eyebrows as cost efficiency and speed offered by the providers of integrated and PHB support are probably second to none. Moreover, with such comprehensive support operators are free to focus on their core activities while transferring the financial and technical risks to a maintenance provider. Naturally, the most popular programs of the kind are associated with such globally known brands as Boeing or Rolls-Royce (during this summer only the latter has reported to have signed $6bn worth of contracts for support of some of the world’s largest airlines), since they can speculate on the fact, that they offer the most comprehensive support with regard to their own products. But is this really the case?

The growing presence of OEMs in the MRO segment is easily explainable

“The growing presence of the OEMs in the MRO segment is easily explainable. Carriers are naturally interested in making sure that their new or modernized aircraft are properly maintained. In turn, manufacturers tend to keep their secrets to themselves by limiting the access to technical publications or making the process of service authorization extremely complex. As a result, whilst the independent MRO providers are struggling with the new requirements, the OEMs are overtaking the maintenance of the products themselves,” explains Zilvinas Sadauskas, the CEO of Locatory.com

Changes in the MRO market raise concern among independent providers

Various sources estimate the share of engine and component maintenance work outsourced to OEMs could be reaching 70% or even 80%. As the demand for new aircraft is very unlikely to shrink any time soon, the increasing concern among independent MRO providers with regard to means of staying competitive in the changing industry is utterly justified. The factor which is further compromising the chances of independent MROs is the amount of trust that carriers put into aircraft manufacturers. For example, Oliver Wyman reports up to 80% of all carriers basing their aircraft purchase decisions largely on the MRO cost estimates provided by the OEMs, although often the actual costs and the forecasts differ widely.

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