Aircraft Maintenance Organizations Strategize to Cope with Difficult Economic Conditions, Finds Frost & Sullivan

MOUNTAIN VIEW, Calif., July 30 /PRNewswire/ -- The number of carriers servicing their aircraft in-house has dipped drastically from more than 80 percent to less than 20 percent over the last three decades. The increase in aircraft maintenance outsourcing attributes to the straitened circumstances in the aerospace industry, which is grappling with an increase in labor, infrastructural, and tooling costs. Outsourcing will receive a further boost from new and low-cost carriers that continue to rely on external organizations for maintenance and engineering support.

New analysis from Frost & Sullivan (http://www.aerospace.frost.com), The Proliferation of Aircraft Maintenance Outsourcing in the United States, finds that future migration of aircraft outside of North America to overseas maintenance, repair, and overhaul (MRO) facilities will likely slow due to new administration, demands from labor and consumer groups, and demands for more Federal Aviation Administration (FAA) oversight of repair stations.

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"The current economic climate holds many uncertainties, therefore MRO companies should identify their value," says Frost & Sullivan Industry Analyst Nathan K. Smith. "It is important that MROs mould their operation around airlines' purchase factors of cost, ability and experience to maintain aircraft fleet types as well as security."

However, MRO companies must prepare for capacity adjustment in the airline industry, which is facing fewer travel demands, tighter credit markets, and fuel hedge losses. The resultant dip in cash, earnings, and profits could cause airlines to exercise prudence by preserving cash, renegotiating contracts with suppliers, selling owned aircraft, and leasing back in order to build cash reserves. Many of the parked aircraft are old and inefficient and will unlikely return to operation or sent for MROs.

Although such conditions do not bode well for aftermarket services, aircraft OEMs will continue to produce new, more efficient aircraft, at a slightly reduced rate. The rolling out of new aircraft could compensate, in part, for reduced orders from old aircraft.

"The MRO service providers in the United States are also likely to face stiff competition from low-cost Asian and Latin American MRO companies," says Smith. "To compete against them, U.S. participants have to not only lower costs but also increase productivity, reduce wastage, provide timely and quality products, and focus strongly on customer satisfaction."

The Proliferation of Aircraft Maintenance Outsourcing in the United States is part of the Aerospace Growth Partnership Service program, which also includes research in the following markets: merging air transport market dynamics, World commercial helicopter market, North American aircraft & engine MRO markets, global commercial aviation electrical power systems and infrastructure market assessment, as well as composite application market assessment. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

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The Proliferation of Aircraft Maintenance Outsourcing in the United States

SOURCE Frost & Sullivan