Aviation maintenance, repair, and overhaul sector (MRO) spend will approach $80 billion in 2022 and come close to matching pre-Covid levels in 2023. However, the industry is facing significant challenges according to Oliver Wyman's Annual MRO survey, titled “The Quest for Stability.”

“The MRO industry has displayed remarkable resilience during the past two years, but it may not be enough as it faces a new set of challenges around labour, inflation and sustainability,” said Brian Prentice, a partner with Oliver Wyman.

The MRO industry has showed nimbleness during the past two years: working to park and store aircraft at the height of the pandemic, completing essential maintenance tasks to keep the fleet airworthy, and then quickly getting the fleet back in the air (with the global fleet 94 per cent recovered as of January 2022). This dramatic contraction and longer rebound, however, has created a new set of challenges for the industry over the next several years, from replacing a generation of talent that has left the industry and controlling costs, to meeting sustainability expectations and closely monitoring OEM moves, the survey added.

Recovery and Growth

According to him, although the market will soon recover to 2019 levels, MRO demand throughout the next decade will be lower than the pre-Covid-19 forecast. In aggregate for 2020–2030, the survey report anticipates the total MRO market will be $160 billion (13 per cent) smaller than the pre-Covid-19 forecast. “Even in the second part of the decade, we anticipate MRO spend to be 7.6 per cent lower per year on average than called for in our pre-Covid-19 forecast,” the survey noted.

For 2022–2023, two-thirds of respondents expect the market to grow between 3 per cent and 10 per cent. From 2024 on, the market expects a more stable growth rate, with half of respondents expecting 3–5 per cent growth.

Unless there is a dramatic return of Covid-19 worldwide, there is optimism for all MRO sectors. Indeed, it appears that recovery for airframe may be nearly complete, buttressed by a spike in aircraft cargo conversions.

A Tight Labour market

The need for pilots is well known, but another critical segment of the industry could keep planes from flying. A lack of technical staff was cited as the top disruptor for the MRO industry over the next five years. Some 80 per cent of North American respondents said that finding mechanics and technicians has become challenging, with Europe (65 per cent) and other geographies (79 per cent) feeling a similar strain. The challenge of securing labour has become critical, with more than half of survey respondents reporting that the lack of labour is already beginning to constrain growth – even with demand not yet fully at pre-pandemic levels.

Covid brought about a wave of retirements and fewer new people are entering the industry. While apprentice programs and technical school partnerships continue to work well as traditional recruitment tools, it is not enough to combat the overall talent shortage.

Cost management

Survey respondents ranked labour/material cost management as the second top disruptor facing the industry. Some 60 per cent of respondents anticipate that materials costs will increase by more than 5 per cent. North American respondents expect the largest inflation in labour costs, with 59 per cent expecting increases of 5 per cent or more.

“In an inflationary environment with a tight labour market, MROs over the next few years will be looking for any way to offset labor and material costs,” said Derek Costanza, a partner with Oliver Wyman. “To complicate matters, the industry will be trying to do this when consumer travel demand is rebounding rapidly.”

Sustainability Imperative

 Nearly 90 per cent survey respondents indicated that sustainability is a priority for MRO-related activities. More than three-quarters expect sustainability to become an area of high focus and report that their companies have sustainability targets in place.

Despite the industry's commitment, most sustainability concepts are still in the early stages. The most widely used strategy is recycling, followed by measuring greenhouse gas emissions and reducing direct material inputs. Overall, the industry expects sustainability to become a required cost of doing business rather than a pricing differentiator. But sustainability is also impacting talent recruitment and retention efforts.

“At a time when the concept of how and where people work has radically changed, MRO leaders need to engage and attract a new generation of workers – who value quality of life and are very concerned about climate change. It will be a tough sell,” concluded Prentice.

The report concludes with five things the aviation MRO industry must focus on moving forward, including: a clear outlook on future labour plans, creative ways to attract and retain talent, mitigating cost increases, increasing labour efficiency, and meeting customer and investor sustainability demands.