Third Party MROs Will be out of Runway Over the Next Decade: Aviation Product Complexity to Blame

Third Party MRO Providers are Taking a Backseat in the Age of Aviation Product Complexity

The new aircraft slated to come on line over the next 10 years will be manufactured from new materials, feature new technologies, and provide a sea of data on their health. Control of that data, and expertise in working with new materials, along with existing relationships with Owner/Operators will create a significant advantage for OEMs. New business models, coupled with software and services to manage these products from inception to grave, mean less maintenance dollars left over for some regional, niche third-party MROs and can ultimately result in driving them out of business.

According to research firm, Oliver Wyman’s, “2018 Global Fleet & MRO Market Forecast Commentary”, OEMs and Owner/Operators continue to increase their share of the total available MRO market while third-party MROs are being squeezed, making it difficult for them to sustain their current business level. For Component and Engine/Complex Assemblies—OEMs now hold a 58% and 53% market share respectively. Couple this with Owner/Operators—owning 64% market share of the Airframe segment, and it is no wonder third parties will start to question their long-term viability.

Third-party MRO providers that want to compete and collaborate with Owner/Operators and OEMs will need to invest in people, process, and technology. The time is now to plan and execute on a strategy that enables you to compete for your share of maintenance—while gaining the competitive edge to provide the level of service that the next generation of aircraft deserves.

The Time is Now to Revamp Your Legacy

Until now, the primary focus for third-party MROs has been growing their business with the current fleet of aircraft. With their primary focus on providing high quality service to multiple airlines, it was all about what was coming in the door, and how fast it could go back out again.  In contrast, the coming decade is all about who has the visibility into potential issues and what contract guarantees for airplane uptime exist.  This will result in the OEM and the Owner/Operator coordinating on the most effective way to get the work done—which has the potential to result in more maintenance tasks happening on the “line” as opposed to another location.

As a third-party MRO provider, you lack this visibility.  When applying legacy IT solutions to next generation aircraft, organizations like yours quickly find their existing solutions lacking when it comes to effective maintenance. According to Oliver Wyman, 62% of third-party MROs are constrained by IT systems that lack functionality and flexibility and are often not compliant with changing regulations. They also have limited capability to analyze and take advantage of the vast amounts of data available needed to diagnose maintenance issues from next generation aircraft. This creates a double whammy.

What’s required is a new generation of MRO solution. Delaying the investment in a purpose-built MRO solution that can align with the next generation of aircraft will affect the viability of an organization and result in higher internal costs, delayed delivery to promise dates, customer dissatisfaction, lower operating incomes, and loss of market share

Expand Your Horizon

Opportunities are emerging for third-party MRO suppliers—namely expanding their business to include the design authority of aircraft parts. To do this requires organizations to pursue Parts Manufacturer Approval (PMA). PMA is granted by the Federal Aviation Administration and allows companies to manufacture new aircraft replacement parts based on OEMs’ designs.

As new, more complex aircraft come online, it should be anticipated that OEMs will primarily focus on the manufacture and sale of parts related to these aircraft, opening the door for third-party MRO suppliers to support legacy aircraft requirements.

Moving into the business of manufacturing replacement aircraft parts requires incorporating disciplines you may not have previously invested heavily in, namely Engineering and Manufacturing. The good news is that some of the people and processes you have invested in for the maintenance of aircraft components are similar, and can be used moving forward. This existing knowledge can be the launching pad for investment in additional resources.

Technology investment is critical too. This specifically applies to solutions enabling connectivity back to OEM information such as, Computer-aided Design files, Bill of Materials, Suppliers, and Manufacturing Process Plans. These solutions should include capabilities allowing for the execution of engineering, manufacturing, and quality best practices. To be successful, a Product Lifecycle platform approach is required.

Take Action and Remain Competitive in the Age of Aviation Product Complexity

Third-party MRO providers can take immediate action to reduce their chances of being disrupted—either from traditional competitors, or the emergence of OEMs and Owner/Operators. Defending or advancing market share requires investments in people, processes, and technology that support new business models.

Here are some specific suggestions to get you started:

  • Rethink the approach and use of MRO systems.
  • Combine the power of the MRO system with a product lifecycle platform to sustain solution viability.
  • Expand into new business opportunities by investing in the right people and utilizing capabilities within the platform to incorporate the Engineering and Manufacturing disciplines—all with one solution.
  • Invest in people, process, and technology to create opportunities to maintain and gain a greater share of the maintenance dollars.
  • Acquire domain knowledge in composite repair and manufacture.

Once disparate systems are connected and business processes aligned, you will unlock new opportunities to create revenue and stay competitive.  In order to compete in the next decade, taking a step-by-step approach is essential for third-party MRO suppliers that seek to transform their systems and processes, and critical to projects focused on engineering, manufacturing, and maintenance best practices.

Access the eBook, “How Third-Party MROs Can Compete in the Age of Aviation Product Complexity” to learn more about how you can stay competitive.