Surviving the Rebound

European Aviation MRO Finds a New Path

Duncan Craig
Gareth Evans
Matthew Abraham

As market conditions in the aviation industry begin to improve, the results aren’t quite what most people expected. After surviving the combined effects of 11 September 2001, a global economic downturn and the SARS (severe acute respiratory syndrome) scare, European MRO (maintenance, repair and overhaul) industry players are finding that the upturn is not translating into business as usual.

As the authors discuss, the downturn effectively masked a number of changes that are fundamentally altering the industry structure. Although demand is climbing, so is capacity, which means competition will continue to be fierce. Before the downturn, the MRO market fell into three groups: geographic, service and technical expertise. Today, the only significant point of differentiation is service and technical expertise. On the customer side, one-stopshop service centers are not as attractive as they once were, which means MRO suppliers must accept more, and perhaps greater, risk.

The result of these and other changes is that by the end of the decade, a three-tier industry model will evolve. At the top, three or four global service networks will dominate. The middle tier will feature an emerging group of low-cost country players. The final group will include niche companies that offer deep product expertise in certain airframes and subsystems, especially in legacy areas.