quest global mro market opportunities · 2020. 3. 30. · quest global 1 a market of growth the...

Bill MorrisChief Engineer - Aftermarket Services

QuEST Global

Industry Report

QuEST Global MRO Market Opportunities

1QuEST Global www.quest-global.com

A Market of Growth

The growth in the commercial aviation industry as well as businesses supporting it from the maintenance, repair,

and overhaul (MRO) sector is set to continue. Airline carriers have had a period of profitability and this has flowed

throughout the supporting infrastructure. Rising demand for air travel is keeping production of aircraft, engine, and

component manufacturers fully occupied. Lower fuel prices, along with the ability of airlines to spend on upkeep, are

delaying retirements of older jets, which results in more business for the MRO sector. The predicted trend is

upwards in the short term. In 2017-2027, the forecast projected annual growth is averaging 3.4%.

Boeing and Airbus expected their production of Boeing 737s and A320s to reach a record level of 60 aircraft per

month (each) sometime during 2019, not allowing for consequences of the challenges Boeing has had recently. This

is a huge increase of 43% in just four years. Due to this strong demand (and supply struggling to keep up) and entry

into service challenges with newer engines and aircraft, including the PW1000G, A320 and notably the Boeing 737

Max, airlines have deferred some retirements to protect operational flexibility.

The commercial air transport MRO market is growing at a high rate, with total spending expected to rise to

$114.7 billion in the next 10 years from $77.4 billion in 2018 -- a growth of 48%; the expansion is back-end loaded

towards the end of the 10 years.

While the forecast for aviation and therefore the MRO market is generally positive, there are still risks in the medium

term. This growth is leading to strained capacity and higher costs as demand allows suppliers to raise rates and

workers to seek higher wages. The MRO industry is particularly affected when it comes to finding qualified

mechanics and engineers. In mature economies, a scarcity of technicians and engineers trained to support the older

and newer model aircraft will put pressure on companies over the next decade. The retirement of mechanics in

particular and the low interest in the job among youth will cause the qualified population to shrink.

The MRO market can be separated into 4 main areas:

Airframe

Engine

Component

Line

Asia Pacific China North America Western Europe World

2018 MRO (US$ Bns)

Airframe

Engine

Line

Total $14.1 $6.5 $19.9 $16.2 $77.4

$3.2

$6.6

$2.1

$2.2

$1.8

$2.2

$1.2

$1.4

$4.7

$7.9

$4.0

$3.2

$4.4

$5.8

$2.8

$3.2

$19.0

$32.7

$12.9

$12.8

Component

Asia Pacific China North America Western Europe World

2028 MRO (US$ Bns)

Airframe

Engine

Line

Total $20.9 $17.8 $23.8 $21.7 $114.7

$4.4

$9.8

$3.5

$3.2

5.30%

2.70%

4.00%

10.50%

10.70%

10.60%

-0.5%

4.20%

1.80%

2.70%

3.20%

3.00%

3.50%

4.50%

4.00%

$3.7

$7.6

$3.3

$3.1

$4.8

$10.4

$4.7

$3.9

$4.6

$9.3

$3.7

$4.1

$23.5

$52.6

$20.0

$18.5

Component

Table 1- Data from: GLOBAL FLEET & MRO MARKET FORECAST COMMENTARY 2018–2028, Oliver Wyman

2018.

MRO Growth Rates

2018-2023

2023-2028

2018-2028


As shown in Table 1, engine is the most significant among these areas, typically accounting for 50% of the market.

Original Equipment Manufacturers (OEMs), led by engine OEMs, have aimed to gain the MRO market by selling

maintenance packages as part of the initial sales. This is showcased by GE’s On-Point that claims to support

cost-effective protection against unexpected downtime. It provides a maintenance program that helps ensure that

assets retain a high level of performance and residual value by program management of line maintenance and

engine overhauls. Boeing has stated a $50-billion goal for its aftermarket services. This represents a three-fold

increase in its current revenue from the aftermarket. Research by Oliver Wyman indicates that OEMs servicing

engines handle about 53% of the market, while airlines and their affiliated MRO operations control 64% of the

airframe maintenance market. OEMs handle about 58% of the component MRO aftermarket.

The nature of the Engine MRO market is such that organizations are largely high-revenue, but low margin.

Much of the cash flow is in the buying and selling of parts often in a restricted business model, i.e. the prices are externally set (by OEMs). Quite often, individual sites are stand-alone facilities even when they are part of

larger organizations -- certain regulatory framework drives this approach. This, combined with a massive

operational bias, may leave them exposed to limited opportunity to engage with digitalization and investments

(in terms of time) for future opportunities.

A Market of Change

The risks and opportunities from technological innovation disrupting all sectors of aviation are starting to make a

noticeable presence even in this inherently conservative industry. The aviation as a whole was, perhaps, near the

front of the digital revolution with the seamless “retirement” of paper tickets, and now adopted throughout the

boarding process. Organizations such as the IATA are trying to help the industry through forums such as paperless

operation -- driving common standards that the industry must use if it needs to remain commercially flexible.

However effective implementation requires access to highly-specialized digital skills and knowledge that aren’t

widely available, and the shortfall is even larger when trying to identify those with context awareness too.

Advancements in aircraft include much more sophisticated avionics and systems that interface with health

monitoring technology, designed to recognize pending system or component failures. This new era of Big Data

capture and processing will require a clear strategy to take full advantage of its potential. The industry has been

acutely aware of the value and impact potential of data, and there is emerging tension in the ownership of data and

the desire of the OEMs to capture more of the lifecycle value of their products. These OEMs have been joining up

with big IT names, such as Pratt and Whitney with IBM and Rolls-Royce with Google. However, there is evidence

that the airlines are working together to create a global infrastructure for data collection to allow real-time analysis

that involves predictive maintenance without the reliance on OEMs, who are data hungry and keen to make

commercial offering. This infrastructure seems intended to deliver a framework independent of commercial ties,

which can be accessed by analyzing services by agreement. The opportunities of Big Data for the airlines industry

will not be developed further now, but needless to say, in a maintenance context, the cost reduction and disruption

reduction are large.

3D Printing or Additive Manufacturing is a new technology that should disrupt the aftermarket soon. Using models

built through computer-aided design, 3D Printing can produce virtually any solid object -- even those with complex

architectures and those are unassemble-able in a variety of materials including plastic and metal. Technology has

had only a limited impact so far. OEMs’ reluctance to share proprietary design data and support the certification make it difficult for the MRO industry to adopt. However, it seems evitable that a suitable commercial model with

complimentary technology will be adopted -- so that the warehouses having parts kept around the world can be

significantly reduced, particularly in non-critical systems.


The interaction of OEMs and the MRO market is typified by Rolls-Royce, who are trying to find both engine maintenance capacity and repair capability in advance of models such as the Trent 1000 and XWB. These might

enter their first shop refurbishment visits in a couple of years, according to Scott Holland, Marketing Vice-President, Rolls-Royce -- Europe. “We are in a period of doubling our in-service wide-body engine fleet in 10 years from around 4,000 at the end of 2018 to around 8,000 in 2028,” he says. This number of engines will reach the MRO eventually.

While the Powerplant media is discussing the excitement caused by the move towards electrification in the near and medium term, threat is mitigated by the likely rate of adoption and subsequent roll-out. Technologies and business

cases need to improve significantly if they have to make a significant impact in MRO. From a commercial perspective, the capital investment is high and therefore biased towards not replacing aircraft too prematurely. The

technical position is neatly described by Paul Stein, Chief Technology Officer at Rolls-Royce Plc:


Given the rapid transition to new-generation aircraft over the next decade, it’s evident that MRO providers must

prepare for the work associated with the newer fleet types or focus their strategy to capture end-of-life markets. From an airframe MRO perspective, providers must be able to handle the new composite and metal matrix materials

dominant in the latest-generation aircraft, such as the 787 and A350.

Challenges also extend to component and line maintenance MRO providers. Component MROs need to invest to

acquire equipment and licenses to access OEM manuals for these new parts, or be partners. Line maintenance

providers will face far more sophisticated systems requiring sophisticated training.

Global MROs should aim to take on wide-body work, currently performed by Asia MROs with the addition of new

capacity and competency. As Asian labor rates move toward parity, MROs that deliver high-quality, on-time

service will be well-placed to gain market share. Nevertheless, gaining market share will not be simple, given the

credibility and competency development challenges for both technicians and engineers. The migration of

wide-body heavy maintenance work will help growth in MRO markets in North America and Western Europe that

might otherwise be flat. However, adding and improving facilities is not a panacea; optimization of process and rework reduction as well as accelerating material and repair delivery is necessary. These changes along with

partnerships for engineering and workforce development will support growth in any market. Moving organizations

along these behaviour-based changes is not easy without major disruptors. Engineering service providers such

as QuEST Global are potential positive disruptors, helping companies focus on quality and LEAN.

However, the business case for using these parts is dominated by legacy products -- especially where switching

back on closed supply chains is expensive. Nonetheless, parts that haven’t been designed to be 3D may not offer

the opportunities.

Figure 1

Source : Oliver Wyman Global Fleet & MRO Market Forecasts

“Regional hybrid aviation is set to revolutionize intercity mobility by 2030. It is possible that we will see a new type of

regional air transport, being more fuel effcient and quieter than current turboprops, which will bring a new approach

to mass transportation. The main challenges in this power class include the technology for very high power-to-weight

machines, power electronics and batteries, thermal management, and systems integration complexity. However, we

are on a trajectory to solve these issues. For larger aircraft, the gas turbine will remain the main source of thrust as only chemical fuels can deliver the energy density required for medium/long-haul flights. Because of this, sustainable aviation fuels will become the cornerstone of environmental performance in these markets. However, electrification will enable simplification of gas turbine internal design, unlock new methods of managing aircraft drag, and open new benefits to aircraft at platform level.”

The concluding observation is that it is an exciting time in aviation MRO, with much growth and development to

occur, but the industry cannot be complacent. It must:

Find a commercial advantage through digital

Ensure that there are competent engineers and technicians available

A Market to Support

So, if the key challenges for the MRO market are capacity of competency and transformation, including

digitalization to maximize physical capabilities, then Engineering Service Providers should be a strategic part of the

solution.

QuEST Global, as a pure-play engineering services provider, is uniquely positioned to support businesses through

the challenges, with the ability to blend core engineering capabilities and the digital world. The company has well

established competencies in the competitive market for aerospace engineers -- these resources can be accessed

remotely or deployed on/near-site either temporarily or permanently.

If an MRO business can be compared to a series of

tanks that flow work between them (see Figure 2) :

1. Business today has a slowly turning tap between

operations output.

2. Then a similar tank and tap representing the

engineering function and then onward through its

systems before delivering its output.

Business will become more limited over time as

mechanics and engineers are not available (as shown

on the left). However, a business that introduces a

flexible model around operations and engineering

capacity supported by a sound digital and

technological infrastructure will take and deliver.

Work

Overload

Overload

Overload

Operations

Manufacturing Engineering

Systems

Constrained Business

Work Work

Systems

Flex

FlexManufacturing

Engineering

Digital

Digital

A QuEST-partnered

flexing business

QuEST Integrated Solutions

operations


Figure 2

Having a defined and internally communicated strategy to work with the partner needs to be in place for success – and then ensuring that the whole MRO enables the strategy to deliver.

All these can be provided through a managed service model to avoid excessive management burden on the

customer. Having a strategy of managed services is crucial to avoid tying up technically able individuals within the

MRO managing internal transactions, rather than using delivered solutions. Further, there is the opportunity to understand the customer’s operations and subsequently offer tailored digital solutions from a standard portfolio

based on industry standards. A good example of the widespread adoption of industrial standards, such as AS9100

for First Article Inspection -- allowing a cookie-cutter solution (therefore flexible and competitive) for both compilation and approval services.

QuEST is in the right position to offer competencies across the wing-to-wing cycle:

Leveraging our existing capabilities, we can demonstrate credibility to stand up and deliver support to customers in

an operationally sensitive environment, where time for learning is short. Examples of some operational services we

have already provided include (these are offered across the engine, airframe, component and line levels):


There are a number of strategies where an engineering partner, specifically QuEST, can provide enabling solutions, such as:

Access to scarce resource: Leveraging pre-trained, process familiar diverse workforce.

Peak load management

Key resource / knowledge that is only required for transitory or low-level basis

Best-cost solutions, optimized local-global model

Recognizing that diversity is widely cited as a key to effective problem solving -- QuEST Global is well placed

to provide this

Smart Workscoping based on past and future engine utilization to optimize shop visit costs, time on wing, and

reduced inspection efforts during line maintenance

Development of a selection of repairs and procedures around newly deployed technologies

Support today’s established operations, allowing the MRO to focus their own people for the future (QuEST

currently provides ME and shop floor support to several MROs)

Leverage access to the larger organization to manage onboarding of new products through all processes --

from new facilities layout and tooling assessments to route cards and FAIR planning and approval

Definition and development of targeted digital solutions to deliver effective operations

While the list above is not exhaustive, it shows the wide range of managed service provisions available. These are

often supported by a commercial framework that encourages innovation and transformation for the customer to

ensure that QuEST can be recognised as a trusted partner to deliver.

Our digital credentials are impeccable for leveraging the technological, cost and performance benefits of the fourth

industrial revolution. With proven expertise in system engineering, enterprise software and data science across

industries, our digital capabilities can help MROs design, develop and implement:

ICA Deviation Approval

Recovery of Held / Unserviceable Material

Sampling at the System, and Component Level

Repair Definition

Repair On-boarding Including FAI

MRO Facility Layout

Data Analytics

Workscope Definition Tooling Design and Management

Configuration Management

Edge Solutions that reduce dependency on the Cloud by facilitating end-device data acquisition, analysis and

control. This is achieved through process engineering, testing and establishing human-machine interfaces,

data acquisition and connectivity.

Digital Software and Solutions to string the digital thread across traditionally isolated assets and processes --

for creating digital twins that enable real-time assessment of the system’s current and future capabilities to

optimize business operations and processes.

Digital Factories that enable effcient digital manufacturing with flexibility and operational integration, with centers of excellence to optimize costs.

Pervasive Technologies such as Artificial Intelligence, Machine Learning, and Augmented Reality to innovate and future-proof user platforms.

In conclusion, the MRO market is going through a great period of growth and change, threats and opportunities,

and the organizations that adapt well will thrive. Choosing a strong engineering services partner, such as QuEST,

to drive transformation of the MRO can provide access to a successful future.


Bill joined QuEST in 2018. As Chief Engineer for Aftermarket Services, he plays a key role

in developing technical solutions and competencies to support our customers. Bill has over

20 years of experience in Aerospace in a wide variety of contexts, including Part 21J, Part

145, and within airlines. He has both BEng (Hons) and MSc in Engineering, and has been

a Fellow of the Institute of Mechanical Engineers for several years.

Our Team

Rajesh joined QuEST in 2008 after a successful career with the Indian Air Force as a member of Technical Staff. He has almost 33 years of experience in Aero Engine Opera-

tions and Maintenance. He is responsible for developing technical solutions for Gas

Turbine Engines for Aero and Land-Based applications. He is an expert in defining the value streams, Do/ Buy strategies, and developing complex solutions for global clients. He

is an avid trainer and loves to help teams grow their competencies. He holds a Degree in

Mechanical Engineering and an MBA in Human Resources Development.

Christy joined QuEST in 2007, and has played a key role in developing the Aftermarket

business with our strategic Aero Engine customer. Christy has more than 20 years of

experience working with Aero Engine OEMs and MROs. Prior to joining QuEST, Christy

worked in the Aero Engine Division of Hindustan Aeronautics Ltd. for Engine Serviceability

Certification for 10 years. In his current role, Christy manages the global Aftermarket business engagement and is responsible for building a trustworthy relationship with the

client.

Murali joined QuEST in 2004, and is responsible for developing technical solutions to

address the technical and digital needs of our customers, specifically in the area of After-market. He has more than 20 years of experience working with Aero OEMs and MROs. In

his current role, he supports new client engagements through innovative technical

solutions, and existing clients through capability management and transformations. Prior to

joining to QuEST, Murali worked with Hindustan Aeronautics Ltd. and Goodrich Aerospace

in the Aftermarket area. Murali holds a Bachelor’s degree in Aircraft Maintenance from

Singhania University and also an Aircraft Maintenance Engineer’s basic license from

DGCA, India.


Bill Morris

Christy Francis

Murali Mohan

Rajesh Handuja

[email protected]

[email protected]

[email protected]

[email protected]


For more than 20 years, QuEST Global has aimed to be a trusted global product engineering and lifecycle services partner to many of the worlds’ most recognized

companies in the Aero Engines, Hi-Tech, Aerospace & Defense, Transportation (Auto

and Rail), Power and Industrial, Oil & Gas and Medical Devices industries. With a

global presence in 15 countries, 75 locations and 12,880 personnel, QuEST Global

believes that it is at the forefront of the convergence of the mechanical, electronics,

software and digital engineering innovations to engineer solutions for a safer, cleaner

world. QuEST Global’s deep domain knowledge and digital expertise aim to help its

clients accelerate product development and innovation cycles, create alternate

revenue streams, enhance consumer experience and make manufacturing processes

and operations more efficient.

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quest global mro market opportunities · 2020. 3. 30. · quest global 1 a market of growth the...

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