Category: BizJet

How MROs Can Survive Tariffs: Advice from the Experts

With tariffs being an integral aspect of Donald Trump’s legislative platform, the time has come for MROs and their supply chain partners to cope with this unpleasant new reality of business life. This is no easy task: “Tariffs continue to present significant challenges for the aviation maintenance sector, particularly in terms of cost predictability and supply chain efficiency, with the ability to forward-plan hampered by the ongoing state of flux,” said Hamish Martin, partner at LAVA Advisory Partners.

So how can MROs find ways to survive tariffs, let alone thrive? Aviation Maintenance polled the experts to find out. Here’s what they told us.

A Vulnerable Sector

People in the space equipment and launch industries like to explain the many problems they face by saying, “Space is hard”. Well, when it comes to dealing with tariffs, “MRO is hard too”.

“MRO is one of the sectors that is feeling more of the pain than other sub-sectors of aerospace and defense, both on the price side of the tariff and on general parts availability, which is already pretty scarce in the market today,” said Meghan Welch, managing director of Brown Gibbons Lang & Company. Her firm is a middle market mergers and acquisitions consulting agency that also covers debt capital markets and equity capital markets. “There’s a big supply demand imbalance already for MRO parts and repair capabilities, and this has just been exacerbated by the tariffs themselves.”

“From a broader macro perspective, the tariffs, especially all the news that was announced about China and Boeing, really called into question further delays on the production side for the OEMs like Boeing,” she added. “The cancellation of Boeing orders that China has announced has repercussions throughout the supply chain and the aftermarket. Of course, the longer that new aircraft production continues to get delayed, the longer that airlines and operators will continue to fly older aircraft, which directly translates to increased need for MRO services — as long as they can get parts. So the news isn’t all bad for MROs.”

The Tried and True Methods Still Work

Chris Brumitt is managing director, aerospace & defense, for Maine Pointe. “We are a supply chain and operations implementation firm, specializing in transformational change for major private and public companies,” Brumitt told Aviation Maintenance magazine. “Our focus is on delivering measurable economic returns in cost and cash flow across planning, procurement, operations and logistics, enabled through hands-on execution, data analytics and leadership, and organizational effectiveness.”

When it comes to surviving tariffs, Brumitt prescribed the “tried and true methods” that give companies the best chances of surviving today’s tariff wars. “Ultimately, most businesses, whether in strong or weak economic times, must strive to be more efficient, reduce costs and deliver quality products to their customers on time,” he said. “Our consulting business is not being directly affected by tariffs. But our clients are experiencing dramatic swings in how they must adjust their approach to not only the tariff cost, but also the administrative burdens and ongoing uncertainty from frequent adjustments to tariff policies. Many clients are forced to reassess their strategies on short notice, which can impact operational capabilities and increase operating costs, as well as drive up material cost.”

In some instances, consulting with an expert like Maine Pointe can be a smart move for MROs and their suppliers — because fresh minds can sometimes come up with useful ideas. A case in point: “Our current engagement with a composite aircraft parts company is focused on two critical areas,” said Brumitt. “The first area is Strategic Sourcing, to improve procurement maturity and reduce material cost in the most critical categories of the supply chain. The second is operations excellence, to drive improved productivity, quality, and throughput within the enterprise itself.”

When choosing an expert, make sure that they practice what they preach. Otherwise, their advice may not be based on firsthand experience and thus lack value.

At Maine Pointe, “we are always focused on managing our financial status in alignment with changes to our long- and short-term revenue projections,” Brumitt said. “This is why we believe that most companies must pay attention to their end-to-end supply chains, and in difficult economic times, the key is for them to stay focused on their costs and cash flow, which is our greatest area of expertise. Because Maine Pointe’s approach is implementation-based and directly impacts cost and cash, our model fits well with our clients’ near-term need to deliver bottom-line results.”

Diversification and Other Options

Diversification is a great way to add new revenue streams, and move into new markets that can help a struggling company do better. Perhaps the most striking example of this truth is Amazon, which started as an online bookstore and now sells everything. Disney achieved similar success by diversifying from purely creating movies, to tie-ins such as theme parks and cruise ships. Apple began by building computers, then branched into MP3 players (iPods) and now smartphones (iPhones).

When it comes to aviation maintenance, “the airlines have been cutting routes, leading to concerns that there’s going to be reduced passenger travel because people are tightening their wallets globally, and thus resulting in less work for commercial passenger aviation MROs,” said Welch. “One way to deal with a potential drop in business is by diversifying into commercial freight, and even the military side of MRO.”

In either case, the key is to look for opportunities in untapped markets that tap into an MRO’s existing capabilities and services. By diversifying in this manner — especially in domestic markets that may be less affected by tariffs — MROs can bring in new work, at rates that factor tariffs into the cost.

Focusing on domestic markets is yet another way to potentially boost revenue streams.

“While cross-border deals now require more careful navigation and a robust approach to due diligence, the focus on regional self-sufficiency is opening up fresh avenues for investment. With the right strategy, businesses can turn tariff pressures into a catalyst for long-term competitiveness and value creation,” Martin said. “This could prompt a wave of exits from innovative founders considering their succession plan and willing to find the right advice to capitalize on the market opportunity.”

In a similar vein, there may be opportunities for smaller MROs to band together and share projects based on their respective strengths, such as an engine shop and an airframe shop. Another solution is for smaller shops to either merge with large MROs, or to be acquired by them. “A lot of my clients are the smaller companies in the middle market, where we’re seeing interest in possibly selling or finding a successor for their business, because they’re getting squeezed on overall costs,” said Welch. “This is creating M&A opportunities for some of these larger consolidators.”

“From an M&A perspective, we’re seeing increased interest in local partnerships and regional consolidation, which can strengthen supply chain resilience and create new growth opportunities for both small companies with a stronghold in a specific region or capability, and for the acquisitive companies looking to broaden their reach,” Martin agreed. “Across the wider aerospace community, these changes are driving innovation in sourcing and logistics, and encouraging more agile and adaptable business models.”

Finally, it may be possible to expand the degree of services that an MRO offers, such as paid online/over-the-phone support to airlines and other aircraft operators, because such services are not being tariffed. Again, a case in point: “While the majority of Maine Pointe’s business is in the U.S., our international business is not generally affected by tariffs because we are exclusively a service business, and the tariffs are directed at physical products,” Brumitt said. “Meanwhile, the adjustments we have made for market changes are based on a customized, strategic approach to each market. Aerospace & Defense, Automotive, and Electronics all require a different approach, depending on what tariffs are being levied and to which countries.”

Toughing It Through Supply Chain Woes

Even before Covid, the aviation supply chain was experiencing serious delays due to lack of parts and distribution issues. Covid made matters worse. Afterwards the supply chain situation was finally starting to improve, until tariffs were added to the mix and messed things up again.

In the hardest, starkest terms, tariffs are now a fact of business life, and a force that has upended the survivability of many MRO businesses. To cope with the additional costs being generated by tariffs, some MROs are changing their ways of doing business. “We used to see a lot more MRO shops operating on a purchase order basis,” said Welch. “Now we’re seeing them move towards a short contractual agreement basis with potential customers, to better manage their costs and revenue streams.”

“Tariffs can create direct financial pressure and significant supply chain disruption,” Brumitt noted. To mitigate these facts, “Maine Pointe is uniquely positioned to help clients offset the impacts of the tariffs and reduce other cost areas to rebalance operations and restore performance. The number one thing that Maine Pointe does to retain our clients and keep them happy is to deliver on what we commit to and focus on total client satisfaction. We utilize extensive analytical tools to determine the potential benefits for our clients and go through a rigorous due diligence process that gives us and our clients the highest level of confidence that we will deliver on our promises.”

The Bottom Line

There is nothing that we at Aviation Maintenance magazine would like to do more than offer our readers an easy, surefire way to survive (and even thrive) during tariffs.

Unfortunately, there are no surefire solutions available at hand. But what does exist is useful advice as offered by our experts above. With any luck, it will help your company get through these tough times, and keep going until things eventually improve. That’s not a “magic bullet” solution, to be sure, but at least we are telling you the truth.

Significantly impacting the safety, efficiency, precision and overall integrity of aircraft operations

Human factors (HF) play a critical role in aviation maintenance ensuring aircraft safety and reliability. It is human factors that too often affect MRO functions that can cause or contribute to many aircraft accidents. Some examples of HF maintenance errors are parts installed incorrectly, missing parts and also required checks not being performed. As the aviation industry continues to grow, the importance of reliable and competent maintenance, repair and overhaul (MRO) services also grows.

Human factors is the study of the relationship between humans and machines. There’s been such an emphasis on recognizing and responding to human factors in aircraft MRO, that the Federal Aviation Administration’s (FAA) Flight Standards Service Aircraft Maintenance Division, together with the Office of Aviation Medicine (AAM), developed and formalized the agency’s Human Factors in Aviation Maintenance and Inspection research program. This program was implemented in response to a congressionally mandated requirement (Aviation Safety Research Act, Pl. 100-591, 1988) and is aimed at reducing the number of accidents and incidents resulting from human error in maintenance.

This strategic program plan describes industry-government-labor partnerships that characterized the human factors in aviation maintenance and inspection research program at the time. The plan provides historical scientific explanation and rationalization of the need for applied human factors research and development.

Significant Impact

Dr. Maggie J. Ma, FRAeS, certified human factors professional (CHFP), technical fellow customer support, Boeing Commercial Airplanes, Seal Beach, California, explains that human factors can significantly impact safety, efficiency and overall reliability through:

Investigating events and near misses to understand contributing factors (a.k.a. performance shaping factors), so we can manage/influence human behaviors — preventing and mitigating human errors and violations.

Designing for maintainability; applying Human-Centered Design (HCD) approach and design for maintainers to ensure they can perform their tasks (maintaining/servicing/inspecting the aircraft) safely and efficiently in the actual operational environments.

Ensuring effective and ease-of-use of work instructions and user interfaces of maintenance applications/systems.

Understanding changing demographics of aircraft maintainers, their changing needs/preferences in seeking information, using technologies, learning, as well as impact of new technologies on the workforce and performance (e.g., artificial intelligence, drone assisted visual inspection, human-robot teaming).

Dr. Bill Johnson is president and chief scientist of Drbillj.com LLC, Atlanta. Over the past 15 years he has spoken to many FAA airworthiness inspectors (perhaps 2,500 ASIs), FAA certification inspectors, NTSB and other international investigative and defense personnel, and U.S. and International airline and MRO employees. At the start of each of his classes he asks the class to use a blank sheet to list the top five HF challenges related to airworthiness.

“I started doing this in 2010,” Dr. Johnson says. “Surprisingly, the lists have not changed radically in that 15-year period and there is a high overlap between U.S. and international audiences. That says that the age-old challenges have not gone away and need continuing reinforcement. These lists include: company safety culture; enough qualified MRO personnel; management and self-induced time and quality pressure; fitness for duty (mostly fatigue); communication; complacency; procedural compliance; learning new technology; and more.”

When it comes to recognized HF challenges, there was an initial industry “Dirty Dozen,” a list of the twelve most frequent pre-cursors or contributing factors to human errors that can lead to incidents and accidents. This list has evolved and expanded to be called the “Filthy Fifteen,” which includes modern stressors and influences in aviation maintenance. The three additions to the original twelve help address risks from new technology regulations and workforce changes:

• Lack of Communication

• Complacency

• Lack of Knowledge

• Distractions

• Lack of Teamwork

• Fatigue

• Lack of Resources

• Pressure

• Lack of Assertiveness

• Stress

• Lack of Awareness

• Norms

• Technology Overload

• Information Overload

• Procedural Drift

Advances, Technologies and Training

What’s available to aid HF in aircraft MROs and keep the Filthy Fifteen at bay? Dr. Johnson explains that while procedural compliance is still a primary challenge, “New delivery methods like hand-held computers make it easier to always have the right documentation available. Younger workers are likely to consult documentation when they have a device readily available. FAR Part 5, related to Safety Management System (SMS) is working for airlines and most MROs. With proper scaling, it will also have a positive impact on general aviation MRO operations. Tied closely to SMS is voluntary reporting. FAA inspectors are adopting the attitude/philosophy that it is better to find ways to address hazards and possibly increase risks rather than find ways to punish personnel and organizations that make mistakes. FAA, company management, organized labor and individual workers are thinking more like risk assessors.”

DOT TSI Mx HF classes use the PEAR model, which was created by Dr. Johnson and another developer in 1995. The model (actually a mnemonic) was initially designed to be understood and used by the aviation maintenance and engineering audience. PEAR remains a main HF training paradigm for FAA inspector training and is also widely used by the Civil Aviation Safety Authority (CASA), Australia training program. PEAR is the basis for maintenance HF training at many airlines and maintenance, repairs and operations. For over two decades, the term “PEAR” has been used as a memory jogger to characterize HF in aviation maintenance. PEAR prompts recall the four important considerations for HF programs:

• People who do the job

• Environment in which they work

• Actions they perform

• Resources necessary to complete a job

Dr. Ma notes that the release of ICAO Doc 10151: Manual on Human Performance (HP) for Regulators in 2023 been a very useful tool. The document has defined the five principles of human performance and provided guidance to the regulators and the regulated on how to best support human performance in aviation.

There is a trend for organizations to rely on computer/web-based training to satisfy the aircraft MRO requirements whenever they can for cost-saving reasons. Dr. Ma warns there is a lot of empirical evidence that CBT/WBT for human factors is not as effective as in-person facilitator led training. “Organizations should implement in-person HF training to take advantage of the human interaction in learning and team building.”

Increasingly, XR (Extended Reality) technologies — a broad term encompassing immersive technologies that merge the physical and digital worlds — are gaining in usage. Virtual Reality (VR) is being used for training and design/development activities. Mixed Reality (MR)/Augmented Reality is being used for training, remote assist, remote inspection, intuitive work instruction with built-in work-progress tracking and error-proof features. Dr. Ma says the fourth wave of computing — enabled by mixed reality immersive wearable technology — target users are first-line workers (2 billion) such as maintainers. Previously the key target computing users were information workers (480 million).

A Shift to Cognitive Interface Management

It is impossible to ignore the rise of AI. “AI is taking the world by storm and will transform aviation/aircraft MRO by transforming what people do and how people work,” Dr. Ma says. “Correct AI use is likely to improve accuracy and efficiency like what automation has done. However, there will also be challenges like misinformation, mistrust, over trust and ethical concerns that are more complex than those concerns associated with automation. The Intl. Society of Human Factors and Ergonomics has released AI ‘guardrails’ for human use.”

“Automation, like AI, can follow a lot of worker activity and provide real-time advice,” Dr. Johnson says. “A smart computer will advise you a lot quicker than a co-worker who does not want to offend you. Automation can make it easier for workers to report and learn from personal errors and the collective errors of other workers. Manufacturers are increasingly offering a built-in test. No matter how much automation there is in the equipment we will always need a competent mechanic to help diagnose, service and R&R hardware.”

Dr. Ma believes that both mechanical interaction and cognitive interface management have been important focuses for maintenance HF and will continue to be in the foreseeable future. “The trend in aircraft maintenance is becoming more proactive and predictive. HF needs to shift to assisting maintainers in proactive and predictive maintenance related training, planning and tasks. As airplanes and systems become more sophisticated, maintenance HF must engage early in the design and development and help to keep maintainers in the loop. [This] allows them to see the logistics behind how systems function and the ‘whys’ when something failed to work properly.”

Technologies are evolving and AI is rapidly re-shaping the world and changing workplaces. Dr. Ma believes that investing in aviation HF research and innovations will help to understand how human performance is affected by these changes and how to keep maintainers and other aviation professionals safe, productive, efficient, healthy and happy. “We need to support new generations of maintainers based on their information search and consumption preferences and learning needs. We need more HF practitioners.”

Safety Culture

While implemented in the MRO trenches, the focus on HF must start at the top. An organization’s safety culture is a pervasive attitude that places safety at the heart of every operational decision. Dr. Johnson says, “The concept of safety culture is increasingly familiar to management and the workforce. It is a safety culture evolution with new technologies ensuring continuing safety. That’s true for all types of organizations. Enlightened management is continuing to move in the right direction. If management does not do the right thing then organized labor and individual workers will encourage them. The maintenance workforce is determined to do the right thing.”

Dr. Ma quotes a common HF expression, “To err is human and to drift is human,” when discussing organization culture and company policies/protocol (e.g., SMS) that manage human behaviors based on the understanding of human behaviors. “To prevent and mitigate human errors and violations, the key is to manage/remove contributing factors that precede errors and violations. Telling people to not make errors or not violate procedures or just punishing people won’t prevent reoccurrence. Organization culture/safety culture should make people feel comfortable, and encouraged and incentivized to report events, near misses and any safety concerns. For example, by having established psychological safety among teams, established just culture and reporting culture, and an easily accessible/easy-to-use reporting system. Employees know what to report and have the options to report confidentially or anonymously.”

The requirement for U.S. repair stations to establish, implement, and maintain a Safety Management System (SMS) under the U.S./European Union Bilateral Aviation Safety Agreement (BASA) became official in February. The Bilateral Oversight Board’s decision No. 13 amended Annex II of the BASA and brought to regulatory reality the warning of FAA’s June 2024 InFo 24007.

The American aviation safety rules (in part 5) for domestic repair stations do not require an SMS, but those holding or applying for EASA approval under the bilateral must establish one. The requirement is effective right now for applicants; existing approval holders must show compliance by Jan. 1, 2026.

The exact language added to Appendix 1 of Annex 2 provides the following requirement:

“The repair station shall establish, implement, and maintain a Safety Management System (SMS) acceptable to the FAA and compliant with ICAO Annex 19 as applicable to maintenance organizations. The FAA SMS Voluntary Program outlines the process and requirements.” (See, Annex II, Appendix I, Paragraph 1.1.1.(b).)

The FAA SMS voluntary program has had a less than stellar beginning; it is hard to navigate, few inspectors understand the “scalable” requirements, and even fewer can apply ICAO standards — particularly since ICAO “requirements” are directed at the countries (states), not the applicants or certificate holders. It has taken years for the countries to adopt, implement, and manage their own SMS, and that confusion will be brought to American repair station applicants and certificate holders. To sell maintenance services worldwide, a repair station must take on the cost of compliance, but whether an SMS reduces risk in the aerospace environment has yet to be supported by objective data.

Despite the dubious value of the requirement, ARSA urges both government and industry to make good on the promise of “safety management.” That means both sides must recognize the safety continuum is contained in the regulations: American standards for safety management of aerospace maintenance start with part 43, add the repair station’s quality system mandates in § 145.211, and the personnel requirements in subpart D. These provide the foundation for managing technical and human risk. A certificate holder’s business must be focused on maintaining compliance.

How can the regulator demand and oversee SMS if it punishes certificate holders for revealing non-compliance? Government tendency towards hunting “violations” deters the very communication on which “safety management” depends. Forcing corrective action based on guidance or preference rather than rule-based safety analysis produces nothing but defensiveness and mistrust. Mistrust is not removed by silence; it can only be addressed through open, honest, boundary-pushing communications that do not punish indiscriminately.

Regardless of its regulator, a repair station/approved maintenance organization would do well to layer SMS within existing quality management systems. At its core, safety management is a human factors discipline, training in which is already required for American facilities holding EASA approval under the bilateral. Those approval holders integrate “lessons learned” from within the quality system into “lessons received” by personnel to prevent future escapes — a considerable step towards SMS implementation. Closing the gap between how things work in a repair station’s systems and applying it to what the company does to control organizational risk is the key to a successful program.

Last year, ARSA’s member newsletter explored the PEAR Human Factors Model (People, Environment, Actions, Resources) in safety risk management for aerospace maintenance. In a maintenance facility, each element in the model helps focus the organization on airworthiness. Tending to these characteristics ultimately ensures the company can “do … work in such a manner and use materials of such a quality, that the condition of the aircraft, airframe, aircraft engine, propeller, or appliance worked on will be at least equal to its original or properly altered condition.” The performance standard of § 43.13(b) establishes the foundation for human factors in aviation maintenance Safety Management Systems.

A true SMS will be integrated into existing requirements, not piled on top of other manuals and programs designed to elicit self-disclosure and corrective or remedial action, e.g., Aviation Safety Action Programs, hotline and whistleblower systems, and other avenues to communicate potentially non-compliant behaviors or actions. Certificate holders meet regulatory standards to demonstrate system safety. Their business strategies must protect private interests while eliciting information detrimental to safety or profit. To avoid creating more opportunities for miscommunication, mistakes, and mistrust, SMS cannot be added to existing systems; it must be integrated.

Sarah MacLeod is managing member of Obadal, Filler, MacLeod & Klein, P.L.C. and a founder and executive director of the Aeronautical Repair Station Association. She has advocated for individuals and companies on international aviation safety law, policy, and compliance issues since the 1980s.