European MRO Outlook

Slow Growth and Mounting Challenges

EUMRO251The European MRO market is a mature sector, with great technical expertise but with relatively high costs and slow growth rates. It is home to some of the most successful airline, independent and manufacturer-based maintenance, repair and overhaul facilities, which are especially well-versed in the support of aircraft engines and complex components.

Within the approximately $61 billion global MRO market, Western and Eastern Europe accounted for about $16 billion, or 26 percent in 2013, says David Stewart, global managing director for aerospace with ICF International.

The Western European MRO market hit about $12 billion in 2013 and is expected to grow to about $13 billion—a one percent compound annual growth rate (CAGR)—over the decade through 2023, Stewart estimates. Eastern European MRO is expected to grow from a much smaller base, about $630 million in 2013, to about $880 million in 2023, or about 3.3 percent CAGR, he says.

Stewart expects that Europe will show strongest growth in the 2013-2023 period in modifications and upgrades (about 2.5 percent a year). He pegs growth in the European airframe business at about 1 percent per year over the same period.

Last year ((2013)) was a good year for airline MROs, Stewart says. Original equipment manufacturers (OEMs) also enjoyed growth in the period. European engine OEMs—including companies such as Rolls-Royce, MTU, Snecma Services and General Electric (GE) in the UK—add to the region’s maintenance strength. OEMs are well-positioned in the engine and component markets, especially on the newer platforms, where they have better control of the parts and knowledge of the technologies, Stewart says. This contrasts with airframe maintenance, which is handled more frequently by the airlines and independent MROs, he says.

Yet growth will be a challenge—especially for independents—in the years ahead. “We see the business in Europe as rather flat and under a constant or even growing [cost] pressure, which results in price wars and payment issues,” says Sébastien Weber, vice president of marketing, product support & development for Air France Industries KLM Engineering & Maintenance (AFI KLM E&M). “Chasing bright spots only in Europe is virtually impossible,[so] most of the large European MROs have a global footprint.”

Because big airlines like Lufthansa, Air France-KLM, British Airways and Iberia effectively keep their maintenance work in-house, the number of available contracts may not be so high as in other regions of the world, Stewart says. So there is strong competition for every opportunity. One of the sizable contracts coming up for renewal in 2015 is easyJet, Stewart says.

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