Every year experts release their thoughts on what the aviation industry, and our segment of it, will do during the coming years. As we have seen time and time again, sometimes they are right. And sometimes they are not.
There is always a chance for an unpredictable event such as a terrorist attack, a worldwide health scare or an economic downturn. Given that these things can occur and cannot be predicted, let’s take a look at what a couple of these reports say will happen in the coming years. Let’s start with the annual FAA Forecast released in March. Then let’s put it together with a couple of other prescient outlooks.
The 2018 FAA forecast calls for slightly slower U.S. carrier passenger growth over the next 20 years to average 1.9 percent per year. But passenger growth will continue into 2018, as the FAA report says, “spurred on by favorable economic conditions in the U.S. and the world.” They are predicting oil prices to rise to $51/barrel in 2018. Furthermore, the forecast assumes they will increase thereafter to exceed $100/barrel by 2030. “Over the long term, we see a competitive and profitable aviation industry,” the report says (see more on airline service and support from Rich Hopf, Director of Airlines, BAE Systems on page 20).
As for the GA market space, FAA predicts the active general aviation fleet will remain stable through 2038. “The long-term outlook for general aviation is stable to optimistic,” the report says, but outlines that growth at the high-end will “offset continuing retirements at the traditional low end of the segment.” (See more from Derek Zimmerman, President Gulfstream Aerospace Services on page 44, Jim Swehla, Co-founder/EVP Sales and Marketing, West Star Aviation on page 50 and Todd Duncan, Chairman of Duncan Aviation on page 45). A final key figure from the report is that the U. S. civil aviation maintenance industry employs about 279,000 workers with most of those working in the MRO segment.
FAA’s forecast calls for growth. Couple that growth with record airline profits last year and things look rosy.
Consultancy firm CAVOK and the Aeronautical Repair Station Association (ARSA) made a collaborative forecast which says there are some risks on the horizon. Strained capacity, higher costs and pent-up demand may lead to higher supplier rates and to workers seeking higher wages.
This report predicts a shortfall of maintenance workers by 2022 as a result of the retirement of baby boomers and the lack of interest in the job among millennials. This will be particularly evident in mature economies like North America. “This shortage could produce problems for the aviation industry,” the CAVOK/ARSA report says.
The commercial air transport MRO market is growing. The CAVOK/ARSA report forecasts 3.8 percent growth for five years and then 4.5 percent yearly growth between 2023 and 2028 (see more of ARSA’s Executive Director, Sarah MacLeod’s thoughts on page 21). We used to talk about consolidation in our industry saying there was too much capacity. But this report is now looking at mergers and acquisitions as more likely and a way to handle the growth. We have already seen some of this taking place. For example, the StandardAero purchase of Vector Aerospace (see more comments from StandardAero’s CEO Russell Ford on page 16), AAR’s purchase of Premier (see more from AAR’s Brian Sartain, SVP of Repair & Engineering on page 18) and Chinese firm HNA’s purchase of SR Technics, leaving fewer but larger companies.
Also called out in their forecast is the larger role the OEMs are playing. Boeing, Airbus and the engine manufacturers are all zeroing in on the aftermarket as a way to hold on to the values of their products (see more from Pratt & Whitney’s VP, Aftermarket Operations, Joe Sylvestro on page 17 and Leo Koppers, SVP MRO, MTU Maintenance also on page 17).
This is happening right now with Boeing Global Services recently announcing orders valued at more than $900 million in February (see more of what BGS CEO Stan Deal has to say on page 15). OEM involvement in the aftermarket and competition with the MROs of the world has never been tame. Watch this space for even more cutthroat competition.
One of my favorite forecasts comes from VZM Management Services led by industry veteran and expert, Marcel Versteeg. “The global Mainliner MRO market will grow around three percent in coming years – Middle East and Asia-Pacific will continue to show the highest growth rates,” the report says. VZM says the growing cargo market and need to replace aging fleets will increase demand for P2F conversions.
They also predict labor shortages becoming evident worldwide. But, Versteeg says, efficiency improvements and technology can help to reduce labor shortages. “Independent engine MRO service providers are strengthening their position in the market by offering comprehensive service packages,” VZM says (see more of what Neil Book, President/CEO of JSSI has to say on page 46).
Lastly, the Boeing Technician Outlook says, “global fleet growth will continue to drive a strong demand for technicians to repair and maintain the airplanes. Technology will drive the need for those who can work with advanced avionics, composites and digital troubleshooting, (see more from Gavin Gallogly, President Mitchell Aircraft on page 43). The report says 648,000 mechanics will be needed worldwide through the period ending in 2036. Hold on. It’s going to be an interesting ride.