Airplane MRO market EU up third in coming decade

20 October 2015

The aviation MRO market in Europe will grow by about a third between 2015 and 2025, a recent report from Cavok finds. Although the total fleet size is expected to increase at an annual rate of 2.8%, the additional fleet will place constraints on the MRO market as their more advanced monitoring and technology reduces their overall maintenance demand.

Recent analysis from Cavok, the aviation consulting subsidiary practice of Oliver Wyman, explores the aviation market. The report, titled ‘Turbulence Ahead Disengage the Autopilot’, considers projected changes in the aviation market that will affect the multi-billion dollar Maintenance, Repair, and Operations (MRO) market between now and 2025.

European fleet changes

European Skies
The coming ten years will see a 25% increase in the absolute number of EU planes in the sky, with a growth rate of 2.8%, the total number of planes will grow from 6,131 today to more than 8000 in 2025. However, the numbers hide that the fleet makeup is set to change. In the ten year period, 2,100 planes are set to retired and will be replaced by the addition of more than 4,100.

Change in fleet family type

The retirement and addition of new aircrafts is set to change the makeup of the overall fleet in the EU, with particularly older planes, those from ’70s and ’80s retired and newer models added. The change in the vintage of the fleet will see $2.9 billion in MRO leave the market, while the addition and continued maintenance of the fleet will see MRO on ’90s, ’00s and ’10s aircraft increase $9.9 billion in the next ten years.

Oil price on MRO demand

Jet A prices on MRO demand
One factor that has the potential to affect the MRO market is the decrease in oil price. The spot price per gallon for Jet A fuel has dropped by almost two thirds. In the plot against utilisation hours and Jet A fuel, that define the economic value of investment in new aircrafts, new jets are less profitable than their relative gas guzzling vintage generations. Keeping the older generation around, with their higher MRO costs may therefore increase wider MRO demand and thereby the industry.

The authors of the report, however, do not expect the decrease in oil price to change the orders currently on the books in the long term as oil prices are projected to increase back above the inflection point in the long term.

European MRO market development

Increasing MRO
Over the whole period, the MRO segment is projected to climb by about a third in the coming 10 years, from $18 billion in 2015 to $24.9 billion in 2025 – which constitutes an average growth rate of 3.3%. Following the retirement of old plane and addition of new planes with newer technologies, particularly engines will see growth by 2025, while airframe and line will continue to be flat.

The loss of older aircraft to repair, and the change in fleet to include more planes that have advanced technology requiring less maintenance, as well as more advanced self-monitoring technology, will mean decreased demand on MRO and a constraint on the market. As a result of which, the MRO market will flatten out after 2022. Cavok advises MRO suppliers that “despite the solid growth, aftermarket participants will likely still need to have an aggressive and innovative plan to maintain market share.”


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BDO administrates Flybmi amid aviation industry turbulence

21 February 2019

Around 400 jobs in the UK, Germany, Sweden and Belgium have been lost following the collapse of commercial airliner Flybmi. The administration, which will be overseen by professionals from BDO, constitutes the third failure of a commercial carrier since the start of 2019, with the industry having suffered from sustained turbulence for the duration of last year.

The initial 4 a.m. announcement informing customers that Britain’s longest-surviving airline, Monarch, had been placed into administration meant that many passengers arrived at airports only to find their flights cancelled and holiday plans inconvenienced, while many were left with no means of returning to the UK. Beyond the immediate ramifications, however, the collapse of Monarch also drew to a close six years of steady improvement for commercial carriers across the world. 

Since the economic shock of 2011 – an echo of the 2008 financial crisis – the number of commercial airlines falling into administration across the world declined at a relatively consistent rate. According to data from – barring an anomaly of a year which saw only four airlines falter in 2014 – the number of collapses in the sector declined continuously. In 2017, the figure stood at just 10, compared to a huge 46 in 2011, and a  staggering 61 in 2008.

Global number of airlines to have failed since 2005

Following Monarch’s precipitous fall, however, the situation once more seems to have commenced a nose-dive in the following year. 15 airlines failed in 2018, and less than two months into 2019, another three have followed suit. That puts 2019 on pace to reach 24 airline collapses. 

The latest of these firms to spiral into administration is Flybmi, an East Midlands-based airline which until February operated 17 regional jet aircraft on routes to 25 European cities. The company operated more than 600 flights a week from regional airports including Bristol, Newcastle, Aberdeen and the East Midlands.

News of the firm’s demise emerged as it cancelled hundreds of flights at short notice over the space of a single weekend, leaving many passengers stranded and out of pocket. Flybmi advised customers to seek refunds from credit and debit card companies, or to rebook with other airlines, before eventually appointing administrators from professional services firm BDO.

The appointment, initially reported by UK paper The Telegraph, came following a weekend of chaos, with passengers and staff desperate for information, but without an administrator to turn to, as authorities had remained tight-lipped on the matter. The process was reportedly delayed until the following Monday by a Scottish law which prevents insolvency specialists being appointed over the weekend.

Turbulence ahead

Commenting on the task at hand, BDO Business Restructuring Partner and joint administrator Tony Nygate said, “As joint administrators, we are taking all necessary steps to ensure customers, staff and suppliers are supported through the administration process. Our job is to maximise recoveries and minimise distress for all parties, acting as smoothly and swiftly as possible.”

Administrators from the firm now face questions over what preparations were in place prior to the carrier’s collapse, including actions that could have softened the blow for thousands of stranded passengers. Meanwhile, some 376 employees in the UK, Germany, Sweden and Belgium have been made redundant, with the remainder staying to assist with the administration. Unions have since demanded urgent talks with Flybmi’s administrators, with Unite, which represents about 40 of the airline’s 376 staff, calling for a buyer to be found in order to ensure wages are paid in full.

Unite Regional Secretary Paresh Patel told the press, “Unite is shocked and saddened by the news that Flybmi has gone into administration…  This is a terrible blow for the airline’s workforce and their families, as well as the East Midlands economy. We will be giving maximum support to our members who work for the airline across the UK at this very difficult time for them.”

The Brexit process seems to have played a key role in the downfall of Flybmi. Airlines are required by law to purchase carbon credits to offset their carbon emissions – something which until recently was subsidised through a free allocation of credits by European authorities. Now, however, Brussels has excluded UK firms from their allocation of credits ahead of the UK’s divorce from the EU in March, and it is anticipated that this may  well lead to more casualties in both the airline industry, and the broader British economy.

Glen Flannery, a Partner at law firm CMS, told The Telegraph, “The European Commission has started to implement its No Deal Brexit contingency plans. With effect from January 1st, it has temporarily suspended the UK’s free allocation of carbon allowances, auctioning, and the exchange of international credits. This has created a huge amount of uncertainty for UK participants, the full effects of which have yet to play out.”