Eastern European regional fleet to power local engine MRO

While it is common to attribute the rapid growth of the $60 billion worth aircraft MRO industry to the development of the Asian economies, nowadays the CIS and Eastern Europe contribute to the industry recovery nearly as much as their larger brothers. So far the segment of component maintenance has been considered as one of the most favourable directions for the expansion of local MRO providers. However, according to FL Technics, the engine MRO market for regional aircraft operating in the Baltic States and across the CIS has the potential to be worth $100 million by 2019. Thus, as the newer regional jets of the Eastern European carriers are approaching their first overhauls, the region is likely to present new opportunities for the respective players.

According to TeamSAI, the European MRO market is going to grow from $17 billion this year to almost $21.8 in 2023, which translates into an approximate 2.9% growth annually. However the development in the region is not symmetrical. The Western European spending on MRO services will mostly stay on the same level as before. It is projected that in the next 10 years’ time it is going to increase by as little as $2.7 billion. In the meantime, the Eastern European part of the market is developing in a very different manner and in the upcoming decade is going to increase almost twice (from $2.8 to $5 billion).

According to the survey conducted by FL Technics back in 2013, the component MRO market in Eastern Europe and the CIS was supposed to present the largest opportunities in terms of competition. Over 80% of the respondents said that they were not fully satisfied with the overall support in the area, followed by the heavy maintenance works (65%), engine support (60%) and line maintenance services (40%). However, according to the industry specialists, the recent fleet developments within the region are likely to present new opportunities for growth in the engine support segment as well.

“Recently the CIS and Eastern European carriers have been rapidly expanding their fleets with such regional aircraft as CRJ200/100, ATR42/72, Dash and other. Most of the ACs in the current fleet have been in service for about 5-6 years and are approaching their first wave of overhauls. Moreover, the second-hand machines newly delivered to the region are soon to require scheduled engine repairs. Meanwhile, the older fleet is also in need of continuous attention from the MRO providers,” says Andrey Baydarov, Chief Engine Analyst at FL Technics. “Therefore, since the downtime of a regional jet (which presupposes active commercial utilisation) can be especially costly, local airlines should already be in the process of choosing the best maintenance solution before the actual need for overhaul arises. This especially concerns the engine-related support.”

FL Technics’ experts estimate the potential engine MRO market for regional aircraft operating in the Baltic States and the CIS region to grow from $70 million in 2014 to $100 million in 2019. This sum covers spare lease support programs which are critical to keep the fleet in operation. The market is quite specific as it is mainly driven by engine-related works on such mature or sunset ACs like CRJ100/200.

“A whole range of regional family engines, especially CF34-3 are well fit for heavy on-wing overhauls and replacements, which opens new opportunities for relatively fast maintenance on hot section. For example, such repairs may be provided under base maintenance, and joint with a large amount of engine change-related work. This should prompt local MRO providers to develop the capabilities to offer this kind of services on all levels, including training of certified personnel and acquiring appropriate tooling, as well as expendable materials and components,” shares Zilvinas Lapinskas, the CEO of FL Technics.

According to Andrey Baydarov, the situation may be viewed from at least two perspectives, offering an interesting choice to local MRO players. On the one hand, the market is very promising at the moment and will present considerably large opportunities in the nearest future. On the other hand, though, there is a general trend in the region to replace the fleet that is phasing out. Therefore, after 5 to 7 years these aircraft will most likely cease to be in service, so the niche is also quite temporary. Nevertheless, entering the competition in this area is definitely worth investing into. For instance, the leasing and asset management companies are also likely to claim a bite of the growing engine MRO pie, as this market presents opportunities as concerns long-term lease programs for advanced and mature fleet, as well as exchange and trade-in opportunities when it comes to sunset engines. Also, considering the increasing popularity of the on-wing repairs, the situation should encourage lessors to develop a more flexible approach towards recoupment in case of such maintenance works, as well as the usage of DER/PMA parts.

“On the one hand, this will help to avoid additional expenses and downtimes. On the other hand, it can create favourable conditions with regard to maintaining engines for further leasing to other operators (this mostly applies to new generation engines), or subsequent part-out, as well as utilization (of older-generation engines). In this area leasing companies may require some assistance in the fields of technical data or potential residual value analysis from independent asset managers or engineering organizations,” shares Andrey Baydarov, Chief Engine Analyst at FL Technics.

“The engine MRO market in the Baltic States and the CIS is a quite specific niche, which is likely to present a lot of challenges as well as opportunities to all of the players, including airlines, MROs and leasing companies. Based on its apparent attractiveness, FL Technics is already actively developing its capabilities for regional aircraft support. This concerns both, older generation, such as CRJ100/200 (including engine services), and more advanced aircraft types, such as SSJ100, EMB145 and other. All in all, the region is approaching a really exciting phase for those who will be ready to seize the opportunity,” comments Zilvinas Lapinskas, the CEO of FL Technics.