Renew or modernize: concerns over the future of military aviation from an MRO perspective

Not unlike the commercial one, the military aviation market has recently seen two distinct trends. The first one is primarily related to an increase in the demand for new products whilst the second is largely to do with the need for solutions aimed at maintaining and modernizing the existing fleets. Although the trends might seem contradictory, their coexistence is in fact rather natural: the former is prevalent in the rapidly emerging markets whilst the latter is driven by the necessity to cut costs in the developed parts of the world.

Similar to its civil counterpart, the defence sector has recently been experiencing a shift from mature Western markets where the cuts in defence budgets have made business far more challenging to such fast-growing regions as Asia. While 3 to 4% cuts in most of the major Western markets contributed to lower spending on defence back in 2012 (for the first time since 1998) the proportion of global spending on military needs observed in China and Russia continues to be on an increase. By 2016 it is expected to make up almost a third (32%) of global defence spending among the top five markets worldwide. Nevertheless, despite the apparent positive impact, such massive investments may also bring about some unexpected results.

“Of course, the new developments are among the major factors accelerating growth in the military aviation industry: it is forecasted that the industry will receive close to 11.000 new aircraft in the next 10 years. Russia alone has been developing such a diverse range of new generation military aircraft (Su-35, T-50 and MiG35, to name just a few), that, according to some experts, it is currently surpassing the existing demand,” shares Arturas Dziugelis, the Business Development Manager at FL Technics Military Aviation Department. “However, one should always keep in mind the fact that the development and procurement of new aircraft means that the industry should prepare for the increased demand as concerns specialized MROs, capable of working with more sophisticated technological systems. Needless to say, these are not readily available in the market. This, I think, is exactly why more and more governments have recently begun rethinking their budget planning strategies.”

Alongside the new developments, other operators have been actually extending the life-cycle of many aging aircraft in response to the defence budget cuts, thus concentrating on raising MRO effectiveness and searching for more efficient solutions in the constantly changing business environment. For instance, India has been slowing down on its military aircraft procurement deals. In the next 10 years the country is expected to spend approximately $100 billion on military modernization in search of boosting its military capability as a hedge against neighbouring rivals. The U.S. have also been investing in the modernization of its F-15Еs, while waiting for the introduction of the Lockheed Martin F-35s in 2015. As a result, currently the total amount of money spent on military MRO has actually been larger than the amount spent on new aircraft production.

“The increased attention that the governments have started to pay to MRO is usually attributed to theglobal economic crisis and budget cuts. However, it is not entirely true, or at least, this is not the only reason for maintaining and modernizing the existing fleet. Aviation relies on many segments being in harmony, and increasing the investment into the development of new products may in fact lead to a massive misbalance in the MRO market. This concerns not only the qualified workforce, but also the spare parts supply, which is very limited in the case of new products,” shared the executive.

In the meantime, the situation as concerns parts for older generation aircraft is different, since many of the models which are no longer operated are kept in storage. Their parts can be easily made available through cooperation with governments. “MRO services play a major role when talking about any military air force seeking to operate efficiently. That is why such operators should exercise extreme care when measuring and evaluating the existing MRO capabilities prior to making any strategic decision with regard to their fleets,” concludes Mr. Dzugelis.