Aeronautical Repair Station Association

2014 Global Air Transport:

Fleet size ......................................................... 23,010
2014-24 fleet growth rate ................................... 3.6%
MRO market ................................................... $57.7B
Global MRO Market
2014-24 MRO growth rate ................................. 4.2%

2014 Global Civil MRO:

Firms ............................................................... 4,700+
Small/medium enterprises (SME) ....................... 78%
Economic Assessment
Maintenance employees .................................... 473k

2014 U.S. Civil MRO: Air Transport

Firms ............................................................... 4,000+
Small/medium enterprises (SME) ....................... 84%
Maintenance employees .................................... 244k

2014 U.S. Economic Activity*:

Total ............................................................... $44.4B
MRO ............................................................... $21.3B
Parts Manufacturing/Distribution ................... $23.1B
* includes business aviation

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ARSA REPORT 2014

EXECUTIVE SUMMARY
This report details TeamSAI’s assessment and ten-year outlook of the air transport maintenance, repair, and
overhaul (MRO) market starting with a review of global economic conditions, a key driver in the health of the
industry. The global economy is expected to improve in the coming years, but concerns remain over the pace and
complexion of this recovery. While no two airlines are the same, generally speaking, across the world and
especially in North America, airlines operate with very thin margins. Thus, major cost drivers, such as labor,
maintenance, and fuel, greatly influence their performance. Operators are relentless in their pursuit of managing
these costs. With limited leverage over labor and fuel costs though, airlines are right to focus attention on the cost
of maintenance.
The global air transport fleet in scheduled, commercial service and powered by jet and turboprop engines consists
of more than 23,000 aircraft. Nearly one-third of this fleet is domiciled in North America. Twenty percent of the
fleet is in Western Europe; Eastern Europe adds another 5%. Asia Pacific, including China and India, has more
than a quarter of the world’s fleet. But the fleet composition is changing. North America, which is undergoing
significant re-fleeting, is expected to see its share decline, as its net growth is very limited in the ten-year horizon.
Asia Pacific and other emerging regions are expected to see a greater share of the total fleet, and therefore,
represent the MRO growth engines for the industry.
Globally, the air transport MRO market in 2014 is expected to be $57.7B and grow to $86.8B by 2024 (for jets and
turboprops combined). This represents a healthy 4.2% compound annual growth rate (CAGR). The market
segments of airframe, engine, component, and line MRO each have a different growth profile in the outlook:
Airframe MRO is forecast at $11.5B for 2014. Nearly 30% of this spend is for aircraft based in North
America. Airlines themselves and their affiliated third-party providers maintain a solid hold on this
market based on publicly-announced contracts. The airframe MRO market typically is considered a low-
margin, labor intensive segment.
Engine MRO is expected to be $22.1B in 2014. More than 30% of this value is tied to North American
operators. Unlike airframe MRO, engine MRO is largely contracted out and engine original equipment
manufacturers (OEMs) have a large share of this market. Engine MROs, recognizing the value of the
aftermarket, typically enjoy higher margin work which is also more material intensive.
Component MRO is forecast to be $12.2B in 2014. Upwards of 35% of this spend is for North
American aircraft. Like the engine MRO business, much of the component MRO market is contracted
out, though it varies greatly from one component type to the next. Similarly, the labor/material mix can
vary.
Line MRO is pegged at $11.9B in 2014. North America represents 27% of the market. The nature of
line maintenance makes it less prone to contracting; however, the potential to tap this market
represents a significant opportunity in an otherwise slowly growing market. Of course, these
opportunities may be limited to far flung airports. Because the work is labor-intensive, the opportunities
to take advantage of economies of scale are constrained.
The commentary continues with an examination of the flow of work between regions which reveals that North
America is a net importer of airframe maintenance but is a net exporter of engine MRO. Structural characteristics
in the economy have led to these trends. However, as labor rate differentials between developed and developing
regions narrow, North America will be ripe to reverse its status as a net importer of airframe maintenance.
Similarly, engine and component OEMs—most common to North America and Western Europe—have relied
heavily on their intellectual property to capture a greater share of their respective aftermarkets. OEMs will
continue to gain ground as significant MRO providers in these areas during the forecast period.
In terms of economic activity, MRO plays a significant role. In the United States, nearly 4,100 firms with over
244,000 employees operate in the civil MRO market (including airline employees). Small and medium-sized
enterprises (SME) account for 84% of these U.S. firms and 21% of all employees. There are over 143,000
technicians in the U.S. and approximately 37% are certificated.

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 ARSA REPORT 2014

TABLE OF CONTENTS
Executive Summary ................................................................................................................................ i
Table of Contents ................................................................................................................................... ii
State of the World .................................................................................................................................. 1
State of the Airline Industry (2013 and looking forward) ......................................................................... 2
Global Air Transport Fleet Forecast ....................................................................................................... 4
Global Air Transport MRO Market Forecast ........................................................................................... 5
Definitions ...............................................................................................................................................................5
Airframe Maintenance .......................................................................................................................................................... 5
Engine Maintenance ............................................................................................................................................................ 6
Component Maintenance ..................................................................................................................................................... 7
Line Maintenance ................................................................................................................................................................. 9
MRO Market Size and Forecast .......................................................................................................................... 10
Total MRO – Jets & Turboprops ......................................................................................................................................... 10
Total MRO by Class ........................................................................................................................................................... 11
Total MRO by Region ......................................................................................................................................................... 11
Total MRO by OEM ............................................................................................................................................................ 12
Total MRO by Family and Type Variant ............................................................................................................................. 13
Implications for North American MROs ............................................................................................................... 14
MRO Market by Market Segment ........................................................................................................................ 16
Airframe (HMV and Modifications) Maintenance ................................................................................................................ 16
Engine Maintenance .......................................................................................................................................................... 19
Component Maintenance ................................................................................................................................................... 23
Line Maintenance ............................................................................................................................................................... 27
Global MRO Balance of Trade ............................................................................................................. 30
Airframe (excluding modifications) ..................................................................................................................................... 30
Engine ................................................................................................................................................................................ 33
Component......................................................................................................................................................................... 35
Aviation Maintenance Industry Employment & Economic Impact ......................................................... 37
Global Civil Aviation MRO Employment .............................................................................................................. 37
Airframe.............................................................................................................................................................................. 38
Engine ................................................................................................................................................................................ 39
Component......................................................................................................................................................................... 40
Line .................................................................................................................................................................................... 40
U.S. Employment & Economic Impact by State .................................................................................................. 41
Conclusion ........................................................................................................................................... 44
References .......................................................................................................................................... 45

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ARSA REPORT 2014

This commentary details the economic impact of the maintenance, repair, and
Global economic outlook is positive
overhaul (MRO) market. First, macroeconomic conditions are considered. The
but cautious due to potential
fleet and related MRO market is then sized for the air transport sector. The
downside risks.
market players are then assessed for each segment and across different
world regions. Finally, the employment and economic activity within the U.S.
civil aviation maintenance market is assessed.

STATE OF THE WORLD

More than five years after the onset of the global financial crisis, the global
economy continues to experience modest growth. Economic predictions for
2014 are generally upbeat and anticipate accelerating economic growth.
Developing economies will remain the main driver of global growth, but their
output will remain below the elevated levels seen in recent years. Developed
markets are expected to rebound led by the United States and euro area. As
a result, the spread between the growth rates of developed and developing
economies is expected to narrow.
World gross domestic product (GDP) is expected to grow by 3.6% in 2014 GROSS DOMESTIC PRODUCT (GDP)
according to the October 2013 International Monetary Fund (IMF) World
Economic Outlook update as the factors underlying global activity continue to Global Economic Growth Outlook
1
improve. (See Figure 1.) However, significant risks remain including spillover
effects of central bank policies, particularly the U.S. Federal Reserve’s
2015
tapering of its quantitative easing measures.
Developed economies as a whole are expected to see a 2.0% increase in
2
GDP for 2014 (a significant rebound over the expected 1.2% growth in 2013).
Drivers of the predicted acceleration in growth are a stronger U.S. economy, a
reduction in fiscal tightening, and accommodative monetary conditions. 2014

The U.S. is forecast to experience 2.6% GDP growth in 2014 driven by

increased consumer spending, a stronger housing market, and a more
positive outlook on unemployment. 3 The euro area, moving slowly out of
recession, is expected to grow by 1.0% in 2014.4 The euro area crisis seems 2013 Emerging &
Developing Economies
to have passed, but considerable financial, economic, and political challenges Advanced

remain. Policymakers face significant challenges in restoring confidence in the World

financial sector caused by large quantities of private and public debt and
addressing high levels of unemployment risks that create political instability
2012
risk. Growth in the Japanese economy is expected to slow from 2.0% in 2013
to 1.2% in 2014 due to tightening of fiscal policy.5
Emerging and developing economies, including China, are expected to grow 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%
at 5.1% in 2014.6 Exports driven by stronger growth in advanced economies
Source: IMF World Economic Outlook - October 2013
and increased consumption encouraged by low levels of unemployment are Figure 1
expected to support this growth. However, growth is not expected to rebound
to the high rates experienced in 2010 and 2011. There has been much
discussion by economists on the slowdown of growth in emerging economies,
7,8
particularly whether the slowdown is cyclical or structural in nature. The IMF
argues that a majority of the slowdown has been caused by the unwinding of
previous positive cyclical factors (sharp rebound in exports and high
commodity prices), but the overall growth potential of these economies has, to Emerging and developing economies
a lesser extent, deteriorated as well. The IMF views China and Russia as two are forecast to have the highest
economies affected more by structural factors and expects them to have growth rates, though they may not
persistently lower growth rates in the future relative to the previous decade reach the levels seen in recent years
(although Chinese growth is expected to remain in the range of 7-8%). Growth as growth moderates and capital
rates of the remaining BRICS countries are expected to remain in line with investment returns to developed
their averages over the past 15 years in the medium term. economies.

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Global trade remained weak in 2013. According to the World Trade

Organization (WTO), world trade will grow by 2.5% in 2013. In 2014, world
trade is expected to grow by 4.5%, with exports increasing by 2.8% in
developed economies and 6.3% in developing economies. Imports are
expected to rise by 2.3% in developed countries and 6.2% in developing
9
countries.

CRUDE OIL There is a general consensus among noted forecasters that the price of oil will
be slightly lower in 2014 compared to 2013. The World Bank forecasts oil to
Crude oil: average spot price (Brent, Dubai, WTI) average $101.00/bbl in 2014. The IMF forecasts oil to average $101.40/bbl in
$200
2014 ($3.10/bbl lower than 2013). The International Air Transport Association
(IATA) predicts that the price of Brent crude oil will be $104.50/bbl in 2013
$150 (down from $108.20/bbl in 2012). IATA also predicts the price of jet kerosene
will be $120.60/bbl in 2014 (3% lower than the $124.00/bbl 2013 price). (See
$100 Figure 2.)
While there are signs that growth is picking up in both developed and
$50 developing countries, the world continues to face a fragile recovery. All these
economic issues can have significant impact on the airline and MRO
$-
industries making their business environments increasingly challenging if
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: IMF, World Bank, TeamSAI Consulting Analysis
conditions worsen.
Source: IMF, World Bank, TeamSAI Consulting Services analysis
Figure 2
STATE OF THE AIRLINE INDUSTRY (2013 AND LOOKING
FORWARD)
In 2013, air travel is expected to grow by 5.3% (slightly higher than the 20-
year average of 5%). Passenger traffic is estimated to top three billion
travelers in 2013, an industry first. This growth in traffic, alongside continued
capacity discipline by airlines, kept passenger load factors high at 79.9% in
2013. Air freight markets are expected to grow by 1.0% in 2013 after
contracting by 1.6% in 2012.

PASSENGER AND TRAFFIC OVER THE LAST DECADE

15% Passenger and Traffic Growth Trends 25%

20%
10% 15%
RPK
RPK Growth Rate (%)

FTK Growth Rate (%)

FT K 10%
5% 5%
0%
0% -5%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
-10%
-5% So urce: IATA
-15%
Source: IATA

Figure 3

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ARSA REPORT 2014

According to IATA’s December 2013 Financial Forecast, increasing levels of “Airlines are demonstrating that they
passenger traffic, lower fuel costs, and technological efficiencies have can be profitable in adverse business
generated better than expected financial performance in 2013. IATA believes conditions with efficiencies being
that industry consolidation and partnerships are leading to high profitability, generated through myriad actions:
which is expected to continue over the next few years. IATA raised its forecast consolidation, joint ventures,
for airline profits in 2013 from $11.7B to $12.9B. (See Figure 4.) Expected operational improvements, new
performance in 2013 is considerably better than the $7.4B net profit of 2012. market development, product
“Airlines are demonstrating that they can be profitable in adverse business innovations and much more.”
conditions with efficiencies being generated through myriad actions: - Tony Tyler, IATA CEO
consolidation, joint ventures, operational improvements, new market
development, product innovations and much more,” states IATA CEO Tony AIRLINE PROFITABILITY (US$B)
10
Tyler.
The upward trend should continue into 2014 when airlines are expected to Airline Profitability
return a net profit of $19.7B. This would make 2014 the strongest year ever in ($USB)
terms of net profit—topping the $19.2B in 2010. The 2014 IATA forecast is
driven by slightly higher economic growth in 2013, increased revenue from
ancillary services, improvements to industry structure and efficiency, and $0.1
AF
slightly lower fuel prices. Fuel costs are expected to decrease slightly in 2014 $(0.1)
as a percentage of airline operating costs to 30%.
North American airlines continue to improve their profitability as seen in
$1.5
IATA’s most recent forecast ($5.8B in 2013 and $8.3B in 2014). Net profits in LA
Asia Pacific are forecast to be $3.2B in 2013 and $4.1B in 2014. European $0.7
airlines are expected to recover in 2013 and 2014 (net profits of $1.7B in 2013
and $3.2B in 2014).
$2.4
Overall, traffic is expected to grow by 6.0% in 2014. North American ME
passenger traffic (RPK) is expected to grow at 2.5% in 2014. European traffic $1.6
is forecast to increase by 4.7%, and traffic in Asia Pacific is predicted to grow
by 7.4%. The Middle East, Latin America, and Africa are forecast to
experience the highest traffic growth rates in 2014 (13.0%, 8.5%, and 7.8%, $4.1
AP
respectively). For the air freight market, IATA predicts freight ton kilometer $3.2
11
(FTK) growth of 2.1% in 2014.
Overall, the outlook for 2014 is largely positive as profitability is forecasted to
continue to improve. However, the airline industry remains a low-margin $3.2
EU
business, and the balance between profit and loss remains delicate. Net $1.7
12
margins are expected to remain weak at 2.6% in 2014. With this thin margin,
the industry remains highly susceptible to negative shocks.
$8.3
NA
$5.8

2014F 2013F
Note:
AF... Africa
LA ... Latin America & the Caribbean
ME .. Middle East
AP .. Asia Pacific
EU .. Europe
NA .. North America

Source: IATA, December 2013

Figure 4

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GLOBAL AIR TRANSPORT FLEET FORECAST

The global turbine-powered air transport fleet is about 23,000 aircraft. (See
Figure 5.) Nearly one-third of this fleet is domiciled in North America. Twenty
percent of the fleet is in Western Europe; Eastern Europe adds another five
percent. Asia Pacific, China, and India combined have more than a quarter of
the world’s fleet. But the fleet composition is changing. North America, which
is undergoing significant re-fleeting, is expected to see its share decline, as its
net growth is very limited. Emerging markets are expected to see a greater
share of the market, and therefore represent areas of MRO growth.

FLEET FORECAST (2014-24)

35,000
2014-2024 Fleet Forecast 32,906
All Aircraft
3,222
30,000
Turboprop (TP)
28,019
Regional Jet (RJ) 3,125
Widebody (WB)
3,052
Narrowbody (NB)
25,000
23,010
3,357 6,733
2,664

20,000
3,384 5,554

15,000 4,506

10,000 19,826

16,056

12,456
5,000

-
2014 2019 2024

Source: TeamSAI Consulting Services analysis

Figure 5

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ARSA REPORT 2014

GLOBAL AIR TRANSPORT MRO MARKET FORECAST

Definitions
MRO is comprised of four main segments of maintenance: (1) airframe; (2)
engine; (3) component; and (4) line.

Airframe Maintenance
Airframe maintenance involves work carried out on a regular, scheduled basis
to inspect, maintain, repair, and conduct preventive maintenance for the
airframe’s structure and cabin interior. As a consequence, the aircraft is
removed from commercial service for a generally predetermined period of
time at specified intervals. Individual airlines are responsible for conducting
this maintenance (either by themselves or through a qualified provider) in
compliance with the applicable aviation safety regulations (e.g., the Federal
Aviation Administration (FAA), the European Aviation Safety Administration
(EASA), etc.). As such, these individual airlines develop schedules for Airframe maintenance consists of
airframe maintenance to meet safety and operational requirements. light C checks and heavy checks
(e.g., 4C and larger).
Such scheduled work scopes are typically based on calendar time, a fixed
number of flight hours, or a fixed number of flight cycles. While some
operators and aircraft types have highly-customized maintenance programs
such as “phase checks” and “overnight C checks,” the vast majority fit into a
traditional model of a light C check and a heavy maintenance visit (HMV).
Each aircraft model is different, but for illustrative purposes, an average light
C check occurs typically every 18-24 months while the HMV (often also called
a “D check,” “4C Check,” or “Structural C Check”) usually occurs every 60-84
months. However, the C check interval can range from 12 to 36 months. HMV
checks can range from 60 to 144 months. Newer generation aircraft often
have longer intervals; turboprops and older aircraft have the shortest intervals.
(See Table 1.)
Activity Description Frequency Man-hours
required

C Check Detailed 12-36 months 1000-15000Mhrs

inspection 2000-12000 FH 3800 wtd avg
1000-15000 FC
HMV (or D Major 48-144 months 2000-70000Mhrs
Check or 4C reconditioning 8000-36000 FH 11600 wtd avg
Check) 6000-24000 FC
Note: all intervals are highly dependent on the flight profile of the actual
aircraft
Table 1

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Engine Maintenance
Engine maintenance involves work carried out on a scheduled or on-condition
basis to inspect, maintain, repair, and conduct preventive maintenance for the
purpose of returning the engine to service or restoring performance margins.
Engine maintenance is limited to off- Engine maintenance under consideration is limited to off-wing work that
wing work only for the purpose of requires significant effort to disassemble, repair, restore, and return to service
this study. each engine that powers the aircraft. Engine maintenance is often divided into
shop visit overhaul work and replacement of life-limited parts (LLP). As a
consequence, the engine is removed from commercial service for a period of
time. While individual air transport airline operators exercise a degree of
autonomy over when the engine overhaul occurs, LLP events must adhere to
more rigid intervals. However, for modeling purposes, all events are estimated
at an average flight hour or flight cycle interval. (See Table 2.)
Activity Description Frequency Shop Life- Total
Visit Limited Cost
Overhaul Parts
Cost (LLP)

Overhaul Off-wing 3000-24000 $200k - $0 - $200k -

disassembly, FH $6.5M $2.1M $8.6M
inspection, 1500-15000 $2.3M wtd $900k $3.2M
repair/ FC avg wtd avg wtd avg
replacement
of parts
(including
LLP), re-
assembly,
test
Note: all intervals are highly dependent on the flight profile and specific LLP
limits of the actual engine
Table 2

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Component Maintenance
Component maintenance involves work carried out in the shop environment
when components have been removed from an aircraft due to condition or
schedule to inspect, maintain, repair, and conduct preventive maintenance in
order to return them to serviceable condition. This represents the average
aggregate component maintenance expense for off-wing repair and overhaul
of components. As a consequence, the component is removed from Component maintenance covers a
commercial service for a period of time after being removed from an aircraft wide range of work across many ATA
as unserviceable. Individual airlines are responsible for conducting this chapters.
maintenance (either by themselves or through a qualified provider) in
compliance with the applicable aviation safety regulations. As such, these
individual airlines develop policies and procedures for handling component
maintenance to meet safety and operational requirements; with increasing
frequency, airlines are contracting this work on a cost per flight hour or cycle
basis.
While no one system dictates how the component maintenance market should
be organized, for modeling purposes, the component MRO market is grouped
as follows. (See Table 3.)
Component sub- Description
segment

Avionics Maintenance related to auto flight, communications,

indicating/recording systems, navigation, and integrated
modular avionics

Auxiliary Power Unit Maintenance of the auxiliary power unit

(APU)
Cabin Systems Maintenance of cabin core systems, inflight
entertainment system (such as audio, video, and WIFI
equipment), external communication system, cabin
mass memory system, cabin monitoring system,
miscellaneous cabin system

Equipment/Furnishings Maintenance of the aircraft equipment and/or

furnishings, such as buffets/galleys, lavatories, cargo
compartments, emergency equipment, accessory
compartments, and insulation
Electrical Maintenance of the generator drive, AC generation, DC
generation, external power, etc.

Engine Accessories Maintenance of the ignition, engine air, engine controls,

engine indicating systems, engine exhaust systems
(excluding thrust reversers), engine oil systems, and
engine starting systems

Propellers Maintenance of the propeller assembly, controlling,

braking, indicating, and propeller duct

Flight Controls Maintenance of the flight controls, such as aileron,

rudder, elevator, stabilizer, flaps, spoiler, etc.

Structures Maintenance of the doors, fuselage, stabilizers,

windows, and wings

Fuel Systems Maintenance of the fuel, inflight fuel dispensing, and

engine fuel and control systems

Hydraulics Maintenance of the hydraulic power systems

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Component sub- Description

segment

Pneumatics Maintenance of the pneumatic systems, such as packs,

air cycle machines, distribution and indicating

Landing Gear Maintenance of the landing gear systems, including

main gear and doors, nose gear and doors, extension
and retraction, etc.

Wheels & Brakes Maintenance of the wheels and brakes

Tires Maintenance of the tires

Nacelles/Thrust Maintenance of the nacelles/pylons and thrust reversers

Reversers
Waste & Water Maintenance of the waste and water systems and the
water ballast systems

Cargo Maintenance of the cargo and accessory

compartments, including loading systems and insulation

Other Maintenance of the air conditioning/environmental

control systems, fire protection systems, ice and rain
protection systems, lights (flight compartment,
passenger compartment, cargo compartment, exterior,
and emergency), oxygen systems, vacuum systems,
multisystem, diagnostic and maintenance systems,
information systems, and inert gas systems.
Table 3

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Line Maintenance
Line maintenance involves work carried out on a regular, scheduled basis or
in response to discrepancies noted by the flight crews to ensure the aircraft is
in an acceptable airworthy condition for operation. This work is conducted Line maintenance includes pre-flight
before/between operations. As a consequence, the aircraft is not removed checks, transit checks, daily checks,
from commercial service; however, individual airlines typically budget time weekly/overnight checks, and A-
(labor) and resources (material and consumables) to conduct this work. This checks.
budget includes time and resources for routine and non-routine tasks. Line
maintenance scheduled work can be grouped into categories including pre-
flight checks, transit checks, daily checks, weekly/overnight checks, and A-
checks. (See Table 4).
Activity Description Frequency Labor input Material Costs

Pre-flight/Transit Walk-around visual inspections Daily/before 0.5 - 7 Mhrs $0 - $500 per

checks performed by flight crew or each flight (depending on a/c and event
personnel involved)
mechanic to fix any defects that
developed during flight operations
Daily checks Visual inspections and minor Daily 1.5 - 25 Mhrs $30 - $500 per
routine maintenance, including: (every other day as (depending on a/c and event
applicable) personnel involved)
 measuring brake pads
thickness
 inspecting & testing
emergency systems and
equipment
 testing hydraulics
 checking fluid levels
 reviewing on-board
maintenance computer
messages
 maintaining IFE
Weekly/overnight Similar routine content as the Weekly 0 - 30 Mhrs $0 - $1,000 per
checks daily checks but allows for (every other week as (depending on a/c and event
applicable) personnel involved)
additional tasks
A-checks Routine and non-routine work 110 - 800 FH 64 - 760 Mhrs $500 - $40k+
included in the weekly check plus: (depending on a/c) per event
 functionality testing
 emergency & safety equipment
checks
 control surface & mechanisms
checks
 non-destructive testing
Note: all intervals are highly dependent on the flight profile of the actual
aircraft
Table 4

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MRO Market Size and Forecast

The following sections detail the total air transport MRO market forecast for
2014, 2019, and 2024. (See Figure 6.)

Total MRO in the air transport space Total MRO – Jets & Turboprops
for all aircraft classes is forecast to
grow from $57.7B to $86.8B or 4.2% The fleet forecast as previously discussed drives demand for MRO work. The
annually over the next ten years. global air transport MRO (for jets and turboprops) is expected to be $57.7B in
2014. This will rise to $73.2B in 2019, representing a solid growth at 4.9%
CAGR. The growth rate will decline to 3.5% in the second half of the forecast
period (2019-24). Over the full forecast period, this indicates growth of 4.2%,
rising to $86.8B by 2024.
Little change in the relative mix of airframe, engine, component, and line MRO
spend is expected over the forecast period.

MRO FORECAST (2014-24)

2014-24 Global MRO Forecast ($USB)

Airframe Engine Component Line Total

$86.8

$73.2 $17.7

$14.8
$57.7 $18.7

$11.9 $15.3

$12.2
$33.2
$29.9
$22.1

$17.2
$11.5 $13.2

2014 2019 2024

Note: NB, WB, RJ, and TP

Source: TeamSAI Consulting Services analysis

Figure 6

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ARSA REPORT 2014

Total MRO by Class MRO FORECAST BY CLASS ($USB)

On the whole, very little change is expected in the total MRO market mix by
aircraft class (NB, WB, RJ, or TP) over the period. (See Figure 7.) 2014 TP
Narrowbodies will hold a commanding overall share (upwards of 46-48%) to RJ $2.9
the widebodies’ 40-43%, the regional jets’ declining 9%, and the turboprops’ $5.0 5%
9%
5%. Also, the relative constant mix is true across all market segments.
NB
REGIONS OF THE WORLD Globally, MRO related to $26.4
narrowbody aircraft dominates 46%
Region Abbreviation the budget. The MRO share WB
Africa AF mirrors that of the fleet itself— $23.3
that is, the narrowbody fleet 40%
Asia Pacific AP
constitutes just over 50% of the
China CH total fleet, and the narrowbody
Eastern Europe EE
MRO constitutes just under 50% $57.7B
of the global MRO. Narrowbody
India IN MRO share should continue to
2019 TP
grow over the forecast period. RJ $3.5
Latin America & the Caribbean LA&C
$4.7 5%
Widebody MRO, on the other
Middle East ME 6%
hand, represents 40-43% of the
North America NA market over the forecast period, NB
because each aircraft is much $34.5
Western Europe WE 47%
more maintenance intensive. WB
Source: TeamSAI Consulting Services analysis
(Said differently, the widebody $30.6
Table 5 fleet represents just 20% of the 42%
global fleet but drives
comparatively larger unit costs.) As the global regional jet fleet size declines,
regional jet MRO and its share of the total MRO market are expected to
decline. The turboprop fleet is expected to grow moderately (1.9% CAGR $73.2B
2014-2024), which translates into a total MRO market size that will grow at
3.4% CAGR in the first half of the forecast period, then just 0.3% in the TP
second half, as more maintenance-efficient turboprops assume a larger share 2024 RJ $3.5
of the fleet. $4.0 4%
5%

Total MRO by Region NB

$42.0
Regionally, as the fleet distribution changes, MRO will follow. North America WB 48%
will remain the largest single region for total MRO value, growing from $17.7B $37.2
to $19.0B over the forecast period. This represents relatively flat growth at 43%
0.7% CAGR, with very little difference in the first and second half of the
forecast period. Latin America and the Caribbean, which represents 5-6% of
the total MRO market, is expected to more than double over the period
(growing from $2.6B to $5.4B). (See Figure 8.) $86.8B
Europe is expected to see solid growth. Western Europe should lose some Source: TeamSAI Consulting Services analysis

market share, even as it adds $3.4B. Eastern Europe, while relatively small at Figure 7
just 4-5% of the market, is forecast to grow much faster, at 6.2% over the Narrowbody and widebody MRO are
forecast period. expected to both gain share at the
Asia, as has been the case for some years now, remains the growth engine of expense of regional jets and
total MRO. Asia Pacific countries should grow at a healthy 5.0%, rising to the turboprops.
same levels as that of Western Europe and North America. China, which is
expected to have an MRO market 2.5 times larger ten years from now, is
forecast to grow at 9.8% CAGR. India is expected to grow at well over 10%
over the forecast period, but should remain a relatively small share of the total
market (1-3%).

11 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

Together, the Americas, Europe, and Asia represent nearly 90% of the total
MRO FORECAST BY REGION ($USB)
MRO market. As TeamSAI has pointed out in the past, though, the Americas
and Europe are expected to lose market share to Asia. By 2024, Asia
AF (including Asia Pacific, China, and India) is expected to constitute the largest
2014 ME
IN $4.0
$1.7
3% share of the three combined regions.
$0.8 7%
CH
1% NA
$4.0
7%
$17.7
31%
The Middle East is anticipated to double in market size and constitute nearly
10% of the global MRO market by 2024. Africa too is expected to enjoy
healthy growth, but should just maintain its market share.
AP
$10.6
18%
The highest MRO growth rates are expected in India, China, Eastern Europe,
LA&C the Middle East, Latin America and the Caribbean, Asia Pacific, and Africa.
$2.6
EE
5% The lowest rates (i.e., those below the total MRO market CAGR of 4.2%) are
$2.4
4% WE
again in Western Europe and North America. Growth rates range from a low
$13.9
24%
of 0.7% to a high of 11.8% for the full forecast period (2014-2024).
$57.7B India’s and China’s highest MRO growth rates are driven by the growth in the
number of aircraft for these regions, which should more than double their
AF
respective fleet sizes. Similarly, Eastern Europe, the Middle East, Latin
2019 ME $2.3
3%
America and the Caribbean, and Asia Pacific also will see their fleets grow to
$6.3
IN
$1.4
9% NA
$18.3
1.5 times or more their current size by 2024.
2% 25%
CH
$6.9
9% Total MRO by OEM
LA&C
Boeing and Airbus will remain the two dominant players in the air transport
$3.9
5%
aircraft manufacturing market with three-quarters of the fleet or more. Boeing
AP
$14.6
aircraft are expected to maintain the largest share of the global fleet over the
20% forecast period; however, it will lose share as Airbus’ share of the fleet
WE
EE $16.1 approaches that of Boeing. Interestingly though, the share of the MRO
$3.3 22%
5% market that Boeing aircraft currently drives is notably larger than that of
Airbus. Here too though, Airbus’s impact is expected to grow to nearly match
$73.2B that of its main rival as its market value doubles in size. Combined, today
these two OEMs’ aircraft drive 86% of the MRO and by 2024, they are
AF
expected to grow this share to 90%.
2024 ME $3.0
3%
$8.1 NA
IN
$2.4
9% $19.0 Bombardier and Embraer aircraft are both expected to lose MRO market
22%
3% share over the forecast period. Some of this loss will be to new entrants to
CH
$10.2
the regional jet market space, while the rest is to operators favoring
12% LA&C narrowbodies. This is true despite the fact that Bombardier’s narrowbody
$5.4
6% CSeries will be introduced in the forecast period. The MRO value the CSeries
should drive is limited compared to the MRO value Bombardier regional jets
AP
will shed as they are phased out of service (especially its CRJ fleet).
WE
$17.2 $17.3
20%
EE
20% Within the regional jet space, Embraer aircraft are anticipated to rise to the
$4.3
5%
top ranking for global MRO, even as its fleets’ MRO value climbs at just 0.9%
CAGR through 2024. Bombardier’s regional jet share could fall more than
$86.8B 50% as its existing aircraft’s market potential declines over the forecast
period and the OEM turns its focus to the CSeries narrowbody aircraft.
Source: TeamSAI Consulting Services analysis
Despite the positive press for new regional jets, none of the new entrants in
this MRO market space will come close to rivaling either Bombardier or
Figure 8 Embraer over the forecast period.

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 12
ARSA REPORT 2014

Total MRO by Family and Type Variant TOP 10 FLEETS BY MRO SIZE
Globally, the ten largest fleets in terms of 2014 MRO value are expected to 2014 2024
be (in order) as listed in Table 6 in the left-hand column. Looking ten years A320 CEO & NEO A320 CEO & NEO
forward, the top ten fleets in terms of MRO value are expected to be (in order) 1*
2* 737 NG & MAX 737 NG & MAX
as listed in the right-hand column of the same table. Airbus A320 family
(including the NEO) and the Boeing 737 NG family (including MAX version in 3* 777 777
later years) will dominate MRO demand throughout the forecast period. The 747-400 A350
4*
A320 family has a larger share, but Boeing’s 737 family should close that gap
5* A330 A330
by 2024. Both will approximately double in market size by 2024.
6 767 787
The 2014 MRO spend of the A320s and 737 NGs is much more comparable
7 757 A380
to that of the next three fleet types (777s, 747-400s, and A330s) than it is
expected to be in 2024, when the two largest fleets are expected to far 8 737 Classics Embraer 170/175/190/195
& E2
outpace the MRO of the next largest fleet. In fact, by 2024, the A320 and 737
families are forecast to constitute a greater share of the MRO market than the 9* A340 747-400
next eight fleet types in the top ten. Both will also each be more than double CRJ-700/900/1000 A340
10
the size of the third largest fleet (777).
* denotes aircraft that are in the top ten in 2014 and 2024
The A340 is the one other fleet that will remain in the 2024 top ten. New Source: TeamSAI Consulting Services analysis
entrants to the 2024 top ten include the A350, A330, 787, A380, and Embraer
Table 6
170/175/190/195 & E2 family.
The top thirteen aircraft families in 2014 should exceed $1B. By 2024, the top
fourteen aircraft families are forecast to exceed $1B in market value. The next
five type variants/families are expected to exceed $500M, which makes for a
shorter list than in 2014 when the next eight type variants/families are
expected to exceed that threshold.
While the global fleet’s MRO will grow 4.2% in ten years, the change in the Boeing and Airbus aircraft drive
mix by type variants shows some interesting developments. The entrance of nearly 90% of the MRO market.
the NEO and the MAX will push these respective families’ growth rates to
6.2% and 8.3%, respectively, over the period. Six of the top ten fleets in 2014 The A320 (CEO & NEO) and 737 (NG
are forecast to decline in total MRO value by 2024. These declining fleets will & MAX) are expected to drive the
give way to other aircraft types. largest share of the MRO market over
The fastest growing fleets in terms of MRO value over the forecast period are the forecast period.
the A350, 787, A380, 747-8, and the CSeries. As the fleets of DC-8/9, L-1011,
737-200, DC-10, AvroRJ, and 747-100/200/300 retire, demand for related
MRO will dissolve. These fleets currently represent just a small share (about
1%) of the global market though, so their retirement will have little impact on
the overall market. More significantly, the 767 and 757, with their combined
10% of the global MRO market in 2014 are expected to fall to less than half
that by 2024 and shed 6% of their market share. While this will leave just over
$3B in combined market value, they will only fall from sixth and seventh,
respectively, to twelfth and thirteenth.
The 787, while small in terms of MRO value today, is expected to grow over
nd th
50% year over year through 2024. This should drive it from 32 to 6 in terms
of MRO rank as it grows to over $5B. Its Airbus counterpart, while not
currently in service, is expected to grow to over $6B in the same time period.
The Embraer family (with its upgraded E2) is also expected to nearly double
its MRO value over the ten-year period. However, by 2024, it should just
break the $2B threshold mark, making it just 10% of the largest A320 MRO
market size. The fastest growing fleets in terms of
In 2014, globally the leading turboprops in terms of MRO market are the ATR MRO value over the forecast period
72, Bombardier Q400, and Beech 1900. By 2024 though the ATR 72 is are the A350, 787, A380, 747-8, and
expected to far outpace any other fleet type. the CSeries

13 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

Implications for North American MROs

NA MRO FORECAST BY VINTAGE ($USB) The total MRO market is expected to become increasingly top heavy. In
2014, the top ten airframes comprise 77% of the total MRO market. By 2024
2014 the top ten airframes are expected to represent 81%, picking up four
2010's
$0.0
percentage points of market share. Globally, the same trend is expected as
2000's
0% the top ten airframe types pick up additional market share by 2024 relative to
1970's
$1.8 $0.4 2014 estimates.
10% 2%
The implications of the transition described above are that MROs must be
prepared to handle the work associated with this changing mix, or focus their
1980's
$7.8 strategy to capture declining markets. From an airframe MRO perspective,
44%
1990's providers must be able to address the demands of composite airframe
$7.7
44%
materials (specific to the 787 and A350). At the other end of the spectrum,
the MD-11 freighters round out the top ten, meaning those with MD-11
capabilities should be well positioned to capitalize on the extended life of
these aircraft.
2024 The obvious targets on the narrowbody side are 737 NG/MAX and A320
1970's
$0.0
0% CEO/NEO. These two families are expected to drive a combined 27% of the
2010's
$1.9
market in 2014. More importantly, the same two families are forecast to drive
10% 1980's 45% of the market by 2024.
2000's $4.2
22%
$2.9 While all the North American widebodies combined are not expected to come
15%
close to these two top narrowbodies, six of the top ten families in 2024 in
terms of MRO value are widebody aircraft. Moreover, based on publicly-
available contract information, TeamSAI estimates that North American
operators currently are sending as much as 60% of their widebody heavy
1990's
$10.0
maintenance to Asia Pacific and China. (See map in Figure 10.)
53%
By targeting widebody maintenance work through the introduction of capacity
and development of the necessary skills, MROs can open a broad market for
themselves. Recognizing that the North American and Asian labor rate
In North America, the newest fleet types (2000’s differential will wane over the forecast period, MROs that build widebody
and 2010’s) will begin to drive a larger share of capabilities could be in a position to capture this market from North American
MRO by 2024
operators that have been sending that work abroad.
Source: TeamSAI Consulting Services analysis
It will not be a simple task though. Even if labor rate parity is reached, Asian
Figure 9
MROs have the capacity and skills in place today. While American MROs do
have widebody capability, investment will be needed for training, tooling and
equipment. The cost of capital for such expansion will be challenging but
necessary to compete with Asian MROs.
New aircraft enjoy a significant honeymoon period, particularly when the
engine and component MRO value is low due to long intervals between
service and/or long warranty periods. Aircraft of the latter half of the 2000’s
vintage and the 2010’s vintage will experience increased MRO demands in
the latter half of the forecast period. For instance, the 787, A350, 737 MAX,
A320 NEO, A380, CSeries, MRJs, Embraer E2, and Sukhoi Superjet are
expected to ramp up MRO demand from negligible amounts in 2014 to a
substantial share by 2024. In total, the 2000’s and 2010’s vintage fleets will
grow from 10% in 2014 to a quarter of the market by 2024. This makes the
combined 2000’s and 2010’s vintage second only to the 1990’s vintage
dominated by the 737 NGs. (See Figure 9.) As the fleets continue to age
beyond the forecast period, MROs with capabilities to service this growing
segment will be well positioned for success.
Globally, engine OEMs have captured over 50% of the market based on
publicly-available information. North American operators rely even more on

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 14
ARSA REPORT 2014

OEMs, sending upwards of 60% of their engine MRO work to OEMs. This
represents a serious, and much discussed, challenge for independent engine An estimated 62% of North America’s
MRO providers, which often find themselves at a disadvantage. HMV work is contracted to providers
But aircraft heavy maintenance work represents a brighter picture for the outside the region.
independent MRO (at least the largest ones). TeamSAI estimates that,
globally, airlines, airline third-party providers, and independent MROs have
captured over 90% of the market, with independent MROs performing as
much as 36% of the work. Looking at just the demand from North American
operators though, TeamSAI estimates that independent MROs are performing
as much as 62% of the known work.
Currently, ST Aerospace is the leading provider of widebody MRO for North
American operators. Interestingly, TIMCO, which is in the process of being
acquired by HAECO perhaps because it too sees this very opportunity, has
positioned itself well. Combined, the two will assume second place among
providers of widebody HMV work—although it remains a distant second.

2014 REPATRIATION OF NORTH AMERICA’S CONTRACTED HMV WORK PRESENTS OPPORTUNITIES

N. AMERICA
38% WB HMV

MIDDLE EAST CHINA

9% WB HMV
2% WB HMV

ASIA PACIFIC
51% WB HMV

Source: TeamSAI Consulting Services analysis

Figure 10

15 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

MRO Market by Market Segment

The MRO market can be divided into four main market segments: (1)
airframe, (2) engine, (3) component, and (4) line.

2014 AIRFRAME MRO MARKET ($11.5B) Airframe (HMV and Modifications) Maintenance

by Aircraft Class Market Size & Forecast

Air transport’s labor intensive airframe or heavy maintenance and
TP
RJ 7% modifications MRO market is expected to be $11.5B in 2014, which
4% represents 20% of the total MRO spend. (See Figure 11.)
The total airframe market is forecast to increase at a rate of 2.8% CAGR
NB through 2019. It is expected to see notably faster growth (5.5% CAGR) in the
WB 53% following five years as modifications pick back up and the high number of
36% deliveries of the early 2000s return for their second round of heavy visits, at
the same time the 2005-2009 and 2010-2014 deliveries begin their first round
of HMVs.
In 2014, the global airframe MRO market will be dominated by narrowbody
spend. While widebody airframe MRO will increase its share over the forecast
Class 2014 2019 2024 period, narrowbody will continue to lead. The regional jet and turboprop
NB $6.1 $6.7 $8.8 airframe MRO spend is expected to struggle to stay flat over the period, as
WB $4.1 $5.1 $7.2 both lose share.
RJ $0.4 $0.5 $0.4 The impact of new RJ programs on the airframe MRO market is expected to
TP $0.8 $0.9 $0.8 be beyond the timeframe of this ten-year forecast; related maintenance
Total $11.5 $13.2 $17.2 events are anticipated in the future though, once these deliveries begin to
age. Thus, for the time being, the RJ airframe market is expected to be
CAGR 2014 2019 2024 limited.
NB 1.9% 5.5% 3.7% Regionally, North America will be the largest market in 2014. While North
WB 4.5% 7.0% 5.8% America is forecast to lose 6 points of market share by 2024, its fleet should
RJ 0.9% -1.5% -0.3% continue to drive the largest market in ten years. The fastest growing regions
Region 2014 2019 2024
TP 2.1% -2.2% -0.1% are all in developing areas, led by India, China, the Middle East, and Latin
NA $3.3 $3.4 $4.0
Total 2.8% 5.5% 4.1% America and the Caribbean. (See Figure 11 and Figure 12.)
LA&C $0.5 $0.8 $1.0
Source: TeamSAI Consulting Services analysis The influence of improved technologyWE and increased
$3.2 check $3.3
intervals in$3.8
new
Figure 11 generation aircraft, particularly the
EEheavy use of composites
$0.6 and
$0.7the maturing
$0.8
of smart electronics, will influenceAPthe heavy maintenance
$1.9 and
$2.3modifications
$3.3
spend in the latter half of theCH forecast period.$0.8
The 787 $1.1technology,$1.9for
example, is anticipated to save some 30-35% over a similar sized, older
IN $0.1 $0.2 $0.4
technology aircraft.
ME $0.6 $1.0 $1.3
2014 AIRFRAME MRO MARKET BY REGION ($11.5B) AF $0.4 $0.4 $0.6
Total $11.5 $13.2 $17.2
by Region
Region 2014 2019 CAGR2024 2014 2019 2024
AF
ME 4% NA $3.3 $3.4 NA $4.0 0.7% 3.2% 1.9%
IN 5%
CH 1% NA
LA&C $0.5 $0.8 LA&C $1.0 8.3% 5.3% 6.8%
7% 29% WE $3.2 $3.3 WE $3.8 0.4% 3.1% 1.8%
EE $0.6 $0.7 EE $0.8 2.3% 4.6% 3.4%
AP
16%
AP $1.9 $2.3 AP $3.3 4.4% 7.4% 5.9%
LA&C CH $0.8 $1.1 CH $1.9 7.2% 10.9% 9.0%
5%
EE
IN $0.1 $0.2 IN $0.4 15.7% 13.8% 14.7%
5% ME $0.6 $1.0 ME $1.3 8.9% 6.2% 7.5%
WE
28%
AF $0.4 $0.4 AF $0.6 -1.7% 8.4% 3.2%
Total $11.5 $13.2 Total$17.2 2.8% 5.5% 4.1%
Source: TeamSAI Consulting Services analysis

Figure 12 CAGR 2014 2019 2024

TEAMSAI©2014
NA 0.7% AL L RI G HT1.9%
3.2% S R E S E R V E D. 16
LA&C 8.3% 5.3% 6.8%
ARSA REPORT 2014

Market Structure 2014 AIRFRAME MRO PROVIDERS

Airframe maintenance providers can be classified into five categories. (See Airframe MRO Providers' Relative Share of Market
Figure 13.) OEM
1%
Joint Venture
Airline: Commercial air transport operators that perform maintenance with in- 6%

house airframe maintenance capabilities. Airline

29%

Airline Third Party: Maintenance subsidiaries of airlines, often operating with

Independent
a degree of autonomy and that perform maintenance for other operators and 31%

possibly their own parent. These organizations leverage maintenance

capabilities at scale to offer competitive pricing to the marketplace.
Independent: Dedicated maintenance providers with no relation to either Airline Third
Party
Airline Third
Party in house
OEMs or airlines. From large to small, these maintenance providers often outsourced
10%
23%

have lowest labor costs.

Joint Venture: Airframe maintenance providers that are formed by (typically) Source: TeamSAI Consulting Services analysis

joining the resources of OEMs and in-country capabilities to build indigenous Figure 13
capacity (e.g., AMECO, Taikoo, GAMECO, etc.).
OEM: Airframe manufacturers, such as Airbus, Boeing, Embraer, Bombardier,
Sukhoi, ATR, etc., offering maintenance capabilities for their respective
aircraft types.
Based on known, publicly-available information, it is possible to estimate the
market share that each market player type enjoys. Interestingly, for all the
discussion related to contracting work out, globally, the air transport market
still keeps most of its airframe maintenance in-house (52% when combining
airline work and the in-house work of airline third party providers). Those
airline providers that choose to pursue the maintenance work of other airlines’
airframes capture an additional 10%. Independent providers carryout nearly a
third of the demand. Joint Ventures (JVs) leverage the resources and skills of
existing MROs in developing areas—to date, this represents more than 5% of
the market. Finally, OEMs, recognizing the value that the MRO market holds
in the lifecycle of their products, have moved to capture a portion of that work
for themselves. Currently, OEMs hold a negligible share of the market;
however, as new generation aircraft begin to demand maintenance, the efforts
of OEMs to sell those aircraft with maintenance packages are expected to add
to their share.

Cost Structure 2014 AIRFRAME LABOR/MATERIAL MIX

The airframe spend can be divided into labor and material elements. (See Airframe Spend Cost Structure

Figure 14.) $11.5B = $7.9B + $3.6B

 Labor: Labor is the larger element of airframe work. Labor accounts 31%
40%
for 60% of the airframe spend. This includes labor for licensed
technicians (mechanics or engineers) for all airframe maintenance 63%
labor services provided and for related modifications work. It also
includes the cost of benefits and overhead. When differentiating
69%
between airframe and modifications work, labor represents 69% and 60%

17%, respectively.
 Material: Material is the smaller element of airframe work. Material 17%

accounts for 40% of the airframe spend. This includes all materials Airframe Spend Airframe Mx Airframe Mod
Labor Material

and consumables. When differentiating between airframe and

Source: TeamSAI Consulting Services analysis
modifications work, material represents 31% and 63%, respectively.
Clearly, the nature of modifications work drives a higher emphasis on Figure 14
materials.
Little change in this mix is expected over the forecast period.

17 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

2014 AIRFRAME MATERIAL PROVIDERS Supply Chain

Airframe Maintenance Material Providers Parts The airframe maintenance material supply chain consists of four main
Repair sources: OEMs, distributors, surplus providers, and PMA providers. (See
0%
PMA Figure 15.)
8%
Surplus  OEMs: Original equipment manufacturers represent more than 60%
10% of the airframe maintenance material parts market.
 Distributors: As intermediaries between the parts manufacturers and
Distributors maintenance providers, distributors represent about one-fifth of the
20% material parts demand.
OEM
62%  Surplus providers: Surplus providers, which purchase new and used
material from other surplus providers, MROs, operators, and/or
directly from parted-out aircraft, constitute 10% of the airframe
maintenance parts demand.
Source: TeamSAI Consulting Services analysis  PMA providers: PMA providers, despite significant barriers, have
made some inroads into the airframe maintenance market, providing
Figure 15
some 8% of the material. Looking to the future, while PMA currently
represents the smallest share, some large PMA providers have
implemented strategies which are expected to yield significant gains
because of their attractiveness to airline customers focused on cost
reductions.

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 18
ARSA REPORT 2014

Engine Maintenance 2014 ENGINE MRO MARKET ($22.1B)

Market Size & Forecast by Aircraft Class

The engine MRO market is forecast to be $22.1B or 38% of total MRO spend
in 2014. TP
RJ 4%
It is forecast to grow at 6.2% over the next five years, then at a much slower 12% NB
2.1% per year over the following five-year period, for a total ten-year growth 32%
rate of 4.1% per year. This growth rate is rather restrained compared to
several years ago, especially for the second half of the forecast period.
Despite the poorer performance in the second half of the forecast, the full
forecast period growth rate makes it among the fastest growing segments
because of the increasing value engine MRO captures. (See Figure 16.) WB
52%
In 2014, unlike other market segments, the global engine MRO market will be
led by widebody spend. Widebody engine MRO is expected to constitute
more than half the market spend. Importantly, this dominance should be Class 2014 2019 2024
furthered as the widebody market grows its share. Narrowbody engine MRO,
NB $7.1 $10.7 $12.0
at nearly one-third of the market in 2014, is also expected to grow its share
by 2024, particularly as the next-generation narrowbodies enter the market. WB $11.4 $15.9 $18.4
The regional jet engine MRO spend could decline as much as $1B by 2024, RJ $2.6 $2.1 $1.6
as it sheds 7 points of market share. The turboprop engine MRO spend is TP $1.0 $1.2 $1.3
expected to grow, but it should still lose pace to the narrowbody and Total $22.1 $29.9 $33.2
widebody fleets’ growth.
North America is expected to be the largest market in 2014, but Asia Pacific CAGR 2014 2019 2024
is expected to rank first by 2024. This spells a loss of 10 points in market NB 8.4% 2.3% 5.3%
share for North America over the ten-year period. Asia Pacific’s engine MRO WB
Region 6.8%
2014 2.9%
2019 4.9%
2024
is expected to grow substantially faster in the first half of the forecast than the RJ
NA -4.2%
$6.9 -5.3%
$7.0 -4.8%
$6.8
second half. In fact, this slower second half growth rate is expected across all TP
LA&C 4.5%
$0.8 0.4%
$1.3 2.4%
$1.9
regions, which is largely attributed to the increased share of more efficient Total
WE 6.2%
$4.9 2.1%
$6.1 4.1%
$6.0
aircraft powered by longer-on-wing engines. (See Figure 17.)
EE $0.6 $1.0
Source: TeamSAI Consulting Services analysis $1.4
AP
Figure 16 $4.8 $7.0 $7.3
CH $1.3 $2.7 $3.9
IN $0.3 $0.5 $0.8
ME $1.9 $3.3 $4.0
2014 ENGINE MRO MARKET BY REGION ($22.1B) AF $0.6 $0.9 $1.0
Total $22.1 $29.9 $33.2
by Region
AF Region 2014 2019 CAGR2024 2014 2019 2024
ME 2%
9% NA $6.9 $7.0 NA $6.8 0.4% -0.5% 0.0%
IN
CH1% NA LA&C $0.8 $1.3 LA&C$1.9 9.8% 7.5% 8.7%
6% 31%
WE $4.9 $6.1 WE $6.0 4.4% -0.2% 2.1%
EE $0.6 $1.0 EE $1.4 11.0% 6.5% 8.7%
AP AP $7.3 7.8% 0.8% 4.3%
22% AP $4.8 $7.0
CH $1.3 $2.7 CH $3.9 16.0% 7.5% 11.6%
LA&C
4% IN $0.3 $0.5 IN $0.8 11.6% 9.6% 10.6%
EE
ME $1.9 $3.3 ME $4.0 10.8% 4.0% 7.3%
WE
3%
22% AF $0.6 $0.9 AF $1.0 10.0% 1.8% 5.8%
Total $22.1 $29.9 Total$33.2 6.2% 2.1% 4.1%
Source: TeamSAI Consulting Services analysis

Figure 17 CAGR 2014 2019 2024

NA 0.4% -0.5% 0.0%
LA&C 9.8% 7.5% 8.7%
WE 4.4% -0.2% 2.1%
EE 11.0% 6.5% 8.7%
AP 7.8% 0.8% 4.3%
19 A L L R I G H T S R E S ECH
R V E D. TEAMSAI©2014
16.0% 7.5% 11.6%
IN 11.6% 9.6% 10.6%
 ARSA REPORT 2014

In 2014 the largest engine fleets (in terms of engine MRO) are the CF6-80C2,
GE90, and CFM56-7B, each driving more than $2B in MRO. This represents
some 10% of the market, for each engine type. The top ten engine variants
constitute more than two-thirds of the market.
By the end of the forecast period though, the CFM56-7B, which has the
largest fleet by far even today, is expected to require more than $5B in MRO
services. To reach this level of spend, its market share will have to grow by 7
points to 17%. This engine, which powers the Boeing 737NG, should have a
fleet that exceeds 12,000 units.
Over this period, the -80C2 will fall to ninth in terms of MRO demand, and the
Trent XWB and GE90 engines should assume the second and third ranking.
The Trent XWB, which is dedicated to the Airbus A350, is especially
noteworthy because its growth will come entirely within the forecast period.
In 2024 more than three-quarters of the market’s MRO will be concentrated in
the top ten engine types. The top twenty engine variants are expected to drive
94% of the engine MRO demand.
CF6-80C2, GE90, and CFM56-7B The Leap engines which power the NEO (in part) among others is not
currently drive as much as 30% of the expected to drive much engine MRO demand over the forecast period. Pratt &
engine MRO market. Whitney’s PW1000G though, which has much broader implementation, is
expected to drive nearly $600M in spend, although this represents just 2% of
the market in 2024.
By 2024 though, the CFM56-7B alone Looking just at the engines powering the regional jet fleet, in 2014 the five
is estimated to command upwards of largest fleets (in terms of MRO value) are the CF34-8, CF34-3, AE3007,
17% of the market. CF34-10, and Tay. The CF34-8 is the only regional jet engine expected to
drive more than $1B in MRO demand; this represents nearly half of the engine
MRO market for all regional jets. These top five engines represent 97% of the
total engine MRO market. By 2024, the top five engines in terms of MRO
value (the CF34-10, CF34-8, PW1000G, CF34-3, and the SaM146) are
expected to drive 95% of the market. Of the engines in the top five in 2014,
the Tay should be retired by 2024 and the AE3007 should be reduced by 80%
of its 2014 demand.
Among turboprops, the PW100, which is the largest fleet by far, not
surprisingly is expected to be the largest in terms of MRO value in 2014; this
engine should maintain, if not further, its share by 2024.
Engine costs reflect the continued increases in annual material pricing,
modestly offset by PMA influences and higher on-wing life as engines mature.
Concentration of pricing power in the engine MRO value chain with the engine
OEMs remains a commanding driver in the engine MRO market.
The price of fuel and additional environment-related issues (brought on in part
as the European Union Emissions Trading Scheme (EU ETS) which should
come into force for all airlines flying within the EU sometime during the
forecast period, pending the implementation of an International Civil Aviation
Organization (ICAO)-wide scheme), are expected to drive a continued push
for better engine designs and new drop-in fuels (as well as overall aircraft and
air traffic control systems designs).
Although the effects of these changes on the engine MRO market remain
uncertain, it will surely require continued improvement in engine performance
and care. This alone will impact the engine MRO market.

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 20
ARSA REPORT 2014

Market Structure
Engine maintenance providers can be classified into five categories. (See
2014 ENGINE MRO PROVIDERS
Figure 18.)
Engine MRO Providers' Relative Share of Market
Airline: Commercial air transport operators that perform maintenance with in-
house engine maintenance capabilities. Generally, this is limited to operators Airline
9%

that have a large enough fleet and experience to merit conducting engine
Airline Third
maintenance for themselves. Party in house
9%

Airline Third Party: Maintenance subsidiaries of airlines, often operating with Airline Third
Party
a degree of autonomy and that perform maintenance for other operators and outsourced
OEM 12%
possibly their own parent. These organizations leverage maintenance 56%

capabilities at scale to offer competitive pricing to the marketplace. Independent

10%
Independent: Dedicated maintenance providers with no relation to either
Joint Venture
OEMs or airlines. From large to small, these maintenance providers often 4%

have lowest labor costs.

Source: TeamSAI Consulting Services analysis
Joint Venture: Airframe maintenance providers that are formed (typically) by
joining the resources of OEMs and in-country capabilities to build indigenous Figure 18
capacity (e.g., TAESL, HAESL, AMECO, Turkish Engine Center, Shanghai
P&W, etc.).
OEM: Engine manufacturers, such as GE, CFM, Rolls Royce, Pratt &
Whitney, Snecma, IAE, etc., offering maintenance capabilities for their
respective engine types.
Based on known, publicly-available information, it is possible to estimate the
market share that each market player type enjoys. In the air transport
segment, OEMs are by far the dominant player in the engine MRO space,
controlling more than half the market. Airlines manage just under 20% of the
market themselves (when combining airline work and the in-house work of
airline third party providers). Airline third party providers servicing other
airlines’ engines tack on another 13%.
Independent providers capture just 10% of the market, though it will be
interesting to see how their collective effort to obtain more and better repair
information from OEMs improves their share. JVs, which benefit from their
OEM connections, control just 4% of the repair. For the foreseeable future, it
seems that OEMs are sure to maintain a strong hold on this market.

Cost Structure 2014 ENGINE LABOR/MATERIAL MIX

The engine spend can be divided into three elements: labor, parts, and parts Engine Spend Cost Structure
repair. (See Figure 19.)
Parts Labor
 Labor: Labor (excluding parts repair) is the smallest element of Repair 9%
engine work. Labor accounts for just 9% of the engine spend. This 14%

includes direct labor for all engine maintenance labor services

including disassembly, inspection, repair, reassembly, and testing. It
also includes the cost of benefits and overhead.
 Parts: Parts (or materials) represents, by far, the largest element of
engine overhaul work. Materials can be new or surplus parts (from
the OEM or a PMA provider) or used parts (after refurbishment). Parts
77%
 Parts repair: Parts repair refers to the costs associated with
refurbishing used parts to a serviceable state. $22.1B

Little change in this mix is expected over the forecast period. However, as Source: TeamSAI Consulting Services analysis
many particular engines age, their material costs may decline as alternative
Figure 19
parts are developed and improved repair processes are implemented.

21 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

Supply Chain
2014 ENGINE MATERIAL PROVIDERS The engine overhaul maintenance material supply chain consists of five main
sources: OEMs, distributors, surplus providers, PMA providers, and (because
Engine Maintenance Material Providers
of the significant material involved) parts repair providers. (See Figure 20.)
 OEMs: Original equipment manufacturers, not unrelated to their
Parts
Repair dominance in the engine MRO market as a whole, provide nearly two-
PMA
18% thirds of the engine overhaul material parts market.
1%  Distributors: As intermediaries between the parts manufacturers and
Surplus
8% maintenance providers, distributors represent about 9% of the
Distributors material parts demand.
9% OEM  Surplus providers: Surplus providers, which purchase new and used
64%
material from other surplus providers, MROs, operators, and/or
directly from parted-out aircraft, constitute 8% of the engine
maintenance parts demand.
 PMA providers: PMA providers have encountered especially
Source: TeamSAI Consulting Services analysis significant challenges in the penetration of the engine parts space.
Figure 20 This market segment is expected to remain a challenge for engine
PMA providers, potentially leading to even less PMA content as the
fleet grows.
 Parts repair providers: Because engine material is such a significant
share of the cost of engine repair, parts repair providers are included
separately and approach nearly one-fifth of the material cost.

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 22
ARSA REPORT 2014

Component Maintenance 2014 COMPONENT MRO MARKET ($12.2B)

Market Size & Forecast by Aircraft Class

Component maintenance, consisting of work on such equipment as auxiliary
power units (APUs), avionics, wheel/brakes, landing gear, flight controls, TP
RJ 5%
structures, equipment/furnishings, cabin systems, etc., represents a $12.2B
11%
segment of the MRO activity or 21% of the total. (See Figure 21.)
Component MRO, not unlike engine MRO, represents an area where the NB
value continues to grow because of the relative concentration of power in the 53%
value chain among a smaller set of major competitors. WB
31%
The market is expected to grow at 4.8% over the first five-year period and
4.1% over the second five-year period, for a total growth of 4.4% over the
entire period.
Regionally, North America will be the largest market in 2014 and continue to
hold that position by the end of the forecast. However, the region’s growth is Class 2014 2019 2024
nearly flat at 0.4%. Consequently, North America is forecast to lose 9 points of NB $6.4 $8.6 $11.0
market share by 2024, as developing regions gain share. Not surprisingly, the WB $3.8 $4.7 $5.7
fastest growing regions are all in developing areas, led by India, China, the RJ $1.3 $1.4 $1.3
Middle East, and Latin America and the Caribbean. (See Figure 22.) TP $0.6 $0.7 $0.8
Total $12.2 $15.3 $18.7

CAGR 2014 2019 2024

NB 6.1% 5.0% 5.5%
WB
Region 3.9%
2014 4.0%
2019 3.9%
2024
NARJ 0.7%
$4.3 -1.1%
$4.4 -0.2%
$4.5
TP
LA&C 3.8%
$0.7 1.7%
$1.0 2.7%
$1.3
WETotal 4.8%
$2.6 4.1%
$3.1 4.4%
$3.4
EE $0.6
Source: TeamSAI Consulting $0.8
Services analysis $1.0
APFigure 21 $1.9 $2.7 $3.4
CH $0.9 $1.5 $2.3
IN $0.2 $0.3 $0.6
ME $0.7 $1.0 $1.4
2014 COMPONENT MRO MARKET BY REGION ($12.2B) AF $0.4 $0.5 $0.7
Total $12.2 $15.3 $18.7
by Region
AF
Region 2014 2019CAGR2024 2014 2019 2024
ME 3%
IN 5% NA $4.3 $4.4NA $4.5 0.3% 0.5% 0.4%
CH 2% LA&C $0.7 $1.0 LA&C $1.3 8.2% 6.6% 7.4%
8%
NA
35%
WE $2.6 $3.1WE $3.4 3.8% 2.0% 2.9%
AP
16% EE $0.6 $0.8EE $1.0 7.3% 5.2% 6.2%
AP $1.9 $2.7AP $3.4 7.0% 5.2% 6.1%
CH $0.9 $1.5CH $2.3 10.7% 8.0% 9.4%
EE IN $0.2 $0.3IN $0.6 13.5% 11.2% 12.4%
5% LA&C
5% ME $0.7 $1.0 ME $1.4 8.7% 7.0% 7.9%
WE
21%
AF $0.4 $0.5AF $0.7 6.8% 6.2% 6.5%
Total $12.2 $15.3Total$18.7 4.8% 4.1% 4.4%
Source: TeamSAI Consulting Services analysis

Figure 22 CAGR 2014 2019 2024

NA 0.3% 0.5% 0.4%
LA&C 8.2% 6.6% 7.4%
WE 3.8% 2.0% 2.9%
EE 7.3% 5.2% 6.2%
AP 7.0% 5.2% 6.1%
23 A L L R I G H T S R E S ECH
R V E D. T
10.7%E A M S A I © 2014
8.0% 9.4%
IN 13.5% 11.2% 12.4%
 ARSA REPORT 2014

Market Structure
Component maintenance providers can be classified into five categories. (See
Figure 23.)
Airline: Commercial air transport operators that perform maintenance with in-
house component maintenance capabilities. Generally, this is limited to
operators that have a large enough fleet and experience to merit conducting
component maintenance for themselves.
Airline Third Party: Maintenance subsidiaries of airlines, often operating with
a degree of autonomy and that perform maintenance for other operators and
possibly their own parent. These organizations developed to leverage
maintenance capabilities at scale to offer competitive pricing to the
marketplace.
Independent: Dedicated maintenance providers with no relation to either
OEMs or airlines. From large to small, these maintenance providers often
have lowest labor costs.
Joint Venture: Component maintenance providers that are formed by
(typically) joining the resources of OEMs and in-country capabilities to build
indigenous capacity (e.g., AMECO, CAMSSL, GAMECO, OEM Services,
Spairliners, TAECO, etc.).
OEM: Component manufacturers, such as BAE, Eaton, UTC-Aerospace
Systems Goodrich, UTC-Aerospace Systems Hamilton Sundstrand,
Honeywell, Meggitt, Messier, Panasonic, Rockwell Collins, Thales, etc.,
offering maintenance capabilities for their respective component parts.
Based on known, publicly-available information, it is possible to estimate the
market share that each market player type enjoys. In the air transport
segment, OEMs are by far the dominant player in the component MRO space
for the most complex component types. Airlines (along with their affiliated third
party providers) and independent MROs enjoy notable shares as well.

2014 COMPONENT MRO PROVIDERS

Component MRO Providers' Relative Share of Market

100%

80%

60%

40%

20%

0%
APU Avionics Cabin Electrical Engine Equipment Flight Controls Fuel Systems Hydraulics Landing GearNacelle/Thrust Pneumatics Wheels &
Systems Accessories Furnishing Reversers Brakes

Airline Airline Third Party in house Airline Third Party outsourced Independent Joint Venture OEM

Source: TeamSAI Consulting Services analysis

Figure 23

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 24
ARSA REPORT 2014

Cost structure
The component spend can be divided into two elements: labor and material.
The cost structure split between labor and material depends on the
component type. (See Figure 24.)
 Labor: Labor is the smaller element of component work for the most
part.
 Material: With a few exceptions, material tends to represent the larger
share of the component MRO spend. This is especially true of wheels
and brakes, APU, and avionics

2014 COMPONENT MRO LABOR/MATERIAL MIX

Component Spend Cost Structure

100%

80%

60%

40%

20%

0%
APU Avionics Cabin Electrical Engine Equipment Flight Controls Fuel Systems Hydraulics Landing GearNacelle/Thrust Pneumatics Wheels &
Systems Accessories Furnishing Reversers Brakes

Material Labor

Source: TeamSAI Consulting Services analysis

Figure 24

25 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

2014 COMPONENT MAT’L PROVIDERS Supply Chain

Parts Component Maintenance Material Providers The component maintenance material supply chain consists of four main
Repair sources: OEMs, distributors, surplus providers, and PMA providers. (See
0%
PMA Figure 25.)
Surplus 2%
8%  OEMs: Original equipment manufacturers in the component MRO
Distributors segment provider nearly 80% of the material.
11%  Distributors: As intermediaries between the parts manufacturers and
maintenance providers, distributors represent about 11% of the
material parts demand.
OEM  Surplus providers: Surplus providers, which purchase new and used
78% material from other surplus providers, MROs, operators, and/or
directly from parted-out aircraft, constitute 8% of the component
maintenance parts demand.
Source: TeamSAI Consulting Services analysis  PMA providers: Similar to engine PMA providers, component PMA
providers are expected to struggle as the fleet grows. But because of
Figure 25
the different types of components, some being less complex in
design, PMA may see marginally better success.

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 26
ARSA REPORT 2014

Line Maintenance 2014 LINE MRO MARKET ($11.9B)

Market Size & Forecast by Aircraft Class

Line maintenance represents an $11.9B segment of the MRO activity or 21%
of the total. (See Figure 26.) TP
RJ 5%
This segment is expected to grow at 4.5% over the first five-year period and 6%
3.6% over the second five-year period, for a total growth of 4.1% over the
entire period.
WB NB
Most carriers still control their own line maintenance and this characteristic is 33% 56%
not expected to change dramatically. Increased contracting at locations where
airlines have limited flight schedules, however, represents a growth
opportunity for third-party providers who are working to expand their
coverage. (See Figure 26 and Figure 27.)
In 2014, the global line MRO market will be dominated by narrowbody spend,
and this dominance should continue into the future. Widebody airframe MRO Class 2014 2019 2024
should grow at a comparable rate as that of narrowbody aircraft, but it will NB $6.7 $8.5 $10.2
command roughly the same share in 2024. The regional jet line MRO spend is WB $3.9 $4.9 $6.0
expected to struggle to stay flat over the period. Turboprop line MRO spend is RJ $0.7 $0.8 $0.7
forecast to increase moderately. Both regional jet and turboprop line MRO are TP $0.6 $0.7 $0.7
expected to see a decline in market share. Total $11.9 $14.8 $17.7
Regionally, North America is expected to be the largest market in 2014 but
should yield that position to Western Europe by 2024. Both Western Europe CAGR 2014 2019 2024
and North America are forecast to lose market share by 2024 though, as NB 4.9% 3.8% 4.3%
developing regions erode the share of developed areas. (See Figure 27.) WB 4.6% 4.2% 4.4%
Region
RJ 2014
1.5% 2019
-0.9% 2024
0.3%
NATP $3.3
2.8% $3.5
1.6% $3.7
2.2%
LA&C
Total $0.6
4.5% $0.8
3.6% $1.1
4.1%
WE $3.2 $3.6
Source: TeamSAI Consulting Services analysis $4.0
EE $0.6 $0.8 $1.0
Figure 26
AP $2.0 $2.7 $3.2
CH $1.0 $1.5 $2.1
IN $0.2 $0.3 $0.5
ME $0.7 $1.1 $1.4
2014 LINE MRO MARKET BY REGION ($11.9B) AF $0.3 $0.5 $0.6
Total $11.9 $14.8 $17.7
by Region
AF
Region 2014 2019 CAGR2024 2014 2019 2024
ME 3%
IN 6%
NA $3.3 $3.5 NA $3.7 1.5% 1.1% 1.3%
CH 2% NA LA&C $0.6 $0.8 LA&C$1.1 7.0% 5.3% 6.2%
8% 27%
WE $3.2 $3.6 WE $4.0 2.6% 2.1% 2.4%
AP EE $0.6 $0.8 EE $1.0 7.0% 4.4% 5.7%
17%
AP $2.0 $2.7 AP $3.2 5.8% 3.6% 4.7%
LA&C
5%
CH $1.0 $1.5 CH $2.1 8.4% 7.3% 7.9%
IN $0.2 $0.3 IN $0.5 12.6% 9.8% 11.2%
EE ME $0.7 $1.1 ME $1.4 7.4% 5.8% 6.6%
5% WE
27% AF $0.3 $0.5 AF $0.6 6.4% 5.5% 6.0%
Total $11.9 $14.8 Total$17.7 4.5% 3.6% 4.1%
Source: TeamSAI Consulting Services analysis

Figure 27 CAGR 2014 2019 2024

NA 1.5% 1.1% 1.3%
LA&C 7.0% 5.3% 6.2%
WE 2.6% 2.1% 2.4%
EE 7.0% 4.4% 5.7%
27 AP
ALL RIGHTS RESE R V E D. 5.8%
T E A M S A I ©3.6%
2014 4.7%
CH 8.4% 7.3% 7.9%
IN 12.6% 9.8% 11.2%
 ARSA REPORT 2014

Daily checks constitute the largest segment of the market, at 32%. Transit
checks, which are also very frequent, command another 26% of the market. A
checks, which are less frequent but relatively more maintenance-intensive,
make up 30% of the market. (See Figure 28.)

2014 LINE MRO BY ACTIVITY Market Structure

Line maintenance is typically either performed by the operator or contracted
by Activity out. (See Figure 29.)
While most programs are fairly standardized for given airframe types,
Preflight/Tran different aircraft and different flight profiles can dictate different needs.
A Checks sit Checks
30% 26% Moreover, line maintenance requirements will gradually increase as the rate
of technical defects and discrepancies climbs.
Most line maintenance is performed at the gate or ramp and is done to
Other maintain the operational performance of the aircraft.
4%
Weekly/Over
night Checks Because of its importance in keeping an aircraft airworthy for daily operations,
8% Daily Checks
32%
operators seek to control line maintenance carefully, often performing the
bulk of the work in-house and contracting emergency on-call maintenance at
Source: TeamSAI Consulting Services analysis
non-hub stations. Compared to the other sectors though, contract line
maintenance is less common.
Figure 28
An operator’s decision to contract line maintenance is often tied to locations
2014 LINE MRO CONTRACTED/INHOUSE where the operator has limited capacity, particularly at airports removed from
Line MRO In House / Contracted Share
the main network. Such situations represent opportunities for contract line
maintenance providers.

contracted
Based on known, publicly-available information, it is possible to estimate the
22% share of the market that is in-house and contracted. (See Figure 29.) In the air
transport segment, airlines conduct most of their own line maintenance for
themselves. Nearly 80% of the demand is carried out in-house. When
contracting line maintenance out, operators look to those providers that have
experience for the aircraft in transit. Key considerations include: (1)
reputation; (2) the ability to provide Aircraft On Ground (AOG) service; (3)
in house
78% spares availability; (4) turnaround times; and (5) labor rates (especially given
that line maintenance labor rates tend to be higher than that of airframe heavy
$11.9B
maintenance rates).

Cost Structure
Source: TeamSAI Consulting Services analysis

Figure 29
The line spend can be divided into two elements: labor and material. (See
2014 LINE LABOR/MATERIAL MIX Figure 30.)

Line Spend Cost Structure

 Labor: Labor is the major element of line work, constituting more than
three quarters of total spend. Skilled labor is required to inspect,
troubleshoot, remove, and replace parts as needed.
Material
 Material: Material tends to represent the smaller of the line MRO
23% spend, driving just less than a quarter. Line maintenance material
spend tends to be dominated by expendables and consumables.
Repairable and rotable component repair costs, even if replaced
during line maintenance, are captured in the component MRO
segment.
Labor
77%

$11.9B

Source: TeamSAI Consulting Services analysis

Figure 30

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 28
ARSA REPORT 2014

Supply Chain 2014 LINE MATERIAL PROVIDERS

The nature of line maintenance suggests that it contains elements of airframe Line Maintenance Material Providers
Parts
and component parts. The supply chain consists of three main sources: Repair Surplus
OEMs, distributors, and PMA providers. Line maintenance also requires 0%
PMA 0%
consumable materials, such as oil and solvent, for the regular maintenance. 1%
(See Figure 31.)
 OEMs: Original equipment manufacturers represent nearly 60% of the
Distributors
line maintenance material parts market. These manufacturers higher 42%
value materials drive their share of the market. OEM
 Distributors: As intermediaries between the parts manufacturers and 58%

maintenance providers, distributors represent about 40% of the

market.
 PMA providers: PMA providers represent a small share of line
maintenance. However, the potential for such parts in minor structural
Source: TeamSAI Consulting Services analysis
work as part of A checks, etc, suggests there is room for more PMA
penetration here, especially as airlines seek cost savings. Figure 31

29 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

GLOBAL MRO BALANCE OF TRADE

The following discusses the supply and demand of MRO services in the major
world regions. Comparing the relative amounts of supply and demand
provides an estimate of the balance of trade.
To determine the relative supply of MRO services based on the forecasted
demand each operator generates in each segment, publicly-available contract
information is compiled at the fleet type level. This data is analyzed then at
the regional level to assess the balance of trade.

An example is helpful to explain the A few definitions are important to clearly convey this analysis.
net importer/net exporter definitions:  net importer: a region whose value of imported MRO work is higher
than its value of exported MRO work over a given period of time
North America is a net importer of  net exporter: a region whose value of exported MRO work is higher
airframe services because the MRO than its value of imported MRO work over a given period of time
demand that North American  imported MRO work: MRO work the operator sends outside its
operators send abroad exceeds the home region; essentially, the operator is importing the MRO service,
value of MRO services North even though it must physically send the airframe/engine/component
American MROs supply for operators outside its home region
in other regions.  exported MRO work: MRO work supplied in a given region for other
regions’ operators; essentially the MRO is exporting its MRO service,
even though it must physically bring the airframe/engine/component
into its home region
Note: the decision as to whether a region is a net importer or net exporter
is independent of the amount of work MROs do for operators within their
region
In total (i.e., combining all airframe, engine, and component MRO supply and
demand), North America and Western Europe are net exporters of MRO
services because the MRO demand that North American and Western
European operators send abroad is less than the value of MRO services
North American and Western European MROs supply for operators in other
regions. Latin America and the Caribbean, Eastern Europe, Asia Pacific,
China, India, the Middle East, and Africa are net importers of MRO services.

REGIONAL EX-/IMPORTER – AIRFRAME Airframe (excluding modifications)

Region Net Exporter/Importer North American (NA) operators generate $2.4B in airframe maintenance
(excluding modifications) demand. 77% of this demand is met by airframe
NA net importer
MRO providers in North America. Approximately $568M of this airframe
LA&C net exporter maintenance demand is performed in regions outside North America, and an
WE net exporter additional $66M is conducted for other regions. This results in a total of $1.9B
of airframe maintenance (excluding modifications) supplied by North American
EE net importer airframe maintenance providers. Thus, North America is a net importer of
AP net exporter airframe maintenance services.
CH net exporter Latin America & the Caribbean (LA&C) is a net exporter of airframe
maintenance services. LA&C operators generate $354M in airframe
IN net importer
maintenance demand. 90% of this demand is met by airframe MRO providers
ME net exporter in Latin America. Approximately $34M of this airframe maintenance demand is
AF net importer performed in regions outside Latin America, and an additional $142M is
conducted for other regions. This results in a total of $462M of airframe
Source: TeamSAI Consulting Services analysis
maintenance (excluding modifications) supplied by Latin American airframe
Table 7 maintenance providers.

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 30
ARSA REPORT 2014

Western Europe (WE) is a net exporter of airframe maintenance services.

Western European operators generate $2.1B in airframe maintenance
demand. 88% of this demand is met by airframe MRO providers in Western
Europe. Approximately $248M of this airframe maintenance demand is
performed in regions outside Western Europe, and an additional $400M is
conducted for other regions. This results in a total of $2.2B of airframe
maintenance (excluding modifications) supplied by Western European
airframe maintenance providers.
Eastern Europe (EE) is a net importer of airframe maintenance services.
Eastern European operators generate $414M in airframe maintenance
demand. Just 17% of this demand is met by airframe MRO providers in
Eastern Europe. Approximately $343M of this airframe maintenance demand
is performed in regions outside Eastern Europe, and an additional $78M is
conducted for other regions. This results in a total of $149M of airframe
maintenance (excluding modifications) supplied by Eastern European airframe
maintenance providers.
Asia Pacific (AP) is a net exporter of airframe maintenance services. Asia
Pacific operators generate $1.3B in airframe maintenance demand. As much
as 93% of this demand is met by airframe MRO providers in Asia Pacific.
Approximately $99M of this airframe maintenance demand is performed in
regions outside Asia Pacific, and an additional $540M is conducted for other
regions. This results in a total of $1.8B of airframe maintenance (excluding
modifications) supplied by Asia Pacific airframe maintenance providers.
China (CH) is a net exporter of airframe maintenance services. Chinese
operators generate $478M in airframe maintenance demand. 91% of this
demand is met by airframe MRO providers in China. Approximately $41M of
this airframe maintenance demand is performed in regions outside China, and
an additional $164M is conducted for other regions. This results in a total of
$601M of airframe maintenance (excluding modifications) supplied by
Chinese airframe maintenance providers.
India (IN) is a net importer of airframe maintenance services. Indian operators
generate $66M in airframe maintenance demand. Just 32% of this demand is
met by airframe MRO providers in India. Approximately $45M of this airframe
maintenance demand is performed in regions outside India. This results in a
total of $21M of airframe maintenance (excluding modifications) supplied by
Indian airframe maintenance providers.
Middle East (ME) is a net exporter of airframe maintenance services. Middle
Eastern operators generate $470M in airframe maintenance demand. 87% of
this demand is met by airframe MRO providers in the Middle East.
Approximately $60M of this airframe maintenance demand is performed in
regions outside the Middle East, and an additional $104M is conducted for
other regions. This results in a total of $515M of airframe maintenance
supplied by Middle Eastern airframe maintenance providers.
Africa (AF) is a net importer of airframe maintenance services. African
operators generate $296M in airframe maintenance demand. 70% of this
demand is met by airframe MRO providers in Africa. Approximately $89M of
this airframe maintenance demand is performed in regions outside Africa, and
an additional $33M is conducted for other regions. This results in a total of
$240M of airframe maintenance (excluding modifications) supplied by African
airframe maintenance providers. (See Figure 32 and Table 8.)

31 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

2014 AIRFRAME MAINTENANCE BALANCE OF TRADE

Airframe Maintenance (excluding Mods)

Supply & Demand ($USM)
Demand Supply

$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
NA LA&C WE EE AP CH IN ME AF
Source: TeamSAI Consulting Services analysis

Figure 32

2014 AIRFRAME MAINTENANCE BALANCE OF TRADE: WHERE REGIONS HAVE MAINTENANCE PERFORMED

Dem and by Operator Supplier Region

Region Region ($USM) NA LA&C WE EE AP CH IN ME AF
NA $2,435 77% 4% 1% 0% 15% 2% 0% 1% 0%
LA&C $354 4% 90% 5% 0% 0% 0% 0% 0% 0%
WE $2,066 1% 1% 88% 4% 3% 2% 0% 1% 1%
EE $414 1% 4% 48% 17% 0% 16% 0% 9% 4%
AP $1,326 1% 0% 5% 0% 93% 1% 0% 0% 0%
CH $478 1% 0% 0% 0% 7% 91% 0% 0% 0%
IN $66 0% 0% 20% 0% 32% 1% 32% 14% 0%
ME $470 0% 0% 8% 0% 4% 0% 0% 87% 1%
AF $296 6% 0% 12% 0% 8% 4% 0% 1% 70%
Total $7,905
Source: TeamSAI Consulting Services analysis

Table 8

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 32
ARSA REPORT 2014

Engine REGIONAL EX-/IMPORTER – ENGINE

Most engine OEMs are located in North America and Western Europe. Given Region Net Exporter/Importer
the OEM dominance in the engine MRO market, it is no surprise that these NA net exporter
regions are the largest suppliers of such services. (See Figure 33 and Table
10.) LA&C net importer

North American (NA) operators generate $6.9B in engine overhaul demand. WE net exporter
84% of this demand is met by engine MRO providers in North America. EE net importer
Approximately $1.1B of this engine maintenance demand is performed in
AP net importer
regions outside North America, and an additional $4.9B is conducted for other
regions. This results in a total of $10.7B of engine maintenance supplied by CH net importer
North American engine maintenance providers. Thus, North America is a net IN net importer
exporter of engine overhaul maintenance services.
ME net importer
Latin America & the Caribbean (LA&C) is a net importer of engine overhaul
AF net importer
maintenance services. LA&C operators generate $835M in engine
maintenance demand. Just 2% of this demand is met by engine MRO Source: TeamSAI Consulting Services analysis

providers in Latin America. Approximately $820M of this engine maintenance Table 9

demand is performed in regions outside Latin America (namely North
America). It appears that LA&C is attracting very little engine work from
abroad. This results in a total of just $15M of engine maintenance supplied by
LA&C engine maintenance providers.
Western Europe (WE) operators generate $4.9B in engine overhaul demand.
69% of this demand is met by engine MRO providers in Western Europe.
Approximately $1.5B of this engine maintenance demand is performed in
regions outside Western Europe, and an additional $4.6B is conducted for
other regions. This results in a total of $7.9B of engine maintenance supplied
by Western Europe engine maintenance providers. Thus, Western Europe is a
net exporter of engine overhaul maintenance services.
Eastern Europe (EE) is a net importer of engine overhaul maintenance
services. Eastern European operators generate $614M in engine
maintenance demand. Just 1% of this demand is met by engine MRO
providers in Eastern Europe. Approximately $607M of this engine
maintenance demand is performed in regions outside Eastern Europe
(primarily Western Europe). It appears that Eastern Europe is attracting very
little engine work from abroad. This results in a total of just $7M of engine
maintenance supplied by Eastern European engine maintenance providers.
Asia Pacific (AP) operators generate $4.8B in engine overhaul demand. 39%
of this demand is met by engine MRO providers in Asia Pacific. This likely will
continue to grow as Asia Pacific builds its engine MRO capacity.
Approximately $2.9B of this engine maintenance demand is performed in
regions outside Asia Pacific, and an additional $685M is conducted for other
regions. This results in a total of $2.6B of engine maintenance supplied by
Asia Pacific engine maintenance providers. Thus, Asia Pacific is a net
importer of engine overhaul maintenance services.
China (CH) is a net importer of engine overhaul maintenance services.
Chinese operators generate $1.3B in engine overhaul demand. 19% of this
demand is met by engine MRO providers in China. Approximately $1.1B of
this engine maintenance demand is performed in regions outside China, and
an additional $133M is conducted for other regions. This results in a total of
$380M of engine maintenance supplied by Chinese engine maintenance
providers.
India (IN) is a net importer of engine overhaul maintenance services. Indian
operators generate $301M in engine overhaul demand. 35% of this demand is

33 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

met by engine MRO providers in India. Approximately $196M of this engine

maintenance demand is performed in regions outside India. This results in
$106M of engine maintenance supplied by Indian engine maintenance
providers.
Middle East (ME) is a net importer of engine overhaul maintenance services.
Middle Eastern operators generate $1.9B in engine overhaul demand. 15% of
this demand is met by engine MRO providers in the Middle East.
Approximately $1.6B of this engine maintenance demand is performed in
regions outside the Middle East, and an additional $75M is conducted for
other regions. This results in a total of $373M of engine maintenance supplied
by Middle Eastern engine maintenance providers.
Africa (AF) is a net importer of engine overhaul maintenance services. African
operators generate $579M in engine overhaul demand. 15% of this demand is
met by engine MRO providers in Africa. Approximately $490M of this engine
maintenance demand is performed in regions outside Africa, and an additional
$5M is conducted for other regions. This results in a total of $94M of engine
maintenance supplied by African engine maintenance providers.

2014 ENGINE MAINTENANCE BALANCE OF TRADE

Engine Maintenance
Supply & Demand ($USM)
Demand Supply

$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
NA LA&C WE EE AP CH IN ME AF
Source: TeamSAI Consulting Services analysis

Figure 33
2014 ENGINE MAINTENANCE BALANCE OF TRADE: WHERE REGIONS HAVE MAINTENANCE PERFORMED

Dem and by Operator Supplier Region

Region Region ($USM) NA LA&C WE EE AP CH IN ME AF
NA $6,869 84% 0% 15% 0% 1% 0% 0% 0% 0%
LA&C $835 69% 2% 28% 0% 1% 0% 0% 0% 1%
WE $4,902 26% 0% 69% 0% 5% 0% 0% 0% 0%
EE $614 18% 0% 77% 1% 5% 0% 0% 0% 0%
AP $4,790 26% 0% 32% 0% 39% 2% 0% 0% 0%
CH $1,306 41% 0% 34% 0% 6% 19% 0% 0% 0%
IN $301 29% 0% 14% 0% 22% 0% 35% 0% 0%
ME $1,947 46% 0% 29% 0% 10% 0% 0% 15% 0%
AF $579 25% 0% 46% 0% 4% 0% 0% 10% 15%
Total $22,144
Source: TeamSAI Consulting Services analysis

Table 10
TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 34
ARSA REPORT 2014

Component REGIONAL EX-/IMPORTER – COMPONENT

Because global shipping enables the remote maintenance and overhaul of Region Net Exporter/Importer
line replaceable units (LRUs) and rotable parts, component maintenance NA net exporter
allows for significant inter-regional flow of trade. However, like the engine
market, concentration of OEMs in developed regions (and their success at LA&C net importer
securing the aftermarket), drives a significant flow toward those regions. (See WE net exporter
Figure 34 and Table 12.)
EE net importer
North American (NA) operators generate $4.3B in component maintenance
AP net importer
demand. 70% of this demand is met by component MRO providers in North
America. Approximately $1.3B of this component maintenance demand is CH net importer
performed in regions outside North America, and an additional $1.4B is IN net importer
conducted for other regions. This results in a total of $4.4B of component
maintenance supplied by North American component maintenance providers. ME net importer
Thus, North America is a net exporter of component maintenance services. AF net importer
Western Europe (WE) operators generate $2.6B in component maintenance Source: TeamSAI Consulting Services analysis

demand. 82% of this demand is met by component MRO providers in Table 11

Western Europe. Approximately $459M of this component maintenance
demand is performed in regions outside Western Europe, and an additional
$3.7B is conducted for other regions. This results in a total of $5.8B of
component maintenance supplied by Western Europe component
maintenance providers. Thus, Western Europe is a net exporter of component
maintenance services.
Latin America, Eastern Europe, Asia Pacific, China, India, the Middle East,
and Africa are net importers of component MRO services.

35 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

2014 COMPONENT MAINTENANCE BALANCE OF TRADE

Component Maintenance
Supply & Demand ($USM)
Demand Supply

$8,000

$6,000

$4,000

$2,000

$0
NA LA&C WE EE AP CH IN ME AF
Source: TeamSAI Consulting Services analysis

Figure 34

2014 COMPONENT MAINTENANCE BALANCE OF TRADE: WHERE REGIONS HAVE MAINTENANCE PERFORMED

Demand by Operator Supplier Region

Region Region ($USM) NA LA&C WE EE AP CH IN ME AF
NA $4,304 70% 2% 24% 0% 0% 0% 0% 4% 0%
LA&C $650 42% 19% 39% 0% 0% 0% 0% 0% 0%
WE $2,587 16% 0% 82% 0% 2% 0% 0% 0% 0%
EE $560 4% 0% 94% 1% 1% 0% 0% 0% 0%
AP $1,893 24% 0% 50% 0% 21% 5% 0% 0% 0%
CH $921 17% 0% 2% 0% 11% 70% 0% 0% 0%
IN $182 8% 0% 77% 0% 0% 0% 15% 0% 0%
ME $664 6% 0% 78% 0% 1% 0% 0% 15% 0%
AF $395 6% 0% 68% 0% 4% 0% 0% 5% 17%
Total $12,156
Source: TeamSAI Consulting Services analysis

Table 12

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 36
ARSA REPORT 2014

AVIATION MAINTENANCE INDUSTRY EMPLOYMENT &

ECONOMIC IMPACT
Global Civil Aviation MRO Employment
13
There are approximately 473,000 employees from some 4,772 firms
14
worldwide participating in the civil MRO market. 78% of these firms are
a 15 16
small/medium enterprises (SMEs ). Globally, of the 281,859 technicians,
17 18
22% are certificated. In the U.S., there are an estimated 4,067 firms with
19
195,114 employees in the civil MRO market (excluding airline employees).
20 21
SMEs comprise 84% of all firms and account for 21% of all employees.
22
There are 143,843 technicians in the U.S., and approximately 37% are
23
certificated. (See Figure 35.)

2014 CIVIL AVIATION MRO ENTITIES AND EMPLOYMENT

# ENTITIES # EMPLOYEES

6,000 500,000

5,000 400,000
4,000
300,000
3,000 NON-SME NON-SME
SME 200,000 SME
2,000

1,000 100,000

- -
GLOBAL USA GLOBAL USA

Source: TeamSAI Consulting Services analysis

Figure 35

a
For the purposes of this study, SMEs are defined to be firms with 50 or fewer
employees.

37 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

Airframe
24
Heavy airframe maintenance facilities employ 379,331 employees within
25 26
2,816 companies; nearly 77% are SMEs, which employ over 27,465
27
people worldwide. In the U.S., there are 140,480 employees in the heavy
28 29
airframe maintenance supply chain within 2,403 companies; nearly 84% of
30 31
the providers in the U.S. are SMEs, employing nearly 24,107 people.
According to the FAA, there are 221,987 technicians engaged in heavy
32 33
airframe maintenance, with nearly 26% being FAA certificated individuals.
34
In the U.S., there are 103,387 technicians, approximately 49% or 50,721 are
35
FAA certificated. (See Figure 36.)

2014 AIRFRAME MRO ENTITIES AND EMPLOYMENT

# ENTITIES # EMPLOYEES

3,000 400,000

2,500
300,000
2,000

1,500 NON-SME 200,000 NON-SME

1,000 SME SME

100,000
500

- -
GLOBAL USA GLOBAL USA

Source: TeamSAI Consulting Services analysis

Figure 36

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 38
ARSA REPORT 2014

Engine
36
The global engine overhaul supply chain employs 366,241 employees within
37 38
1,851 companies; approximately 69% are SMEs, employing nearly 19,248
39
people worldwide. In the U.S., there are 129,773 employees in the engine
40 41 42
overhaul supply chain within 1,571 entities; nearly 77.3%are SMEs
43
employing nearly 17,688 people.
44
Globally, there are 212,665 technicians in the engine overhaul supply chain,
45
around 26% of which are FAA certificated. In the U.S. there are 95,269
46 47
technicians, approximately 50% or 47,771 are FAA certificated. (See
Figure 37.)

2014 ENGINE MRO ENTITIES AND EMPLOYMENT

# ENTITIES # EMPLOYEES

2,000 400,000

1,500 300,000

1,000 NON-SME 200,000 NON-SME

SME SME
500 100,000

- -
GLOBAL USA GLOBAL USA

Source: TeamSAI Consulting Services analysis

Figure 37

39 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

Component
The global component maintenance supply chain employs 411,360
48 49 50
employees within 3,415 companies; approximately 76% are SMEs,
51
employing nearly 33,498 people worldwide. In the U.S., there are 154,552
52
employees in the component maintenance supply chain within 2,836
53 54 55
entities; about 83% are SMEs employing 28,186 people.
Globally, there are 241,337 technicians in the component maintenance supply
56 57
chain; around 23% are FAA certificated. In the U.S. there are 113,799
58 59
technicians. Approximately 41% or 47,144 are FAA certificated. (See
Figure 38.)

2014 COMPONENT MRO ENTITIES AND EMPLOYMENT

# ENTITIES # EMPLOYEES

4,000 500,000
3,500
3,000 400,000

2,500 300,000
2,000 NON-SME NON-SME
1,500 SME 200,000 SME
1,000
100,000
500
- -
GLOBAL USA GLOBAL USA

Source: TeamSAI Consulting Services analysis

Figure 38

Line
Labor, which is internal to the line maintenance facility, accounts for
60
approximately 118,249 employees. An additional 13,007 employees support
61
work in other parts of the line maintenance supply chain. In the U.S., it is
estimated that approximately 49,030 employees are in the line maintenance
62
supply chain.

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 40
ARSA REPORT 2014

U.S. Employment & Economic Impact by State

63
The U.S. civil aviation maintenance industry employs over 311,614 people 2014 U.S. CIVIL MRO EMPLOYMENT &
64
and generates $44.4B in economic activity. (See Figure 39.) MRO accounts ECONOMIC ACTIVITY
65 66
for 78% of the total employment in the U.S. with 244,144 employees.
Within the MRO industry, companies that are certificated by the FAA under U.S. MRO Employment Distribution
67
part 145 are the largest employers with some 195,114 employees. The
remaining 49,030 are employed by other companies involved in civil
68
aviation. Parts manufacturing and distribution accounts for the remaining Parts
69 Manuf/
22% of employment with 67,470 employees. MRO generates 48% of the 311,614
Distr
70 71
economic activity or $21.3B. With 22% of the total employment, parts 22%
manufacturing and distribution, accounts for 52% of the total economic
72
activity or $23.1B.
Air Carrier Part 145
Analyzing the MRO industry at the state level, TeamSAI estimates that Maint Repair
73 16%
California, Florida, Georgia, and Texas combined represent 35% of the total Station
74 62%
U.S. civil aviation maintenance employment with an estimated 110,330
75
employees. The top ten states represent 62% of the total employment in the
76
U.S. (See Figure 40.)
California and Texas also generate the most economic activity followed by
77
Arizona, Connecticut, Georgia, and Washington. Together, these six states
78 U.S. MRO Economic Activity
generate 49% of the total economic activity. (See Figure 41.)
Distribution

$44.4B

Parts MRO
Manuf/ 48%
Distr
52%

Source: TeamSAI Consulting Services analysis

Figure 39

41 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

2014 U.S. EMPLOYMENT RANKING BY STATE (# EMPLOYEES)

# EMPLOYEES

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0
OH

NE
CA

NY

OR

NV

DE

GU
FL

NM
TN

LA
WA

WV

HI

RI

WY
GA

OK

IL

MN

MD
CT

UT
IN

AL

CO

ID
WI

PR
TX

AR

SC

SD

MP
MA

MS
ME
IA

NC

NH

ND
VA

KY

AK
KS

PA
MI

MT

VI
NJ

MO
AZ

VT
Source: TeamSAI Consulting Services analysis

Figure 40

2014 U.S. ECONOMIC ACTIVITY RANKING BY STATE ($USB)

ECONOMIC ACTIVITY

$5.0
Billions

$4.5
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$-
WI
FL
AZ

OH

DE

GU
OR

VT
MO

MT

VI
MI

AR

SD
CO

SC

PR
UT
CT
GA

OK

AL
MN

MD

HI

RI
WA

WY
WV
KY
KS

VA

NC

PA

AK
NH

ND
IN

ID
MS
IL

MA

ME

MP
TN

LA
NY

NE

NM
CA

NV
IA

NJ
TX

Source: TeamSAI Consulting Services analysis

Figure 41

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 42
 ARSA REPORT 2014

2014 U.S. AVIATION MAINTENANCE INDUSTRY EMPLOYMENT AND ECONOMIC IMPACT

Aviation Maintenance Industry Employement Aviation Maintenance Industry Economic Activity

Maintenance, Repair and Overhaul (MRO) Parts Manufacturing Maintenance, Repair Parts Manufacturing Total Economic
Total Employment
State FAA Repair Station Air Carrier /Distribution and Overhaul (MRO) /Distribution Activity
AK 490 417 9 916 $79,094,837 $3,084,064 $82,178,901
AL 5,065 - 28 5,093 $441,692,780 $9,594,866 $451,287,646
AR 2,927 79 61 3,067 $262,137,906 $20,903,101 $283,041,007
AZ 6,306 978 9,907 17,191 $635,200,436 $3,394,869,148 $4,030,069,584
CA 26,296 3,170 5,493 34,959 $2,569,579,358 $1,882,307,079 $4,451,886,437
CO 1,211 1,535 15 2,761 $239,464,634 $5,140,107 $244,604,741
CT 5,042 240 7,067 12,349 $460,616,241 $2,421,675,610 $2,882,291,851
DE 893 25 83 1,001 $80,054,091 $28,441,924 $108,496,015
FL 16,536 3,780 976 21,292 $1,771,654,593 $334,449,610 $2,106,104,203
GA 16,225 3,338 1,435 20,998 $1,705,989,309 $491,736,876 $2,197,726,185
GU 21 54 - 75 $6,540,367 $0 $6,540,367
HI 158 863 8 1,029 $89,036,195 $2,741,390 $91,777,585
IA 2,738 - 4,443 7,181 $238,766,995 $1,522,499,609 $1,761,266,604
ID 501 95 33 629 $51,974,116 $11,308,235 $63,282,351
IL 4,010 4,501 1,441 9,952 $742,200,839 $493,792,918 $1,235,993,757
IN 3,450 618 1,164 5,232 $354,749,502 $398,872,281 $753,621,783
KS 5,479 53 4,932 10,464 $482,417,465 $1,690,067,088 $2,172,484,552
KY 538 965 44 1,547 $131,068,953 $15,077,646 $146,146,600
LA 2,040 135 187 2,362 $189,670,641 $64,079,997 $253,750,638
MA 2,060 486 268 2,814 $222,023,656 $91,836,573 $313,860,229
MD 1,102 246 593 1,941 $117,552,195 $203,205,552 $320,757,747
ME 923 - 129 1,052 $80,490,116 $44,204,918 $124,695,033
MI 4,377 1,946 2,531 8,854 $551,396,534 $867,307,340 $1,418,703,874
MN 2,367 1,557 360 4,284 $342,191,998 $123,362,561 $465,554,559
MO 1,630 276 23 1,929 $166,212,525 $7,881,497 $174,094,022
MP 6 - - 6 $523,229 $0 $523,229
MS 1,076 23 140 1,239 $95,838,177 $47,974,329 $143,812,506
MT 367 - 18 385 $32,004,195 $6,168,128 $38,172,324
NC 3,788 1,031 384 5,203 $420,240,376 $131,586,732 $551,827,108
ND 233 - 99 332 $20,318,740 $33,924,704 $54,243,444
NE 1,079 - 1,297 2,376 $94,094,079 $444,447,894 $538,541,973
NH 661 - 33 694 $57,642,434 $11,308,235 $68,950,669
NJ 4,060 1,735 449 6,244 $505,352,351 $153,860,528 $659,212,879
NM 462 - 47 509 $40,288,660 $16,105,668 $56,394,328
NV 545 1,175 116 1,836 $149,992,415 $39,750,159 $189,742,573
NY 5,761 3,438 2,743 11,942 $802,197,805 $939,954,181 $1,742,151,986
OH 6,052 937 3,174 10,163 $609,474,993 $1,087,646,581 $1,697,121,573
OK 12,188 335 523 13,046 $1,092,066,867 $179,218,387 $1,271,285,254
OR 1,645 552 116 2,313 $191,589,149 $39,750,159 $231,339,307
PA 3,411 1,536 114 5,061 $431,402,602 $39,064,811 $470,467,414
PR 116 55 - 171 $14,912,037 $0 $14,912,037
RI 251 - 44 295 $21,888,428 $15,077,646 $36,966,074
SC 2,197 164 10 2,371 $205,890,751 $3,426,738 $209,317,489
SD 83 - 170 253 $7,238,006 $58,254,543 $65,492,549
TN 2,633 2,055 601 5,289 $408,816,535 $205,946,942 $614,763,478
TX 21,871 7,300 3,910 33,081 $2,543,853,915 $1,339,854,483 $3,883,708,398
UT 342 697 458 1,497 $90,605,883 $156,944,592 $247,550,475
VA 1,179 1,557 2,336 5,072 $238,592,585 $800,485,952 $1,039,078,538
VI 2 - - 2 $174,410 $0 $174,410
VT 171 - 297 468 $14,912,037 $101,774,113 $116,686,150
WA 8,838 888 9,012 18,738 $848,154,783 $3,088,176,114 $3,936,330,897
WI 2,155 195 94 2,444 $204,931,497 $32,211,335 $237,142,832
WV 1,483 - 38 1,521 $129,324,855 $13,021,604 $142,346,459
WY 74 - 17 91 $6,453,162 $5,825,454 $12,278,616
Total 195,114 49,030 67,470 311,614 $21,290,551,239 $23,120,200,000 $44,410,751,239

Source: TeamSAI Consulting Services analysis

Figure 42

43 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

CONCLUSION
This report detailed the air transport MRO market and the impact it has on
economic activity. Moderately optimistic economic forecasts suggest an improved
market environment for air transport, but concerns remain. Because maintenance
is so closely tied to air transport, it is imperative MROs are aware of these
outlooks and prepare accordingly.
Globally, the fleet growth is solid; however, in the U.S., where fleet growth is flat,
MRO growth lies in the developing
new deliveries largely will be used as replacement aircraft. Still, North America is
regions of Asia Pacific, China, and a large market and will remain so, even as other regions grow their shares of the
the Middle East, each of which stand global fleet to comparable proportions. Developing regions in the Far East (e.g.,
to gain $4B or more in MRO value by China) are poised for substantial fleet growth. Asia as a whole is the engine of
2024. fleet growth, and in turn, the engine for MRO growth.
Globally, the air transport MRO market in 2014 is expected to be $57.7B in 2014
The aircraft of 1990’s and 2000’s and to grow to $86.8B by 2024 (for jets and turboprops combined). This
represents a healthy 4.2% CAGR. North America is the single largest region for
vintage are expected to drive the
MRO spend, driving $17.7B in 2014. This is forecast to grow very modestly
increase in the market.
though through 2024 by just 0.7% to $19.0B. Regionally, Asia Pacific, China, and
the Middle East represent the greatest absolute net growth. Looking at the
vintages expected to drive the most MRO growth by the end of the forecast, the
1990’s and 2000’s era aircraft dominate.
WHERE THE MRO GROWTH LIES ($USB) Airframe MRO is forecast at $11.5B for 2014. Nearly 30% of this spend is for
aircraft based in North America. Airlines themselves and their affiliated third party
Region 2014-24 providers maintain a solid hold on this market. The airframe MRO market typically
Net MRO Increase
is considered a low-margin, labor intensive segment.
AP $6.6 Engine MRO is expected to be $22.1B in 2014. More than 30% of this value is tied
CH $6.2 to North American operators. Unlike airframe MRO, engine MRO is largely
ME $4.1 contracted out and engine OEMs have a large share of this market. The engine
MROs, recognizing the value of the aftermarket, typically enjoy higher margin
WE $3.4
work which is also more material intensive.
LA&C $2.7
EE $1.9 Component MRO is forecast to be $12.2B in 2014. Upwards of 35% of this spend
is for North American aircraft. Like the engine MRO business, much of the
IN $1.6
component MRO market is contracted out, although it varies greatly from one
NA $1.3 component type to the next. Similarly, the labor/material mix can vary.
AF $1.2
Total $29.2 Finally, line maintenance is pegged at $11.9B in 2014. North America represents
27% of the market. The nature of line maintenance work makes it less prone to
Vintage 2014-24 contracting; however, the potential to tap this market for line maintenance
Net MRO Increase
providers represents a significant opportunity in an otherwise slowly growing
market. Of course, some of these opportunities may be limited to far flung airports.
1970's -$1.2
Because the work is labor-intensive, the opportunities to take advantage of
1980's -$8.7 economies of scale are constrained.
1990's $15.2
An examination of the regional balance of trade revealed that North America is a
2000's $15.9
net importer of airframe maintenance but is a net exporter of engine MRO.
2010's $8.0 Western Europe, as North America’s largest peer, has a similar trend for engine
Total $29.2 work, although it is net exporter for airframe maintenance. Developing regions
Source: TeamSAI Consulting Services analysis with low-cost but skilled labor tend to be net exporters of airframe maintenance.
Regions with limited indigenous skills often must rely on other regions. Line
Figure 43 maintenance does not allow for as much contracting.
In the U.S., nearly 4,100 firms with over 244,000 employees operate in the civil
MRO market (including airline employees). Small and medium-sized enterprises
(SME) account for 84% of these U.S. firms and 21% of all employees. There are
over 143,000 technicians in the U.S. and approximately 37% are certificated.

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 44
ARSA REPORT 2014

REFERENCES
1
“World Economic Outlook (WEO) Update – Transitions and Tensions,”
International Monetary Fund (IMF), Oct. 2013. available at
http://www.imf.org/external/pubs/ft/weo/2013/02/pdf/text.pdf.
2
Ibid.
3
Ibid.
4
Ibid.
5
Ibid.
6
Ibid.
7
Ibid.
8
“2014 Global Outlook-Closer to the Top, Further from the Exit,” Credit
Suisse, 19 Nov. 2013. available at http://www.credit-
suisse.com/researchandanalytics.
9
“WTO Sees Gradual Recovery in Coming Months despite Cut in Trade
Forecasts,” World Trade Organization, 19 Sept. 2013. available at
http://www.wto.org/english/news_e/pres13_e/pr694_e.htm.
10
“Industry Financial Forecast,” International Air Transport Association (IATA),
Dec. 2013. available at
http://www.iata.org/whatwedo/Documents/economics/IATA-Economic-
Briefing-Financial-Forecast-December-2013.pdf.
11
Ibid.
12
Ibid.
13
FAA Repair Station Data, TeamSAI Analysis
14
FAA Repair Station Data
15
FAA Repair Station Data, TeamSAI Analysis
16
Ibid.
17
Ibid.
18
Ibid.
19
FAA Repair Station Data, TeamSAI Analysis
20
Ibid.
21
Ibid.
22
FAA Repair Station Data
23
Ibid.
24
FAA Repair Station Data, TeamSAI Analysis
25
Ibid.
26
FAA Repair Station Data, TeamSAI Analysis
27
Ibid.
28
Ibid.
29
FAA Repair Station Data
30
FAA Repair Station Data, TeamSAI Analysis
31
Ibid.
32
FAA Repair Station Data
33
Ibid.
34
Ibid.
35
Ibid.
36
FAA Repair Station Data, TeamSAI Analysis
37
FAA Repair Station Data

45 A L L R I G H T S R E S E R V E D. TEAMSAI©2014
 ARSA REPORT 2014

38
FAA Repair Station Data, TeamSAI Analysis
39
FAA Repair Station Data + TeamSAI Analysis
40
FAA Repair Station Data + TeamSAI Analysis
41
FAA Repair Station Data
42
FAA Repair Station Data, TeamSAI Analysis
43
Ibid.
44
FAA Repair Station Data
45
Ibid.
46
Ibid.
47
Ibid.
48
FAA Repair Station Data, TeamSAI Analysis
49
FAA Repair Station Data
50
FAA Repair Station Data, TeamSAI Analysis
51
Ibid.
52
Ibid.
53
FAA Repair Station Data
54
FAA Repair Station Data, TeamSAI Analysis
55
Ibid.
56
FAA Repair Station Data
57
Ibid.
58
Ibid.
59
Ibid.
60
FAA Repair Station Data, TeamSAI Analysis
61
Ibid.
62
FAA Repair Station Data, TeamSAI Analysis
63
FAA Repair Station Data, BLS, RITA, TeamSAI Analysis
64
Ibid.
65
FAA Repair Station Data, RITA, TeamSAI Analysis
66
Ibid.
67
FAA Repair Station Data, TeamSAI Analysis
68
RITA, TeamSAI Analysis
69
BLS, TeamSAI Analysis
70
Ibid.
71
Ibid.
72
Ibid.
73
FAA Repair Station Data, BLS, RITA, TeamSAI Analysis
74
Ibid.
75
Ibid.
76
Ibid.
77
Ibid.
78
Ibid.

TEAMSAI©2014 AL L RI G HT S R E S E R V E D. 46