Military aircraft MRO: benefits of civil injection

aviation_newsThe main effect of the recent global economic crisis on the military aviation segment was the growth of military MRO sector, since in the financially challenging times countries prefer to update or repair their aircraft instead of spending money on new equipment. Another easily observed trend which can be largely attributed to the latest economic turmoil is the increasing number of institutions choosing to outsource their military MRO services. Nevertheless, some regulatory factors may be getting in the way of the operators wishing to receive full benefits of contracting third-party providers.

The military aviation MRO market is worth more than the one of commercial aviation: AWIN estimates the fighter/attack MRO spending alone to hit $238B for the decade. Moreover, as the global economic crisis has forced most countries to cut their military budgets, ASDReports indicates the total amount of money spent on military MRO being more than the amount spent on new aircraft production. This means that operators prefer to postpone buying new equipment for as long as possible. Naturally, even such small markets as Africa are expected to show positive growth during the next ten years. Thus, no wonder that more and more of commercial MRO providers are finding this segment attractive for business expansion.

“There’s no secret that the changes in the global economy have forced aircraft operators to rethink their budget planning strategies. The commercial aviation market was not the only one to experience a steady growth in MRO segment. As most military aircraft operators were also forced to cut-down on purchases of new aircraft, their spending on maintenance services have naturally increased,” shares Arturas Dziugelis, Business Development Manager at FL Technics Military Aviation Department. “The global military aircraft fleet is inevitably aging and the growing use of airpower in the latest military conflicts has only increased the demand for military MRO services. This has created a great opportunity for civil MRO providers to enter a new market.”

Despite the fact that North America has repeatedly spoken in favour of in-house maintenance, it has been reported that it outsources up to 50% of its military aviation maintenance work. The analogical trend is evident globally as well. The main reasons for outsourcing are the economical benefits of performance based logistics contracts (which, according to FL Technics Military, can save tens of billions a year), the need for maintaining mixed fleets and the lack of skilled technical personnel.

“In today‘s economy, when everyone is looking for ways to maximize efficiency and cut down costs, contracting a third-party MRO provider certainly has its benefits. This decision is especially relevant when the industry is facing the shortage of qualified personnel. And due to the lack of in-house training programs this shortage is practically unavoidable at the moment. Then there are also the increasing challenges with location and delivery of parts and components for aging aircraft to consider,” says Arturas Dziugelis “At the same time, despite the rising demand for more efficient solutions, certain laws in some countries do not favour contracts with foreign independent MROs, creating serious obstacles for both, the client and the provider.”

It is reported that in some countries imported components or equipment can incur a customs charge at the rate of up to 100%, not mentioning the taxes on other MRO activities, which significantly reduce the competitiveness of providers. Moreover, sometimes even the participation in the tenders can be difficult, as most of the relevant decisions may require the approval of the highest political authorities, including the president. With regard to such a situation, Business Development Manager at FL Technics Military Aviation Department suggests the possibility of turning to the recent experience of the Asia-Pacific. The liberalization of commercial aviation markets in China has proven to be productive and resulted in a significant economical growth. Surely, outsourcing military MRO has its risks, but as the industry faces the need for new solutions, the accompanying challenges need to be addressed quickly and without unproductive prejudice.

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