A decade of smaller fleets will lead to constrained growth and consolidation, according to Oliver Wyman’s Global Fleet & Maintenance, Repair, and Overhaul (MRO) Forecast 2021-2031.
The new report by the global management consultancy examines the long-term impact of the pandemic on aircraft production, deliveries and aftermarket, found that by 2031, the global aviation fleet will be smaller than once projected because of the impact of COVID-19.
It found that airlines will not return to 2019 levels of operations until at least 2022, with recovery in parts of the aerospace market lagging by a year or two. For consumers, the slow recovery may mean fewer direct and less frequent routes — at least until the pandemic is under control and normal economic activity returns.
“Focus must be on cashflow management”
Tom Cooper, an Oliver Wyman vice president and one of the authors of the report, said: “COVID has created a long list of challenges never seen before in modern commercial aviation. It will take the next few years for the fleet to adjust and return to stable growth, but even after 10 years, the industry will never fully regain all that it has lost from the pandemic. Right now, with many airlines still burning through millions of dollars each day, the focus must be cash flow management.”
At its lowest point during the pandemic, the global fleet had only around 13,000 aircraft in service, less than half the number flying in January 2020 as the outbreak began to spread. Today, the 2021 fleet is up to more than 23,700 aircraft. By 2031, Oliver Wyman forecasts the fleet will number more than 36,500. But the company added that the numbers were a “far cry” from pre-COVID projections, which put the 2021 global fleet at 28,800 and the 2030 fleet at more than 39,000.
Significant short-term impact on MRO market
Fewer aircraft flying means lowers levels of production and repairs. A statement by Oliver Wyman explained: “Given the inventory backlog of new planes that are built but undelivered or unsold, more aircraft will be delivered to airlines over the next several years than will be produced by aerospace manufacturers. While production and deliveries are closely aligned in normal years, this imbalance reflects conflicting pressures on airframe manufacturers to balance the realities of lower market demand with needs of key suppliers to maintain enough production.”
Oliver Wyman has identified a significant impact of COVID on the MRO market – both in the short and long terms. Short term demand in 2020 and 2021 is expected to be 33 per cent, or $60 billion, below pre-COVID projections for the combined two years. Over the next 10 years, the industry will lose more than $95 billion in revenue compared with pre-COVID expectations.
Narrowbody aircraft market expected to hold up well
But the report also identifies bright spots among the challenges with deliveries of narrowbody aircraft expected to hold up reasonably well, with cumulative deliveries approximately 90 per cent of pre-COVID expectations over the 10 years. It notes aircraft which tend to carry under 200 passengers will be easier to fill during periods of lower travel demand.
But the report adds that, in contrast, widebody aircraft deliveries and production could be as much as 40 per cent below previous forecasts due to falloff in international and business travel driven by changing corporate travel policies and government restrictions.
Despite significant short-term losses, the long-term outlook for MRO is described as another “bright spot”. Aftermarket providers will begin to see consistent growth over the mid and long terms, as the size of the fleet expands and the overall age increases. This will drive interest from private equity and other investors.
The 2021-2031 edition of Oliver Wyman’s Global Fleet & MRO Market Forecast Commentary represents a commitment to the understanding and assessment of the commercial airline transport fleet and the associated maintenance, repair, and overhaul (MRO) market outlook which dates back more than 20 years. The resource is aimed at aviation executives—from manufacturers, operators, or aftermarket providers, as well as for those with financial interests in the sector through private equity firms and investment banks.