Last year was a good year for the commercial aftermarket, which saw an uptick “as the period of spares destocking and maintenance deferral by the airlines draws to a close,” according to RBC Capital Market analysts.
But this year could be even better as global airlines add routes and capacity, because “additional capacity can only really come from the existing fleet with Airbus and Boeing sold out,” write RBC analysts Robert Stallard and Steven Cahill in their 2014 aerospace outlook report. They predict a 5% increase in global available seat miles.
So combined, the need for spares and repairs should be stronger this year. They predict a 9% aftermarket revenue rate for 2014.
Stallard and Cahill single out Precision Castparts, “a quality large cap growth name” in the U.S., and “Safran, reflecting its attractive mix of aero aftermarket exposure and inexpensive valuation” in Europe, as their Top Picks for 2014.
It is interesting that a large part of RBC's justification in choosing Safran is due to its aftermarket exposure—particularly for “pent-up demand for CFM56 engine maintenance.” Safran makes about 40% of its revenue from the aftermarket.
Stallard and Cahall believe CFM56 engines should have been “driving high-teens aftermarket growth” between 2010-13, but instead, it has been about 8%. But they think airlines are ending deferred maintenance, which will unleash the demand for high-margin engine MRO.
Still, it takes people to power MRO, and the shortage of qualified, locally trained maintenance engineering and technician talent could hinder growth.
Aviation Week and the University of Balamand Institute of Aeronautics in Lebanon conducted two surveys to try to understand the supply and demand factors for the MRO workforce in the Middle East. We separately polled airline and independent MROs, as well as training organizations and schools, to get beyond calling the workforce shortage “a crisis” and pinpoint some of the key causes. See the survey summary on page MRO6.
One disconnect we discovered is on-the-job training. As one Middle East training survey respondent says, “There will definitely be a scarcity of skilled professionals if this trend of 'not giving opportunity to new candidates' continues.”