It is quite obvious that customers are growing in size as they consolidate. These bigger customers have more power to negotiate. And with newer technologies bringing better value to airlines, there is a clear size effect on the business of components. As a trend, component MROs have to be more and more competitive as time goes by.
With these bigger customers investing in new long-range fleets, which have newer technology and larger engines, it is more difficult to access these new technologies. There are high barriers to getting into the big-engine business, so the number of players is quite low, perhaps only five. As a result, I think in the future we will see only big MROs handling engines. I’m not saying it will lead to a consolidation, but perhaps there will be bigger partnerships in order to cope with the customer’s demands for lower cost and to deal with the size effect of larger airlines.
Will there be room for the smaller aftermarket players?
With bigger customers putting more pressure on price and impacting margins, there is less ability to invest in growth, and at the end of the day, you can imagine how that will affect smaller MROs.
It’s also impossible to predict what will happen as OEMs put more pressure on the market. It’s a question of leveraging discussions with OEMs, and I can imagine that small independents will have some trouble doing that. The trend is going toward partnerships and/or consolidations. When? I don’t know.