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Boom in air travel boost for aircraft markets

        Mumbai: Motivated by the recently slashed airfares, the passion to cover long or short distances through airplanes has really picked up among people across the country. The tremendous growth in air traffic, characterised by the proliferation and emergence of new low-cost carriers (LCC) in Asia Pacific, has captivated many foreign investors. The recent increase in domestic and international fleet movements as well as utilisation has hiked aviation stocks. These two factors are supporting growth in the commercial aircraft and engine maintenance, repair and overhauling (MRO) markets in Asia Pacific region.

      According to Frost & Sullivan, in 2005, the Asian Pacific Commercial Aircraft & Engine MRO Markets totalled 8.71 billion dollars and can reach up to12.90 billion dollars by circa 2011. "Governments in Asia Pacific are striving hard to liberalise this sector by introducing open skies policies and permitting domestic airlines to fly abroad," said Subhranshu Sekhar Das, Manager, Frost & Sullivan Industry. Interestingly, the Air traffic has shown a great recovery subsequent to the 9/11 terrorist attacks It has registered tremendous increase in revenues per miles (RPM) due to customer patronage of large commercial and cargo carriers. To meet such a growing demand, airlines are commissioning new aircraft to expand their fleet. This is likely to have a significant impact on the engine MRO markets as an increase in air travel/aircraft utilisation hours directly correlates to a rise in aircraft maintenance to include major overhauls. Although air traffic is increasing, these markets are likely to register a moderate compound annual growth rate of 7.2 per cent. The reason being probabilities of terrorist attacks, the cost of increasingly sophisticated air travel security measures and the impact of future oil prices. In addition, airline affiliates are being expected to render high-quality, cost-effective MRO services to attract foreign airlines by offering lower labour rates. "The emergence of LCCs caused a shift in the balance of power and, as a result, original equipment manufacturers (OEMs) should now provide round-the-clock services in line with operators' MRO requirements," said Das. "In addition, OEMs need to form joint ventures and partnerships with local participants and properly utilise lower costs of labour as well as cater to different customer groups with higher value-added proposition," Das added.

      Moreover, significant capital investment with risk costs and extended return on investment (ROI) make setting up an independent world-class total MRO in Asia a challenge. Despite these challenges, the first airframe heavy checks and engine overhaul during 2006 and 2007 will contribute significantly to the growth of these markets. In addition, LCCs have made legacy carriers in Asia Pacific to rethink and slash airfares dramatically up to 30-40 per cent as well as assess and acquire in-house low-cost maintenance. A combination of these factors and the predicted tripling of air cargo traffic are likely to encourage steady revenues in these markets. Asian Pacific Commercial Aircraft & Engine MRO Markets is part of the Maintenance Repair & Overhaul subscription and it evaluates the competitive scenario of these markets to forecast potential business opportunities for participants. Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years.
-April 21,  2006

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