Military MRO Represents 60-80% of the System Lifecycle Cost

Tuesday 17 July 2012, Amsterdam

The military aviation MRO market consists of four categories: Attack Aircraft MRO, Transport Aircraft MRO, Rotorcraft MRO and UAV MRO. The value of the market is expected to increase at a CAGR of 3.49% during the forecast period (2012-2022) (reference graph).

A significant number of countries are investing in the development of their domestic military aviation MRO capabilities by establishing strategic alliances and technology transfer agreements with established global manufacturers. In addition to improving the indigenous capabilities of a domestic firm, this provides foreign companies with an opportunity to cater to a new market. This is especially true in today’s economic scenario when companies are looking to maximize efficiencies and cut costs.

In some countries in Asia-Pacific and Latin America, laws do not favor indigenous MRO third party providers including customs duty on the import of spares affecting the industry in India. Aircraft components are mostly imported by service providers and usually incur a customs charge at the rate of 25.40% with it going up to 100% for some equipment. The current rate of indirect taxes on other MRO activities is also quite high, making them uncompetitive as customs duty is exempt on parts imported for MRO of aircraft subject to specified conditions which, if not satisfied, would impose customs duty in the range of 19% to 27% on the imported parts.

Though the global military aviation MRO industry is rising, it is currently facing a significant challenge in terms of skilled manpower to carry out the work efficiently. This shortage is now restricting companies in the amount of work they can take on which is primarily due to the lack of in-house training programs which is further attributed to the MRO industry moving away from traditional apprenticeship programs in an effort to cut costs. A good example of the shortage of skilled personnel is the Canadian military helicopter MRO market which is witnessing a public bias against manual labor as a career choice and many youngsters are now opting for other vocations such as computer technology.

Over the extended life of a military system or platform, the sustainment, repair and overhaul phase represents approximately 60-80 percent of the entire system lifecycle. With continued focus on outsourcing military aviation MRO activities, private OEMs are being asked to assume responsibility for the total care of these systems and platforms, even as cost pressures are increasing and resources are limited. Due to these factors, the military aviation MRO industry still faces significant challenges in resource allocation, information management and service management while delivering required MRO services for a component or an entire platform.