Frost: Middle Eastern Air Carriers' Fleet Expansions Enhance Prospects for Airframe, Engine MRO Service Providers
October 2, 2006 // Published as a news service by IHS
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Middle Eastern carriers are thriving in the aerospace market and are implementing ambitious fleet renewal and expansion programs.
According to Frost & Sullivan, this growth is backed by substantial cash reserves, air transport liberalization efforts and highly effective business strategies focusing on long-haul connecting air traffic.
Consequently, demand for maintenance, repair and overhaul (MRO) services in the region is set to double in the next six years.
Recent analysis from Frost & Sullivan found that the Middle Eastern airframe and engine MRO markets earned revenues of $1.79B in 2005, with estimates to reach $3.31B in 2012.
Overseas MRO suppliers identified the Middle East's potential and are now considering market entry through partnerships, joint ventures and subsidiaries, analysts said.
Another attractive option is the acquisition of former state-owned and airline-affiliated MRO suppliers, which will provide entrants an initial captive business.
"Influenced by the proliferation of low-cost carriers and the privatization of former airline-affiliated Middle Eastern MROs, maintenance outsourcing will become widespread," said Frost & Sullivan research analyst Diogenis Papiomytis.
"Middle Eastern and international MRO suppliers should assess the market's potential and identify the needs of airlines, being fully aware that any investment in infrastructure will have a lead time of one to two years."
Analysts said once suppliers estimate the costs of the proposed investments, they can integrate these costs into the business proposal for new facilities and capabilities. Such forethought will be especially useful in handling the hectic pace of business in the wake of an air travel boom in the Middle East.
Air travel is intensifying in the region because of the increasing popularity of Middle Eastern airports as hubs for connecting flights. As a result, all companies participating in the air transport industry are experiencing a windfall. Analysts said there is a corresponding rise in demand for MRO services in the Middle East - higher than the expected demand in any other region.
"MRO suppliers' revenue generation opportunities are primarily expected to stem from the line maintenance market and subsequently, across all airframe and engine MRO market segments," said Papiomytis.
To capitalize on these opportunities, regional MRO suppliers are restructuring their operations, building the capacities and capabilities required to service Middle East's future aircraft fleet. Many airline-affiliated MRO suppliers are waking up to the benefits of commercialization and privatization to reduce their dependence on a single carrier.
Analysts said suppliers need to develop detailed business plans regarding the required investments and assess all future market opportunities and risks.
Source: Frost & Sullivan.