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The growing LCC market: Line maintenance-related challenges

As the slowly yet surely recovering aviation industry is still struggling to gain profitability, the competition among carriers is as high as ever. On the one hand, LCCs continue to increase their pressure on legacy carriers, with more than 40 LCCs generating more than 36% of the total passenger traffic in Europe alone. However, as more and more players are ambitious enough to enter the attractive market, they should be ready to adopt their requirements for appropriate maintenance support accordingly.

The low-cost business model has undoubtedly been a real success story in the aviation industry. For instance, while some of the traditional carriers have been hardly making ends meet, in 2013 EasyJet celebrated a major milestone in its history as it reported record pre-tax profits of over US$761m. Such remarkable results are largely a result of the LCC being able to reduce its unit cost from 40% to 20% as compared to the one enjoyed by traditional carriers. This was achieved mainly due to lower operating expenses and quicker turnaround times.

According to Boeing, since 2003, when low-cost airlines accounted for as little as 7% of the market, they have grown to capture 9% more, and are projected to reach 21% by 2033. Meanwhile, time charter carriers have suffered a decline from 9% in 2003 to 3% today and network carriers have decreased their market share to 62%. Nevertheless, as more and more network carriers around the world are aiming at having a bite of the LCC pie with low-cost subsidiaries (Aeroflot, China Eastern Airlines and Air India to name a few), they are up for a real challenge regarding both, intense competition and efficient maintenance support of their operations.

LCC line maintenance strategies differ greatly from those of large network carriers, as usually low-cost carriers prefer to conduct turnaround flights and conduct provide more line maintenance works at their main bases during the night time. Therefore, they only need providers at other airports to perform minor works or solve AOG cases. However, at the same time they are much stricter about their requirements. Since they can’t afford to lose time due to inspection-related downtime, line maintenance teams have to meet the requirements to fit into a gap as little as 40 minutes between flights. Thus, in order to survive in such a highly competitive environment while further adapting to the market needs, the market newcomers will have to put special emphasis on their maintenance-related strategies.

According to TeamSAI industry forecast, in the next 10 years, time line maintenance will still have the smallest MRO market share (US$13.2bn out of $76bn). However, it can be expected that the work scope will continue to increase as carriers choose to outsource more and more of the relevant services to third-party providers.

Being able to promptly adapt one’s line maintenance services with regard to both, changes in the location and aircraft type, is an advantage which can be achieved easier through outsourcing. Firstly, independent providers constantly monitor market trends, since they need to be ready and able to foresee any possible shifts in their clients’ fleet before they happen. In addition, specialized independent providers don't have base loaders and don’t prioritize among particular clients, as they are directly interested in securing their business by providing equally high quality services to all of their customers. Meanwhile, carriers themselves can at last fully focus on their core activities.

 

26 September 2014

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