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MRO industry wary as OEMs make services inroads: survey

Airlines and maintenance providers have grown increasingly wary of efforts by large OEMs to significantly expand their aviation services divisions and to capture huge swaths of the MRO industry, according to a 2018 survey produced by consultancy Oliver Wyman.

Released on the first day MRO Americas, the aircraft maintenance industry’s largest North American trade show, the survey also raises alarm about the maintenance industry’s preparedness to fend off or recover from the types of sophisticated cyberattacks that are increasingly common.

The nearly 100 aviation executives who completed the survey identified “growth in OEM aftermarket presence” as being the top “disruptor” in the MRO industry for the next five years.

Likewise, 78% of executives said they expect OEMs will become the most dominant industry players within five years, and they say those companies are likely to meet aggressive growth goals, the report says.

Aircraft manufacturers like Boeing, Airbus, Bombardier and Embraer, and major engine makers, see big opportunity in the aftermarket, thanks partly to a robust pipeline of new aircraft deliveries.

The companies also see expanded aftermarket services as insurance against potential order and delivery slowdowns.

In 2016, Boeing announced it was consolidating aviation services into a new Global Services business unit, setting a goal for the unit to triple annual sales to $50 billion by 2027.

Likewise, Airbus in 2015 consolidated its services into a new unit called Services by Airbus, and Embraer has also consolidated its services work into a new unit and set high financial targets.

Three-quarters of respondents to Oliver Wyman’s survey view the OEMs’ goals as attainable, partly due to those companies’ ownership of intellectual property associated with increasingly complex aircraft materials and components.

“This is primarily the case with engine and component manufacturers, but there is a fear the aircraft OEM may try to recapture more [intellectual property] as they push into the aftermarket,” the survey says.

Great intellectual property ownership “means OEMs can force operators to use their parts and sometimes their MRO operations for repairs and maintenance, providing a competitive advantage in the marketplace. MRO providers, who buy the OEM-designed components, may end up paying more”.

Oliver Wyman says responses to cybersecurity-related questions reveal that the industry should put more resources into countering cyber threats.

Only 9% of MRO providers, 50% of OEMs and 41% of airlines “have established security standards for third-party vendors,” it says. Also, less than half of respondents had completed a cybersecurity threat assessment.

Oliver Wyman warns that MRO providers could be prime targets for sophisticated cyberattacks.

MRO companies have “access to the networks of the world’s airlines and original equipment manufacturers, including major aircraft companies and engine and component-parts makers,” the report says. “Hackers may decide that access through a vendor or any business in that supply chain may be easier to achieve.”

In March, the US Department of Homeland Security’s cybersecurity unit warned of “Russian government actions targeting” industries including aviation, the report notes.

Indeed, in late March Boeing said a malware attack struck its computers.

”It is imperative for the MRO industry as a whole to work together to strengthen its cybersecurity and risk management practices around digital operations,” Oliver Wyman’s report says. “Cyberattacks on aviation have moved from a possibility to a reality.”

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