24 Jan 2023
The global economic recessions continue to linger and loom, and as such the MRO and aftermarket sales sectors are influenced by currency fluctuations as companies focus on their bottom line while also trying to meet the needs of their customers.
In the January 2023 issue of AviTrader MRO, editor Keith Mwanalushi gains industry insight on the influence of the volatile economy on the MRO and aftermarket from AJW Aviation CEO, Clyde Buntrock. Keith delves into the status of MRO and related services and asks how the economic climate might influence the industry going forward.
There is a trend toward increasing production rates of new aircraft, particularly narrowbodies, which is causing uncertainty as to whether vendors will be able to maintain the component supply chain. Buntrock notes, “The newer generation narrowbody aircraft are predominantly electronic systems and have fewer parts, but while this means they have lower margins and are more reliable, which is of benefit to the airline, it could affect the MRO aftermarket services somewhat.”
The AJW Aviation CEO remains positive, however, as aftermarket sales increase due to maintenance schedules which still need to be maintained for existing fleets. Buntrock notes,
"It is business as usual for companies like AJW who offer MRO services. Stakeholders in the MRO and aftermarket sector are ready for this upturn in business and remain positive about business growth going forward."
Looking to the global economy, and more specifically the strength of the US dollar and how it is influencing the aviation industry, experts suggest the strength of the American currency will create cost challenges for global aviation, putting pressure on airlines by driving up the cost of components and aircraft themselves. Buntrock explains that the strengthening US dollar is affecting previously strong currencies such as the British pound and Chinese yen, the former also being affected by the energy and economic crisis and geopolitical instability in the region.
Airlines still recovering from the pandemic are faced with financial challenges while they raise revenue in local currencies but pay many of their maintenance expenses in dollars. Maintenance costs are soaring and escalation clauses for pre-pandemic deals are now coming into effect, so these factors together with the strong USD are not helping an already struggling industry. “Airlines need to deal with balancing flying schedules and pricing amidst reduced passenger confidence in the industry.” says Buntrock, who acknowledges that the only solution for airlines is to pass these costs onto passengers by increasing already high ticket prices.
AJW Group remains positive amidst what appears to be doom and gloom for the economy, as the company sees the upturn in global bookings across the travel industry as positive for airline revenues.
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