Study Highlights Economic Risks of MRO Restrictions

 - September 2, 2009, 10:18 AM

Global MRO Market Economic Assessment,” a study commissioned by the Aeronautical Repair Station Association (ARSA) and conducted by AeroStrategy, has yielded insight about the breadth of the aviation maintenance (MRO) industry and its impact on the U.S. economy.

The study sought to provide a base of information that would better allow MROs to understand the consequences of legislation that would make it harder for aviation maintenance companies to serve international operators, Sarah MacLeod, ARSA’s executive director, told AIN. She cited the aviation bill passed by the U.S. House of Representatives earlier this year that the European Union has said violates existing treaties. The EU has threatened to retaliate against U.S. companies if it becomes law.

“We commissioned the study in part to make the aviation maintenance industry understand its vital role in the world economy,” MacLeod noted. “Industry needs to understand it doesn’t have to hide behind the skirts of the operators when it comes to political or regulatory issues that cause economic hardship. The companies directly impacted must become active without fear of offending the customer.”

AeroStrategy, an Ann Arbor, Mich.-based management consulting firm, determined that spending in the global MRO market exceeded $50 billion in 2008, with North America (the U.S. and Canada) accounting for $19.4 billion of the total. When induced and related economic effects are considered, the MRO industry’s impact on the U.S. economy is $39 billion per year.

The study found that North America is a major net exporter of aviation maintenance services, enjoying a $2.4 billion positive balance of trade. While the region is a slight net importer of heavy airframe maintenance services, it has $1.4 billion and $1.2 billion trade surpluses in the engine overhaul and component maintenance services markets, respectively.

According to the study, the U.S. competitive advantage in these two areas has important economic benefits because one dollar of spending on airframe heavy maintenance generates $1.38 in additional economic activity, while a dollar spent on engine overhaul and component maintenance services generates $1.85 and $1.67, respectively.

The report also found there are nearly 4,200 firms with more than 200,000 employees involved in the civil MRO market in the U.S. Some 85 percent of those companies are small and medium-size enterprises. Such businesses account for 21 percent of all industry employment.

“We now have a better understanding than ever about how small companies and their employees in communities throughout the United States are tied to the global marketplace.” MacLeod said. “Congress should be looking for ways to make it easier for these U.S. companies to serve foreign customers, not trying to hamstring a highly competitive sector of our economy.”

Of the industry’s impact, Bill Voss, president of the Flight Safety Foundation, said, “I knew it was a big number but not how big. It’s clear that the U.S. is on the winning side and [this study] reinforces that we have more to lose than gain. From a safety perspective we take exception to Congress’s position that the FAA must inspect all foreign MROs.”

He continued, “We [supported] the U.S. and EU agreement to share information and oversight. There’s nothing more robust than two or more regulatory entities providing oversight for the same place. If the entire responsibility falls on the shoulders of the FAA we’re concerned about the possibility of a lot of superficial safety audits by overworked regulators on both sides of the Atlantic instead of coordinated, data-driven oversight.”