Travel is back in the black. A great line from a classic heavy metal song is even sweeter music to the ears of the global airline industry. If International Air Transport Association forecasts hold, the industry is poised for a fruitful 2023, with areas of ongoing recovery bolstered by increasing profitability among major operators. These intersecting and cross-pollinating trends are helping the airline industry increase aircraft utilization, generate cash and regenerate aftermarket demand. As operators deploy new strategies to return to growth, aftermarket providers are doing so as well.
Many MRO providers are investing in “digital precision”—the targeted, value-driven application of data insights and automation to improve aftermarket speed, quality, experience and profitability. In the near term, these insights and efficiencies are opportunities to mitigate the impact of supply chain, labor and demand variability on the cost and predictability of aftermarket services.
From predictive workforce planning in overhaul shops to providing operators with digital platforms to improve maintenance decisions, digital precision also is influencing longer-term strategic approaches to how aftermarket services are packaged, priced and delivered. This raises an interesting paradox. The most effective applications of data in the aftermarket business—from predictive maintenance to service-based business models—rely on aggregating and applying data at scale. Yet the very structure of the aftermarket itself may limit the scalability and impact of digital investments.
Building the necessary skills to implement digital precision will require new strategies, especially to address structural impediments in the aftermarket segment. Data-centric businesses such as Amazon, Google and Uber thrive on the flywheel effect generated by the concentration and scale of the data under their management. For them, digital services drive customer satisfaction and market success. Apple is on target to be a 25% digital services company by revenue by 2025. The same cannot be said of the nearly $90 billion commercial aviation aftermarket.
Meanwhile, the aftermarket remains highly fragmented. Pockets of concentration exist in proprietary parts, and the top five independent MRO providers account for less than 20% of aftermarket revenue. This fragmentation extends not just across segments such as spare parts, repair, overhaul and services but within them as well, as organizational and digital divisions persist between spares, overhaul and repair business units.
These structural divisions create pockets of highly prized data littered across the aviation ecosystem, separating understanding of spares consumption from repair schedules, flight conditions from life-limit analytics, inventory availability from fleet utilization and more. Even as MRO providers develop cutting-edge analytics and digital products, structural barriers to building data ecosystems at scale limit their ability to improve operational performance and create new sources of revenue.
The structural challenges of the aftermarket may chasten the most fervent digital evangelists. Pragmatic aftermarket providers will start by focusing on how they manage themselves and their data. Operating-model changes to align spares, repair, overhaul and service businesses can increase customer interactions, and the data those interactions generate can improve the scale and efficiency of data ecosystems under aftermarket providers’ direct control.
The thoughtful, disciplined application of data taxonomies and governance principles can strengthen operator trust in aftermarket offerings and create incremental market opportunities.
These efforts are important, but they are unlikely to scale to industry-wide solutions. Individual providers will continue to increase their own digital precision and innovate, albeit limited by the scope of data they can access, the operators they serve and the Air Transport Association chapters they are certified to support. Absent consolidation of MRO providers, operators shifting aftermarket demand into fewer channels or significant change in data-sharing practices, aftermarket work and its associated digital breadcrumbs will continue to scatter and settle across disparate businesses.
Just as corporate transformations are limited without fundamental changes to operating models that align processes, data and accountability, the benefits of aftermarket digitalization also will be limited without conscious, coordinated changes to an industrial model that dates from the beginnings of commercial aviation.
Craig Gottlieb is the managing director of Accenture’s aerospace and defense practice, focused on innovation in aftermarket services.