Recent airline capacity cuts could minimally impact maintenance providers — or foretell a broader downturn.
There is some concern within the aviation maintenance industry that recent airline capacity cuts, made in response to elevated fuel prices, could eventually weaken demand for maintenance services, deflating the bubble that has defined the sector in the post-pandemic era.
In recent weeks airlines globally have cancelled some flights and broadly trimmed capacity in response to fuel prices doubling since the start of January, a consequence of the near-total closure of the Strait of Hormuz amid the US-Iran war. Fuel shortages, and resultant rationing, are also an imminent risk.
Such pressures have already claimed victims. On 28 April, news broke that UK wet-lease carrier Ascend Airways will return its Boeing 737 Max 8s to lessors and surrender its air operator’s certificate due to elevated fuel costs.
Still, excepting some Middle East Airlines, capacity cuts have to date been relatively minimal, tweaks along the edges of the schedule, as described by some.
But that has not prevented speculation about how changing airline economics will impact the aftermarket segment.
That question is open for debate, with some executives expressing little to no alarm. Others warn airlines could be on the cusp making drastic capacity cuts, even grounding jets, with more-profound aftermarket consequences.
In the end, much depends on how long the Strait, through which one-quarter of the world’s oil supply once flowed, remains closed to shipping traffic.
Jonathan Berger, head of Alton Aviation Consultancy’s MRO and aftermarket advisory practice, has already detected a marked mood shift among maintenance providers.
“Everybody is just worried about how long is it going to last,” he says of the Iran war and elevated fuel prices, speaking on 21 April in Orlando at the MRO Americas trade show. “It’s like the pandemic. It’s like deja vu”.
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BOOMING MRO DEMAND
To be clear, the aftermarket sector is, broadly speaking, riding high amid surging demand — a trend that took hold in the immediate post-pandemic period, a consequence of factors including airlines rushing to add capacity and the need for maintenance capacity to address widespread durability problems affecting new-generation turbofans.
Meanwhile, Airbus, Boeing and essentially all other major aircraft manufacturers have been pushing to increase production, placing additional pressure on aftermarket providers.
But there is a hint of concern in the air.
GE Aerospace revealed such on 22 April, warning during its first-quarter earnings call that fallout from the Iran war could eventually erode demand for aftermarket services.
WARNING FLAG
“Between [fuel] inflation and potential scarcity, we could see some near-term airline shifts… in the later summer, early fall,” GE chief executive Larry Culp says, adding that such shifts would not impact GE immediately but rather have a delayed effect.
The result could be “lower volume related to shop visits, spare parts and spare engines, and lower profitability of our long-term contracts, as well as customer credit implications”, the company adds in a financial filings.
Despite such risks, Culp makes clear GE has not yet seen any notable impact, and the company has not altered its 2026 financial guidance.
GE now anticipates total global airline flights in 2026 will remain flat or possibly increase slightly year on year, with Middle East flights down in the double-digit range.
Notably, Safran — which owns CFM International in partnership with GE — recently struck an optimistic tone despite the Middle East conflict, with CEO Olivier Andries saying on 23 April that he sees no sign of imminent trouble.
“I got no indication at all that there is any potential acceleration in the pace of retirements of [older] aircraft,” Andries says, citing conversations he held with airlines at the recent Aircraft Exteriors Expo in Hamburg.
“We are quite confident that the volume of shop visits this year will be in line with our expectations,” Andries adds. “Airlines have learned from previous years that it is wise for them to make sure they have aircraft capacity.”
TO EARLY TO TELL
Bruce Spear, partner at consultancy Oliver Wyman, calls discussion of a broad airline contraction “premature”. He does not think airlines are close to grounding significant numbers of jets, citing the expense and complexity of doing so.
“There’s a cost to… prepping them for storage and then taking them out of storage,” Spear says. “There’s some transport and transaction costs. By and large, you’re more likely to see in the near term a reduction in flying hours.”
Flight hours and cycles will likely decline “marginally, but it’s not going to be game-changing for MROs”, he adds.
But Berger suspects more-significant changes may be at hand; that airlines might soon need to significantly hike airfares and take a scalpel to their schedules – and even ground jets.
“They’re going to start retrenching, reducing their flying. You’ll see parked airplanes. You will see a lot more lease returns,” he says.
Airlines have already raised fares to help offset jet fuel expenses. A gallon of fuel cost an average of about $4.30 last week, down slightly from the prior week but still roughly double the price in early January, according to IATA data.
The Iran war has already driven up airfares 5-10%, says a 16 January report from economic forecasting firm Oxford Economics. “While this will deter some of the most price sensitive travellers, it is not expected to derail an otherwise positive growth trajectory for global air passenger demand this year outside of the Middle East and Africa,” the report says.
United Airlines CEO Scott Kirby reported recently said his firm might need to raise ticket prices 20% this summer.
“Business travel will probably continue to be strong” despite higher fares, Berger predicts. That would give the USA’s largest airlines – carriers like American Airlines, Delta Air Lines and United Airlines, which cater more to high-paying business travellers — some insulation. But low-cost players could be hit hard.
FUEL SHORTAGES
Berger also suspects jet fuel shortages will become increasingly common, particularly in Asia and Europe, should the Strait of Hormuz remain closed.
Before the war, ships transiting that waterway carried 20-25% of the world’s oil, with Europe relying on that supply to produce up to 30% of its jet fuel, according to the Oxford Economics report.
Berger thinks certain airports will actually run out of fuel. He notes some airlines are already “tankering” – carrying extra fuel aboard outbound flights to ensure they have enough for the return.
If Berger is right – if deeper cuts are at hand – the aftermarket segment has more to worry about.
“Engines and components are often on these costs-per-flight-hour [contracts],” he says. “So if flight hours are down, or ultilisation is down, that’ll impact” the maintenance sector.
Time will tell.
But do not expect airlines to rebound quickly, even if the Strait of Hormuz opens tomorrow.
All those ships laden with crude oil can take weeks to reach their destinations; their oil must then be refined into jet fuel before being shipped to customers. Analysts suspect fuel prices could remain elevated for months or years following the conflict’s conclusion.
“Prices go up like a rocket and come down like a feather,” Berger says.
The post Fuel shock threatens post-pandemic aviation maintenance boom first appeared on FlightGlobal.