Demand for commercial aftermarket services remains strong in general but is showing signs of capacity shifts within the low-cost airline sector, commentary from AAR executives suggest.
“We continue to see exceptionally strong demand out of the larger carriers” such as United Airlines and Delta Air Lines,” AAR President and CEO John Holmes said on a recent earnings call. “Those are some of our largest customers. We’ve seen a little bit of a pullback from the lower-cost carriers,” he added, naming Southwest Airlines, another large customer.
The shift is not affecting AAR’s bottom line, Holmes noted. “The larger carriers have been very quick to fill up any demand softness we’re seeing out of those guys. So overall, the environment remains very healthy,” Holmes said.
But it reflects an underlying trend that is seeing many carriers grapple with unprofitable U.S. domestic flying. While all airlines are affected, smaller ones in the LCC and ULCC space are being hit harder. Some have begun cutting capacity, which means less flying and lower demand for aftermarket services.
Despite signs of overcapacity in some markets, demand for travel remains very strong globally. Traffic as measured in revenue passenger kilometers was up 14.5% in the first five months of the year on a 12.4% increase in capacity, or available seat kilometers, figures from IATA show. The robust demand combined with new-aircraft delivery delays and other issues such as the surge in required Pratt & Whitney PW1000G work mean space is at a premium in most MRO shops.
“Our airframe maintenance hangers will continue to be largely full until our expansions in Miami and Oklahoma City come online” in about two years, Holmes said.
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