Economic Evaluation of the Aircraft Maintenance, Repair and Overhaul Sector in Ireland · 2019-07-17 · located on IDA Ireland sites or other locations. In Ireland, the Irish Aviation

Economic Evaluation of the Aircraft Maintenance, Repair and Overhaul Sector in Ireland

Prepared for

Department of Transport, Tourism and Sport

By

Indecon International Economic Consultants

www.indecon.ie

May 2019

http://www.indecon.ie/

Contents Page

Indecon International Research Economists


Executive Summary i

1 Introduction and Background 1

1.1 Introduction 1 1.2 Background and Scope of Evaluation 1 1.3 Methodological Approach 2 1.4 Structure of Report 4 1.5 Acknowledgements 4

2 Overview of MRO Sector in Ireland 5

2.1 Introduction 5 2.2 Overview of MRO Industry 5 2.3 Characteristics of MRO Market in Ireland 7 2.4 Summary of Key Findings 11

3 International Developments and Implications 12

3.1 Introduction 12 3.2 Industry Forecasts for MRO Sector 12 3.3 Summary of Key Findings 18

4 Economic Contribution of MRO Sector to Irish Economy 19

4.1 Introduction 19 4.2 Overall Sales Revenue 19 4.3 Export Sales 19 4.4 Employment and Payroll Expenditures 21 4.5 Non-Labour Costs 23 4.6 Gross Value Added / GDP Contribution 24 4.7 Exchequer Contribution 25 4.8 Wider Economic Impacts of MRO Sector in Ireland 25 4.9 Summary of Key Findings 29

5 Skills Development and Enterprise Supports 31

5.1 Introduction 31 5.2 Skills Development 31 5.3 Enterprise Supports provided by Development Agencies 38 5.4 Industry Perspectives on Prioritisation of State Enterprise Supports 42 5.5 Summary of Key Findings 42

6 Opportunities and Challenges facing the MRO Sector 44

6.1 Introduction 44 6.2 Opportunities for the MRO Sector 44 6.3 Challenges Facing MRO Sector in Ireland 48 6.4 Views of MRO Firms on Skills Development 51 6.5 Summary of Key Findings 53

7 Recommendations to Support Future Development of MRO Sector 55

7.1 Recommendations 55

Contents Page



7.2 Overall Conclusion 62

Annex 1 Listing of Organisations Consulted 63

List of Tables and Figures Page



Table 2.1: MRO Capability in Ireland – Part 145 Organisations by Approval Class 8

Table 2.2: Geographical Breakdown of MRO Firms in Ireland 9

Table 2.3: Services Offered by Selected MRO Firms in Ireland – Part 145 and Part M CAMO Organisations 10

Table 2.4: Services Offered by Selected MRO Firms in Ireland – Part 145 and Part M CAMO Organisations 11

Table 3.1: Estimated Percentage Change in Fleet Size by Geographic Market (2017-2037) 13

Table 3.2: Estimated Fleet Size by Type 13

Table 3.3: Estimated Number of New Deliveries (2018-2037) 15

Table 3.4: Breakdown of Estimated MRO Revenue by Region (2018-2028) 17

Table 3.5: Breakdown of Estimated MRO Revenue by Region 18

Table 4.1: Employment in MRO Firms who Responded to Confidential Survey 22

Table 4.2: Payroll as a Percentage of Sales in MRO Firms 23

Table 4.3: Percentage of MRO Revenue in Ireland Accounted for by Labour Costs 23

Table 4.4: Estimated Exchequer/Tax Contribution of Employment Supported by MRO Firms 25

Table 5.1: Educational Attainment Levels of Employees in Aircraft Maintenance and Related Trades (2016) 32

Table 5.2: Average Age of Those at Work in Aircraft Maintenance and Related Trades 34

Table 5.3: Aircraft Mechanic Occupational Profile 36

Table 5.4: Graduates from Irish Universities and Institutes of Technology in the Field of Motor Vehicles (Ships and Aircraft) 38

Table 5.5: Selected Enterprise Supports Available from Enterprise Ireland 39

Table 5.6: Selected IDA Ireland Supports – Client Firms in MRO Sector 40

Table 5.7: Taxation Support Measures –IDA MRO Client Firms 40

Table 5.8: Research Support Measures – MRO Firms 41

Table 5.9: MRO Providers’ Views on Importance or Otherwise of Various Enterprise Supports 42

Table 6.1: MRO Providers’ Views on Growth Prospects for their Business in the MRO Sector in Ireland in the Next 5 Years 44

Table 6.2: MRO Providers’ Views on their Businesses Capacity in Physical Infrastructure and Skilled Staff to Accommodate Growth Plans 45

Table 6.3: MRO Providers’ Views on Specific Market Drivers for Opportunities for Growth in MRO Business in Ireland in General 45

Table 6.4: MRO Providers’ Views on Future MRO Capacity and Capabilities in Ireland to Handle New/Additional Business 53

Table 7.1: Recommendations to Support Development of MRO Industry in Ireland 55

Figure 1.1: Methodological Approach to Evaluation 2

Figure 2.1: Overview of Value Chain of MRO in Context of Commercial Aircraft Market 5

Figure 2.2: Indicative Overview of Key Stages of Aircraft Maintenance 6

Figure 3.1: Estimated Fleet Size by Geographic Market 12

Figure 3.2: Projected Growth in Fleet Size by Type of Aircraft 14

Figure 3.3: Projected Growth in Global MRO Revenue (2018-2028) 15

Figure 3.4: Projected Growth in Global MRO Revenue (2017-2037) 16

List of Tables and Figures Page



Figure 3.5: Breakdown of Estimated MRO Revenue by Region (2017-2037) 17

Figure 4.1: Revenue of MRO Firms in Ireland (2015-2017) 19

Figure 4.2: Value of Exports by MRO Firms in Ireland (2015-2017) 20

Figure 4.3: Proportion of Sales of MRO Firms Destined for Export (2015-2017) - % 20

Figure 4.4: Destination of Exports from Agency Assisted MRO Firms (2015-2016) 21

Figure 4.5: Employment in MRO Firms in Ireland (2015-2018) 22

Figure 4.6: Percentage of MRO Revenue in Ireland Accounted for by Material Costs 23

Figure 4.7: Percentage of MRO Revenue in Ireland Accounted for by Services Costs 24

Figure 4.8: GVA of MRO Firms (2015-2017) 24

Figure 4.9: Model of Wider Economic Impacts of MRO Sector in Ireland 26

Figure 4.10: Estimated Gross Value Added of MRO Firms in the Irish Economy (2017) 27

Figure 4.11: Estimated Employment Supported by MRO Firms in the Irish Economy (2017) 28

Figure 4.12: Estimated Payroll in MRO Firms in the Irish Economy (2017) 28

Figure 4.13: Estimated Economic Impact of Exports by MRO Firms on the Irish Economy (2017) 29

Figure 5.1: Licensed Part 66 Engineers in MRO Sector in Ireland 32

Figure 5.2: Age Profile of Licensed Part 66 Engineers in MRO Sector in Ireland 33

Figure 5.3: Comparison of Age Profile of Licensed Part 66 Engineers with Overall Labour Force 33

Figure 5.4: Aircraft Mechanics Apprenticeship Trainee Programme (4 Years) 35

Figure 5.5: Number of Apprentice Registrations for Aircraft Mechanic Apprenticeship 36

Figure 5.6: Courses Offered by Higher Education Institutes in MRO Fields by Level of Course/Degree 37

Figure 5.7: IDA Grant Aid Areas 41

Figure 6.1: MRO Providers’ Views on Growth Potential in Specific Geographic Markets over the Next Five Years for their MRO Business 46

Figure 6.2: MRO Providers’ Views on Growth Potential in Specific Sub-Sectors Over the Next Five Years for their MRO Business 46

Figure 6.3: MRO Providers’ Views on Growth Potential in Specific MRO Activities over the Next Five Years for their MRO Business 47

Figure 6.4: MRO Providers’ Views on Challenges/Constraints facing their Business over the Next Five Years 48

Figure 6.5: MRO Providers’ Views on Existing MRO Capacity in Ireland to Handle New Business 50

Figure 6.6: MRO Providers’ Views on Skills Related Constraints on Growth in MRO in Ireland 51

Figure 6.7: Percentages of MRO Providers who Deem There to Be Significant Skill Shortages 52

Figure 6.8: Overall Unemployment Rate in Ireland 52

Executive Summary



Page i

Executive Summary

Introduction and Background

This report was prepared for the Department of Transport, Tourism and Sport by Indecon International Economic Consultants. The report represents an independent economic evaluation of the Aircraft Maintenance, Repair and Overhaul (MRO) and related enterprise sector in Ireland. The overall objective of the evaluation is to identify the potential of increased MRO activity to contribute to economic activity and job creation in the Irish economy.

The background to this evaluation is that the Department of Transport, Tourism and Sport’s Aviation Services Division’s core objective is to facilitate the development and growth of the air transport sector in Ireland, including traffic using Irish controlled airspace. In this context this evaluation was commissioned to address the following four specific objectives:

❑ Objective 1: To provide a comprehensive overview of the MRO sector in Ireland, and the international context.

❑ Objective 2: To evaluate the economic contribution of the MRO sector to the Irish economy.

❑ Objective 3: To identify opportunities and challenges that may inhibit the expansion of the MRO sector in Ireland.

❑ Objective 4: Having identified and assessed challenges faced by the MRO industry in Ireland, this study also sets out a number of specific policy and industry interventions designed to support the future development of the MRO industry.

Overview of MRO Sector in Ireland

The aircraft MRO industry is comprised of a diverse range of activities designed to ensure the continued safe operation of civilian and non-civilian aircraft. The vast majority of airframe MRO operations in Ireland are located in, or adjacent to, Dublin and Shannon Airports, while engine and components MROs are typically located on IDA Ireland sites or other locations.

In Ireland, the Irish Aviation Authority (IAA) is responsible for the implementation of the EASA continuing airworthiness regulations in respect of aircraft registered in Ireland, approval of organisations to certify maintenance of aircraft, and the licensing of personnel who engage in MRO activities in Ireland. The MRO industry operates in a highly regulated environment, stemming from the requirement to ensure the safe and proper functioning of aircraft during flight. Regulations are coordinated under internationally agreed standards, typically developed by the International Civil Aviation Organisation (ICAO). The MRO industry can be defined based on the following EASA regulatory certifications:

❑ Part 145-approved organisations (approved to maintain specified types of aircraft);

❑ Part 147-approved Training Organisations; and

❑ Continuous Airworthiness Management Organisations (CAMOs).

The table overleaf indicates that about half of Part 145 and Part M CAMO firms in Ireland offer line maintenance services, while base maintenance-related services are provided by 30% of firms. Line maintenance typically takes a shorter time (e.g. overnight) than base maintenance, so the cost of using a more distant MRO facility for line maintenance is often prohibitive.

Executive Summary



Page ii

Services Offered by Selected MRO Firms in Ireland – Part 145 and Part M CAMO Organisations

Market Segment Percentage in Overall

Market Segment

Components overhaul and maintenance 50.0%

Cabins, interiors and entertainment systems 50.0%

Line Maintenance (incl. maintenance activities undertaken by airlines) 50.0%

Continued Airworthiness Management Organisation (CAMO)-related activities 38.5%

Aircraft modifications 30.8%

Base Maintenance 30.8%

Design Organisation Approval & Production Organisation Approval activities 23.1%

Higher-value MRO activities, incl. Composites, Avionics etc. 23.1%

Engine overhaul and components 19.2%

Complete engineering and design services 15.4%

Landing gear maintenance and overhaul 15.4%

APU maintenance and overhaul 11.5%

Aircraft painting 11.5%

Part 147 Approved Training 11.5%

Other 3.8%

Source: Indecon analysis of responses to Confidential Information Request to MRO Firms, supplemented with additional research

International Developments and Implications

It is important to understand the international context for the MRO sector, in particular as MRO providers in Ireland operate within the larger EU and global markets, which may present opportunities as well as challenges for the sector in Ireland. Indecon has reviewed a range of industry projections for the global and regional MRO markets and our market research partners, Grand View Research, have also undertaken new research with major MRO players internationally. We have also surveyed the MRO sector in Ireland on their forecasts for their businesses. Indecon estimates suggest significant expansion of over 40% in the period to 2025, as presented in the chart below. Other industry forecasts also expect significant international expansion in the sector.

Breakdown of Estimated MRO Revenue by Region

Region 2017 2025

2017 - 2025 Growth Revenue (€ bn) Revenue (€ bn)

Asia Pacific 19.4 33.4 72.2%

Europe 16.9 21.7 28.1%

North America 16.2 18.7 15.0%

Middle East 5.1 9.0 78.3%

South America 3.8 6.2 61.6%

Africa 2.5 3.3 28.5%

World 64.0 92.2 44.1%

Source: Indecon forecasts

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Page iii

Economic Contribution of MRO Sector to Irish Economy

Indecon evaluated the economic contribution of the MRO sector to the Irish economy, by assessing the levels of revenue, exports, employment and Gross Value Added associated with the sector.

MRO providers in Ireland recorded overall industry-wide sales revenues estimated at €413.5 million in 2017, as shown in the following figure. These revenues, which include domestic airline line maintenance activities, were just over 10% higher than in 2016. The majority of MRO-related activity in Ireland is destined for clients in export markets. In 2017, €355 million or 85.9% of the aggregate sales revenues of MRO firms in Ireland was sold into export markets.

Estimated Aggregate Sales Revenues of MRO Sector in Ireland (2015-2017)

Source: Indecon analysis, based on data from DBEI Annual Business Survey of Economic Impact and Indecon Survey of MRO Providers

In relation to the employment contribution of the MRO sector, Indecon estimates that there were 2,643 employees engaged in MRO activities in Ireland in 2018. This includes employment in independent MRO providers, as well as MRO-related employment within the commercial airlines. The latest available estimates for 2017 also indicate that MRO providers spent €130.1 million on payroll costs / wages & salaries.

Employment in MRO Firms in Ireland (2015-2018)

Source: Indecon analysis, based on data from DBEI Annual Business Survey of Economic Impact and Indecon Survey of MRO Providers

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Executive Summary



Page iv

The contribution of the MRO sector to Ireland’s overall GDP (Gross Domestic Product) can be measured by reference to the sector’s Gross Value Added (GVA). The estimated GVA of MRO providers in Ireland was €213.1 million in 2017. This estimate includes both stand-alone MRO firms which serve both Irish and overseas markets, as well as the activities of airlines with MRO operations in Ireland.

The above direct impacts of the MRO sector also give rise to wider impacts on the Irish economy. These include indirect and induced impacts. In terms of GVA/GDP contribution, in addition to the above direct contribution of €213 million, a further €67 million can be associated by the activity of the industry in terms of indirect impacts, and a further €85.7 million in terms of induced impacts. This suggests an overall impact of the MRO sector of €365.8 million, as shown in the following figure. In terms of exports, the estimated €355.1 million of exports in 2017 has knock on impacts through business and household expenditure leading to an aggregate economic impact of €515.9 million in 2017.

Estimated Gross Value Added of MRO Providers in the Irish Economy (2017)

Source: Indecon analysis, based on data from DBEI Annual Business Survey of Economic Impact, Indecon Survey of MRO Providers and Indecon sectoral model of the Irish economy

In relation to employment, while direct employment in the MRO sector in Ireland is estimated at 2,643 jobs, a further 761 jobs are supported indirectly in upstream activities providing inputs to MRO providers, while a further 1,133 jobs are supported through the induced impact of expenditure of incomes. The total number of jobs in Ireland associated with MRO activity is therefore 4,536 jobs. In terms of payroll expenditures, when indirect (€29.9 million) and induced (€32 million) impacts are taken into account, the MRO sector is estimated to support €192 million in incomes across the Irish economy.

Indecon estimates that employees in MRO firms in Ireland contributed a total of €36.5 million in income tax payments to the Irish Exchequer during 2017.

Indecon would, however, caution that all sectors of the economy have multiplier impacts on other parts of the economy and it is important to note that there is an opportunity cost associated with the utilisation of resources in any sector of economy, with the opportunity cost of skilled labour in particular being very high in the Irish economy.

Executive Summary



Page v

Skills Development and Enterprise Supports

There is a range of supports available to firms in the MRO sector, both in terms of supports for skills development, and more broadly in terms of a range of enterprise supports which have the aim of promoting employment creation, innovation, investment, and the development of new export markets. In this section we review these supports.

The MRO sector is a labour-intensive industry with a continued demand for skilled workers, many of whom must meet strict regulatory requirements. The technical skills used in the MRO sector are clustered around ‘Level 6’ levels of educational attainment (Higher or Advanced Certificate) in the National Framework of Qualifications. Over half of those employed in the sector have at least a technical, advanced or higher certificate, with a further 27.5% having a Bachelor Degree or higher.

Educational Attainment Levels of Employees in Aircraft Maintenance and Related Trades (2016)

Highest Level of Education Attained NFQ Level Percentage of Population

Lower Secondary or Below Levels 1-3 5.6%

Leaving Certificate Levels 4-5 9.0%

Technical/Advanced/Higher Certificate Level 6 57.9%

Bachelor Degree Levels 7-8 22.9%

Postgraduate diploma/degree or Ph.D. Levels 9-10 4.6%

Source: Indecon analysis of Census data Note: Percentages based on total who have finished education and declared their highest level of education

The employment of Part 66 licensed engineers in Ireland has grown consistently since 2010. After a fall in 2010, the number of licensed Part 66 engineers has increased each year, reaching 1,700 in October 2018 – an increase of over 40% since 2010. The average age of licensed engineers, who are overwhelmingly male, is just under 44 years old. The average age of all employees in the sector in 2016 was just under 42 years old – slightly above the average for the national working population, which was just over 40 years old in 2016.

A key issue for the industry concerns the adequacy of apprenticeship numbers in meeting the growth plans of the MRO industry. The number of apprenticeship registrations for the Aircraft Mechanic Apprenticeship has more than doubled in three years. There were 74 new apprentice registrations in 2018. The increase in Aircraft Mechanic Apprentices is in line with the broader increase in electrical apprentices offered by SOLAS in recent years.

There are a number of bodies nationally which provide support to companies in the MRO sector. Many of these supports are dedicated to those firms eligible for support from IDA Ireland (foreign-owned firms) or Enterprise Ireland (indigenously-owned firms). These include more general supports, such as the R&D Tax Credit. Approximately 70% of employment in the MRO sector in Ireland is located in agency-assisted firms. However, there is limited take-up of IDA supports among MRO firms, with the take-up rate being highest in relation to the RD&I grant, while only one project has utilised the IDA’s capital grant. There are restrictions on state aid allowed, dependent on the geographical location of the firm. While capital grant aid is available for firms based in or near Shannon Airport, these grants are not available for firms based in Dublin Airport or Cork Airport.

Industry participants view training programmes as the most important forms of enterprise support offered by the government. The following table shows that a large majority of firms rated industry-led skill development training programmes (76.9%) and apprenticeship initiatives (75%) as being very important.

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Page vi

MRO Providers’ Views on Importance or Otherwise of Enterprise Supports

Respondents’ Views on Importance of Enterprise Supports Very

Important Important

Not Important

Industry-led skill development training programmes 76.9% 15.4% 7.7%

Increased apprenticeship initiatives 75.0% 16.7% 8.3%

Measures to enhance international profile of Irish MRO sector 66.7% 25.0% 8.3%

Enhanced information from leasing companies on timing of MRO requirements

58.3% 16.7% 25.0%

Attraction of investment in Ireland by OEMs (to generate additional MRO business)

53.8% 38.5% 7.7%

Financial assistance with cost of training 53.8% 38.5% 7.7%

Management development supports 53.8% 38.5% 7.7%

R+D and Innovation Supports 46.2% 38.5% 15.4%

Additional Engineer Degree courses 30.8% 30.8% 38.5%

Source: Indecon analysis of responses to Confidential Information Request to MRO Firms

Opportunities and Challenges

The MRO sector in Ireland has experienced significant growth in recent years, both in terms of aggregate output and employment. However, the sector faces a number of opportunities and challenges, which will determine its future growth trajectory, both in terms of factors specific to the industry, as well as factors relating to the broader economy.

The main market driver for the MRO sector in the medium-term relates to the growth in the overall size of the aircraft fleet globally. The following table demonstrates that half of all respondents to Indecon’s survey of the sector reported this has having a very significant impact, which is consistent with the projected growth of the global fleet size of 61% from 2017 to 2037.

MRO Providers’ Views on Growth Prospects for their Business in the MRO Sector in Ireland in the Next 5 Years

% of Respondents

No significant change 8.3%

0 – 25% growth 16.7%

26 – 50% growth 50.0%

51 – 75% growth 8.3%

75 – 100% growth 16.7%

Weighted Average Growth Forecast for Next 5 Years 39.0%


The demand for maintenance and overhaul of older aircraft was cited as being significant or very significant by a large majority of respondents. The growing importance of ‘new generation’ aircraft, which are expected to have lower maintenance needs, was seen as only having a moderate impact.

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Page vii

In terms of the potential of different geographic markets, Indecon’s research found that MRO providers identified Irish-based airlines and other European markets as likely to provide the greatest relative growth potential for their business over the next five years. The overall level of passenger traffic from Irish airports is currently increasing at a rate of 7% per annum. The smooth operation of airlines is greatly facilitated by access to MRO facilities locally.

MRO Providers’ Views on Growth Potential in Specific Geographic Markets over the Next Five Years for their MRO Business


When asked which sub-sectors of the industry had the greatest growth potential, respondents reported that growth was going to be relatively evenly spread amongst three different sub-sectors, with similar growth potential for cargo jet aircraft; end-of-lease aircraft in transition; and demand from scheduled airlines.

The potential from aircraft transitioning is ranked as the second most important in terms of growth potential. Irish lessors manage more than €100 billion in assets, 22% of the global fleet of aircraft and over 40% of the world’s fleet of leased aircraft. 14 of the top 15 lessors by fleet size globally have a presence in Ireland.

The nature of the demand by this sector differs significantly from the demand from scheduled airlines in a number of respects. In particular, it is typified by less predictable demand patterns; there can be a greater diversity of aircraft make and model; and is typically higher-margin.

Difficulties in recruiting/retaining qualified staff, the cost of skilled labour, and price competition from international competitors in the MRO market were each cited by the largest majorities (of almost 85%) of MRO firms responding to Indecon’s research as likely to represent either a very significant or significant challenge/constraint on their business over the next five years.

The cost of hangar facilities required for MRO activity was cited by 58% of MRO firms as a very significant or significant challenge/constraint, while 69% of firms cited shortages of suitable airside locations/hangars are likely to be a very significant or significant challenge/constraint. Aircraft overhaul and heavy maintenance MRO activities require access to suitable hangars at airside locations. Many MRO firms rely on having access to suitable airside locations on an airport complex owned and managed by an airport authority. However, the access to hangar facilities, particularly in Dublin airport as by far the largest and busiest airport in the State, remains uncertain. The cost of building new hangars can be very substantial and this may be prohibitive for a smaller-scale MRO. However, this does not necessarily represent a ‘market failure’ that requires rectification through Government policy.

0% 20% 40% 60% 80% 100%

Serving Irish-based Airlines

Other European opportunities

North America

MEA (Middle East and Africa)

Asia Pacific

Latin America

Significant Growth Potential Moderate Growth Potential No Growth Potential

Potential for Moderate Decline Potential for Significant Decline Not Applicable

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Page viii

The level of local authority commercial rates was cited by over two-thirds (69%) of MRO providers responding to Indecon’s research as representing a very significant or significant challenge/constraint on their business over the next five years. Some MRO providers have reported that commercial rates represent 6-10% of their indirect costs. The level of commercial rates is determined in part by the large size of hangars, and rates do not bear any relation to MRO revenues.

MRO Providers’ Views on Challenges/Constraints facing their Business over the Next Five Years


Recommendations

Based on the detailed analysis and assessment, Indecon has identified a number of recommendations in relation to policy and industry interventions to support the future development of the MRO industry in Ireland. These recommendations are set out in the table overleaf.

0% 20% 40% 60% 80% 100%

Regulatory resources to oversee heavy maintenance

Growth of 'Next Generation' aircraft

Scale of existing MRO companies

Market profile of sector

Shortages of other supporting infrastructure

Cost of hangars

Lack of apprenticeship/training courses in off-peak periods

Level of commercial rates

Shortages of suitable airside locations/hangars

Insufficient engineer and technician training courses to servicerequirements

Presence and scale of OEMs in the aftermarket MRO sector

Price competition from international competitors

Cost of skilled labour

Difficulties in recruiting/retaining of qualified staff

Percentage of Respondents Stating Very Significant or Significant Challenge / Constraint

Very Significant Challenge / Constraint Significant Challenge / Constraint

Minor Challenge / Constraint Not a Challenge / Constraint

Don’t Know / Not Applicable

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Page ix

Recommendations to Support Development of MRO Industry in Ireland

Infrastructure Provision

1. Enterprise agencies to continue to work with ISIF and EIB to provide funding for projects involving investment in MRO hangars.

2. Decision to be made following further assessment of hangar and other infrastructural facilities for MRO services.

3. Indecon would recommend that airport companies where feasible should provide flexibility on ownership and leasing options for new hangars.

Ecosystem

4. MRO firms to work with development agencies/groups, including IDA Ireland, Enterprise Ireland and Shannon IASC, to continue to market Ireland as a location for OEM operations. IDA Ireland should also continue to seek to attract overseas firms and activities which can help increase the competitiveness of the Irish MRO industry.

5. Closer linkages to be developed between aircraft leasing companies and MRO providers, to share information on end-of-lease opportunities.

Addressing Skill Shortages

6. Investment to be made in an expansion of joint industry-state apprenticeship and traineeship capacity.

7. Consideration to be given to developing additional Skillnet programmes to align training with seasonal pattern of MRO demand.

Enhancing Cost Competitiveness

8. Development agencies should continue to work with MROs to assist them to utilise all available enterprise supports to enhance competitiveness.

9. Reflecting the objectives of the National Aviation Policy, the potential for commercial rates alleviation/waiver under Section 14 of the Local Government (Rates) Bill 2018 to assist MRO infrastructure investments which meet local economic plans and national planning framework objectives should be investigated.

10. MRO Firms should co-examine the potential for co-operation in a range of areas, including cost savings in group purchasing of services and raw materials, and exchange of best practice.

Government Policy

11. Government policy should give priority to supporting the sector in line with the objectives of the National Aviation Policy.

Overall Conclusion

Indecon’s assessment represents the first independent examination of the economic characteristics and contribution of the MRO sector in the Irish economy. The assessment finds that the MRO sector in Ireland provides a significant contribution as an export-focused sector, supporting 2,600 high-skilled jobs directly and over 4,500 jobs overall across the economy, with many of these jobs in Shannon and other regional locations outside the Dublin area. Indecon’s research also notes that MRO firms in Ireland are generally positive with regard to growth prospects for their business over the medium term. The sector’s ability to continue to generate new business will, however, be dependent on maintaining Ireland’s market share in what is a highly competitive, globalised industry. This will require priority by the Government in supporting the sector, as well as a focus by individual firms to enhance competitiveness and to respond to changing market opportunities. This report sets out a number of recommendations in relation to policy and industry interventions, which, if implemented, have the potential to assist in the development of this important high-skilled sector.

1 │ Introduction and Background



Page 1

1 Introduction and Background

1.1 Introduction

This report was prepared for the Department of Transport, Tourism and Sport by Indecon International Economic Consultants. The report represents an independent economic evaluation of the Aircraft Maintenance, Repair and Overhaul (MRO) and related enterprise sector in Ireland. The overall objective of the evaluation is to identify the potential of increased MRO activity to contribute to economic activity and job creation in the Irish economy.

1.2 Background and Scope of Evaluation

The background to this evaluation is that the Department of Transport, Tourism and Sport’s Aviation Services Division’s core objective is to facilitate the development and growth of the air transport sector in Ireland, including traffic using Irish controlled airspace. The Division’s high-level goal is to ensure the aviation sector, including the wider aviation enterprise value-chain such as aviation maintenance and repair sector, supports Ireland's economic and social goals in a safe, competitive, cost-effective and sustainable manner and to ensure maximum connectivity for Ireland with the rest of the world.

The National Aviation Policy (NAP) sets the broad policy framework of Government objectives for Irish aviation. Specifically, the NAP aims to foster the growth of aviation enterprise in Ireland to support job creation and position Ireland as a recognised global leader in aviation. In addition, the NAP aims to maximise the contribution of the aviation sector to Ireland’s economic growth and development. As part of the NAP, a new collaborative industry/Government forum known as The National Civil Aviation Development Forum (NCADF) was established. Under this structure an ‘MRO and Related Enterprises’ sub-group was established to consider MRO capabilities and capacity in Ireland.

In this context, this economic evaluation aims to measure the scale and contribution of the Aircraft MRO sector in Ireland, in terms of economic activity and employment levels, with a view to ensuring Ireland is in a position to avail of the opportunity provided by the growth in commercial aviation. The findings of the study will be used to inform wider Government policy and to support, assist and develop the MRO sector in Ireland. This evaluation addresses the following four specific objectives:

❑ Objective 1: To provide a comprehensive overview of the MRO sector in Ireland, and the international context.

❑ Objective 2: To evaluate the economic contribution of the MRO sector to the Irish economy.

❑ Objective 3: To identify opportunities and challenges that may inhibit the expansion of the MRO sector in Ireland.

❑ Objective 4: Having identified and assessed challenges faced by the MRO industry in Ireland this study also sets out a number of specific policy and industry interventions, designed to support the future development of the MRO industry.




Page 2

1.3 Methodological Approach

A detailed and rigorous methodological approach was applied in addressing the above brief for this evaluation. A schematic overview of Indecon’s methodology and work programme is presented in the figure below.

Figure 1.1: Methodological Approach to Evaluation

Source: Indecon

1.3.1 Data sources

A range of research and data sources was utilised to inform the evaluation. These included the following:

❑ Policy material, including Department of Transport, Tourism and Sport aviation policy and strategy documents, and relevant outputs of the NCADF MRO sub-group;

❑ Research and market reports on MRO sector internationally;

❑ CSO datasets, including National Income and Expenditure Accounts, Input-Output and Supply and Use Tables for the Irish economy, and the Labour Force Survey;

❑ SOLAS data on apprenticeship and traineeship developments in MRO occupations;

❑ Specific requests of a number of bodies with relevant information on the MRO sector in Ireland, including Enterprise Ireland, IDA Ireland and Skillnet Ireland.

Phase 1: Project Inception;

Review of Existing Research;

Stakeholder Engagement

Phase 2: Primary and

Secondary Research

Phase 3: Detailed Analysis

and Evaluation; Assessment

of Opportunities and

Challenges

Phase 4: Conclusions, and

Recommendations on Policy/

Industry Interventions;

Reporting

1.1: Project Inception Meeting;

Finalisation of Scope and

Approach

1.2: Access and Review of

Existing Policy and Industry

Research

1.3: Initiate Engagement with

MRO Industry, Policy,

Regulatory and Other

Stakeholders

2.2: Design and Issue of

Information Request/Survey to

MRO Companies and Airlines

2.1: Complete Consultation

Programme, incl. Site Visits

2.3: Access of Existing MRO

Industry in Ireland, incl. ABSEI,

Skills and Other Relevant

Datasets

3.1: Descriptive Analysis of Size

and Structure of MRO Sector in

Ireland

3.3: Detailed Analysis and

Modelling of Direct and Indirect

Contribution of MRO Sector to

Irish Economy, incl. Output,

Exports, Employment, and

GVA/GDP

3.4: Mapping of Enterprise

Supports used or potentially

used by MRO sector

4.1: Detailed Conclusions

4.2: Formulation of Policy /

Industry Interventions

4.3: Preparation and

Submission of Assessment

Report

2.4: Access and Review Data

on International Trends and

Prospects in MRO Sector

3.2: Analysis and Assessment

of Trends, Drivers and

Prospects in International MRO

Markets, and Implications for

Ireland

3.5: Detailed Identification and

Assessment of Opportunities

and Challenges, incl. Capacity

and Skills Requirements




Page 3

❑ Department of Business, Enterprise and Innovation in conjunction with Enterprise Ireland and IDA Ireland – special data run provided to Indecon from Annual Business Survey of Economic Impact.

1.3.2 Industry engagement and primary research

The evaluation was informed by an extensive programme of engagement with a wide range of stakeholders, including Government Departments, state agencies, independent MRO providers, airlines, airports, aircraft leasing companies, education/training providers, and industry representative bodies. A full listing of all organisations/stakeholders consulted as part of this evaluation is provided in Annex 1. The engagement process included site visits and/or meetings/discussions held with each of the following:

❑ DAA;

❑ Dublin Aerospace;

❑ Lufthansa Technik Shannon;

❑ Atlantic Aviation Group;

❑ Aer Lingus;

❑ Ryanair DAC;

❑ Irish Aviation Authority;

❑ IDA Ireland;

❑ Enterprise Ireland;

❑ Shannon Group;

❑ Ireland West Airport Knock;

❑ Waterford Council;

❑ NTMA / ISIF;

❑ IBEC / Federation of Aerospace Enterprises in Ireland;

❑ AerCap Ireland Limited;

❑ Genesis;

❑ H2 Learning.

Information request to MRO Firms and airlines

In addition to the above engagements, an important element of the research was the issuing of a structured information request to MRO Firms. These included specialised MRO providers and airlines holding Part 145 and/or CAMO regulatory certification. A total of 35 such organisations were contacted, as set out in Annex 1. The information request examined inter alia:

❑ Scope of MRO activity;

❑ Employment levels;

❑ Growth prospects;

❑ Capacity to accommodate growth;

❑ Challenges inhibiting expansion;

❑ Adequacy or otherwise of skill supply;

❑ Views on dimensions including importance of various forms of enterprise support.




Page 4

1.4 Structure of Report

The remainder of this report is structured as follows:

− Section 2 presents an overview of the MRO sector in Ireland, including the sector’s key characteristics and stakeholders. It also profiles the key trends and prospects in the international MRO markets and considers their implications for the sector in Ireland.

− Section 3 focuses on international developments in the sector, and provides a range of industry forecasts which are of relevance to the sector in Ireland, including in terms of global fleet size and fleet type, as well as revenue by geographic market and by MRO market segment;

− Section 4 provides a review of the direct economic contribution of the MRO sector in Ireland in terms of employment, sales and exports. We also examine the broader knock-on economic effects of these activities in terms of other downstream sectors of the economy;

− Section 5 reviews the range of these enterprise supports available to the sector, with a particular focus on those aimed at skills development given the labour-intensive nature of MRO;

− Section 6 identifies the challenges and opportunities facing the MRO industry in the medium term; and

− Section 7 integrates the detailed analyses and assessments undertaken in the preceding sections and presents a number of recommendations designed to support the future development of the MRO sector in Ireland.

1.5 Acknowledgements

Indecon would like to gratefully acknowledge the valuable inputs made by a wide range of officials and other organisations to this review. Indecon would in particular like to thank senior officials in the Department of Transport, Tourism and Sport, including Fintan Towey, Brian Smyth, Liam Keogh, Patricia O’Brien, Lisa Kiely and Laura Cawley. We would also like to express our gratitude to other members of the Department’s steering group overseeing the assessment, including Declan Fitzpatrick (Irish Aviation Authority); Gerard Flaherty (IDA Ireland); David Lucey (Enterprise Ireland); Emma Kinsella (Department of Education and Skills); and Joseph Cummins (Department of Business, Enterprise and Innovation), for their guidance and inputs. We would also like to express our gratitude to senior officials within other state agencies, state corporations, industry representative bodies and other organisations for their assistance and inputs, including Michael Tyrell (Dublin Aerospace); Shane Moynihan (Lufthansa Technik); Mike Byrt (Atlantic Aviation Group); and Mark McAuley (Federation of Aerospace Enterprises in Ireland); Mary Kerins and Niall Farrell (Dublin Airport Authority); Patrick Edmond and John Drysdale (Shannon Group); Joe Gilmore (Ireland West Airport Knock); Alan Quirke, Waterford Council; Fergus Wilson and Niall Timlin (Aer Lingus); Karsten Muhlenfeld (Ryanair); John Bernard and Martin Purcell (Irish Aviation Authority); Brian O’Connor (Ireland Strategic Investment Fund/NTMA); Shauna Dunlop (SOLAS); Fergal Noone and Victor Piggott (Higher Education Authority); Linda Barron (Aviation Skillnet); and Kyriakos I. Kourousis (University of Limerick).

Last but not least, we would also particularly like to thank the large number of MRO providers who responded to Indecon’s information request.

The usual disclaimer applies, and all of the analysis and judgments in this independent report are the responsibility of Indecon.

2 │ Overview of MRO Sector in Ireland



Page 5

2 Overview of MRO Sector in Ireland

2.1 Introduction

The MRO sector represents an important element in the aviation sector in Ireland, both with respect to not only its own activity but also the support it provides to airlines, as well as the links to Ireland’s large aircraft leasing industry. This section presents a comprehensive overview of the MRO sector in Ireland, including the sector’s key characteristics and stakeholders.

2.2 Overview of MRO Industry

The aircraft maintenance, repair and overhaul industry is comprised of a diverse range of activities designed to ensure the continued safe operation (airworthiness) of civilian and non-civilian aircraft. MRO includes maintenance, inspection, repair, overhaul or modification of functioning aircraft, as well as engines and other components, and activities such as teardown of end-of-life aircraft. Maintenance activities may also include tasks required to comply with an Airworthiness Directive.

A broad overview of the role of MRO in the context of the value chain of the commercial aircraft market is depicted in the figure below. The value chain of the commercial aircraft market consists of engine, component and aircraft Original Equipment Manufacturers (OEMs), spare parts manufacturers, specialised independent MRO service providers, and aircraft operators/airlines – with the latter also having their own internal MRO capabilities (for example, to undertake day-to-day ‘line’ maintenance). The primary role of the OEMs it to manufacture original components and to assemble complete aircraft. They also supply parts to the MRO service providers.

Figure 2.1: Overview of Value Chain of MRO in Context of Commercial Aircraft Market

Source: Indecon and Grand View Research

Aircraft and Engine

Original Equipment/

Component

Manufacturers

(OEMs)

Spare Parts

Manufacturers

Independent MRO

Service Suppliers

Airline Operators

MRO Service

Department

MRO ServiceParts

Parts Parts

Parts

Parts




Page 6

The MRO industry operates in a highly regulated environment, stemming from the requirement to ensure the safe and proper functioning of aircraft during flight. Regulations implemented at national level are coordinated under internationally agreed standards, which are typically developed by the International Civil Aviation Organisation (ICAO) and then implemented by national and regional bodies, such as the Federal Aviation Agency in the United States and the European Aviation Safety Agency (EASA).

EASA, which regulates and enforces the standards for civil aviation safety in Europe, has responsibility for the airworthiness and environmental certification of all aeronautical products, parts, and appliances designed, manufactured, maintained or used by persons under the regulatory oversight of EU Member States. EASA regulations determine, inter alia, the detailed processes and tasks that are required to achieve continued airworthiness certification, and staff within MRO firms who carry out such tasks must be licensed to do so.

Figure 2.2: Indicative Overview of Key Stages of Aircraft Maintenance

Source: Indecon, based on Vieira and Loures (2016)1

1 Vieira, D. R., and Paula Lavorato Loures, Maintenance, Repair and Overhaul (MRO) Fundamentals and Strategies: An Aeronautical Industry Overview, International Journal of Computer Applications, Vol. 135, No. 12, February 2016.

Type of

Maintenance

Line

Type of

Check

Indicative

FrequencyPerformance

Transit/Daily

A Checks

B Checks

Description

Typically visual inspection of aircraft to check for

obvious damage or deterioration. May require

designated maintenance hangar with equipment

Series of external and operational checks. Typically

requires designated maintenance hangar with

specialised equipment.

More detailed check of components and systems.

Requires designated maintenance hangar with

specialised equipment

After each flight or

when aircraft on

ground for > 4 hrs

Every 500 Flying

Hours or 2 Mths

Every 1,100 Flying

Hours

Pilot and/or airline/

operator

Airline/operator or

specialised MRO

provider/team

Performed by operator

or specialised MRO

provider/team

Base

C Checks

D / Heavy

Maintenance

Visit (HMV)

Checks

Extensive check of individual systems and

components for serviceability and function, incl. lower

(A, B) checks. Requires designated maintenance

hangar with extensive tooling, specialised equipment,

and skills

Every 4,000 Flying

Hours or 20 Mths

Performed by

specialised MRO

provider/team

Structural check. Includes detailed visual and other

non-destructive test inspections of aircraft structure.

Includes lower (A, B and C) checks. Man-hour and

calendar-time intensive, and requires designated

maintenance hangar with extensive tooling,

specialised equipment, and skills

25,000 Flying

Hours or 6 years

Performed by

specialised MRO

provider/team




Page 7

2.3 Characteristics of MRO Market in Ireland

In Ireland, the competent authority for safety regulation of aviation is the Irish Aviation Authority (IAA). The IAA is responsible for the management of Irish controlled airspace, the safety regulation of Irish civil aviation and the oversight of civil aviation security in Ireland. The IAA’s role in the context of MRO includes implementation of the EASA continuing airworthiness regulations in respect of aircraft registered in Ireland, approval of organisations to certify maintenance of aircraft, and the licensing of personnel who engage in MRO activities in Ireland.

The MRO industry in Ireland, and indeed elsewhere in Europe, can be broadly defined based on the following EASA regulatory certifications for different forms of approved organisation:

❑ Part 145-approved organisations: These are approved to maintain specified types of aircraft, with the scope of such maintenance being based on specified/approved class ratings;

❑ Part 147 Approved Training Organisations: These include training schools and colleges which are approved to provide specialised training and examination for MRO personnel; and

❑ Continuous Airworthiness Management Organisations (CAMOs): The owner of an aircraft may contract the tasks associated with its continuing airworthiness to a CAMO, which assumes responsibility for the proper accomplishment of the contracted tasks.

Part 145 approved maintenance organisations

In practice, organisations may hold one or more of the above regulatory certifications. However, Part 145 organisations constitute the core of direct MRO activities in Ireland. Table 2.1 lists the Part 145 organisations currently approved by the IAA.




Page 8

Table 2.1: MRO Capability in Ireland – Part 145 Organisations by Approval Class

Organisation Part 145 Ratings

Aer Lingus Ltd. A1, C5, C6, C15, C18

Aero Engines Ireland Ltd. B1, C7, D1

Aero Inspection International B1, B3 (Boroscope, Boroblend), C5

Atlantic Aviation Group Ltd. A1, B1, C5, C6, C7, C8, C20

Airbus Helicopters International Services Ltd. A3

Air Transport Systems Ltd. C6

ASL Airlines (Airlines) Ltd. A1

ATA 25 C6

Boeing Ireland Ltd. A1

Camtronics MRO Ltd C6

CHC Ireland DAC A3, C5, C6, C10

Cityjet DAC A1, C5

Dublin Aerospace Ltd. A1, B3, C1, C5, C6, C7, C8, C12, C14, C15, C17, C18, D1

Eirtech Aviation Services Ltd. C3, C6, C8, C20

Emerald Helicopter Consultants Ltd. A3, C5

Executive Helicopters Maintenance Ltd. A3, C5

Galway Aviation Services Ltd. (Trading as Aer Arann Islands)

A2, C5, C14

Helicopter Support Ireland Ltd. A3

International Aerospace Coatings Ltd. C6

Lufthansa Technik Shannon Ltd.* A1, B1, B3, C1, C2, C3, C4, C5, C6, C7, C8, C9, C10, C12, C13, C14, C15, C16, C17, C18, C19, C20, D1

National Flight Centre A2, A4, C5

ND Technologies Ltd D1 (NDT)

Parc Aviation Engineering Services Ltd. B1, B3

Ryanair DAC A1, B1, C3, C4, C5, C6, C7, C8, C9, C13, C15, C18, C20

Shannon Aircraft Motor Works C1, C3, C5, C6, C7, C8, C9, C12, C14

SR Technics Airfoil Services Ltd. C7, D1

Starlite Maintenance Ireland Ltd. A3

Stobart Air Unlimited Company A1, C6, C7, C15, C20

Team Accessories C1, C4, C6, C7, C8, C9, C12, C14, C17.

Technical Engineering & Tooling Services Limited C6

Triumph Aviation Services International Limited A2

Turbine Repair Services Global Ireland Ltd. C7, D1

UJET Interiors Ltd. C6 (Aircraft seats)

Vortex Aviation Ireland A1, B1

Westair Aviation Ltd. A1, A2, A3

Source: Irish Aviation Authority Note: *Lufthansa Technik information sourced from Lufthansa Technik * Part 145 Organisation Classes are as follows: A: Aircraft B: Engines C: Components D: Specialised Services, incl. Non-Destructive Testing




Page 9

The IAA has approved a total of thirty-four organisations to provide MRO services in Ireland under Part 145. Such activities can be undertaken by independent MRO specialists, airlines or aircraft/equipment manufacturers. There is a wide variation across organisations in relation to the scope of MRO services for which they are rated, with eighteen organisations having a single class rating, twelve hold ratings in two categories, and five organisations are rated to provide Part 145 MRO services in three or more categories. It is noteworthy that twenty of the overall set of Part 145-approved organisations hold ‘A’ ratings to provide line or base maintenance on specified aircraft types, with ten of these organisations certified to work on aircraft above 5,700 Kg (e.g. Boeing 737 series and Airbus A320 series). Six organisations hold B ratings to undertake specified work on engines or auxiliary power units (APUs). Twenty-four organisations are certified with a C rating for overhaul/maintenance of specified aircraft components. Five organisations hold ‘D’ ratings to perform specialised work such as Non-Destructive Testing (NDT) (rating ‘D1’).

Regional location of MRO providers

It is also instructive to consider the geographical location of MRO providers in Ireland. The table below indicates the county of location of Part 145, Part 147 and CAMO organisations, highlighting the concentration of the industry in Dublin and Clare. The vast majority of MRO operations are located in, or adjacent to, Dublin and Shannon Airports. There are also other related non MRO companies in other locations, for example Honeywell Aerospace based in Waterford.

Table 2.2: Geographical Breakdown of MRO Firms in Ireland

County Part 145 Part 147 CAMO

Dublin 42.9% 50.0% 43.8%

Clare (Shannon) 34.3% 40.0% 28.1%

Cork 8.6% 0.0% 6.3%

Galway 5.7% 0.0% 6.3%

Kildare 2.9% 0.0% 6.3%

Meath 2.9% 0.0% 0.0%

Westmeath 2.9% 0.0% 0.0%

Carlow 0.0% 10.0% 0.0%

Longford 0.0% 0.0% 3.1%

Sligo 0.0% 0.0% 3.1%

Waterford 0.0% 0.0% 3.1%

Source: Indecon analysis of IAA data

Half of Part 145 and Part M CAMO firms in Ireland offer line maintenance service, while base maintenance-related services are provided by a smaller number (30%) of firms. ‘Line Maintenance’ generally refers to minor, unscheduled or scheduled maintenance carried out on aircraft that is in service to ensure that the aircraft is airworthy and fit for flight. It can include unscheduled maintenance resulting from unforeseen events; maintenance on ‘en route aircraft’ that are stopped before their next flight including servicing or repair between successive flights. Base maintenance generally refers to heavy aircraft maintenance or work outside of line maintenance carried out within a hangar, and is often scheduled on an annual basis during the off-peak (winter) season.




Page 10

The scope for Irish-based airlines to have line maintenance undertaken outside Ireland is more limited than is the case with base maintenance, so it is unsurprising that the industry in Ireland is more focused on line maintenance. Line maintenance typically takes a shorter time (e.g. overnight repairs and checks) than base maintenance (e.g. 2-3 weeks), so the cost of using a more distant MRO facility for line maintenance is often prohibitive. These costs can include the time cost that the aircraft would be out of service, and fuel /staff costs in flying the aircraft to the overseas MRO facility. However, the Irish-based airlines do much of their base maintenance overseas given the limited capacity of the MRO industry in Ireland.

Table 2.3: Services Offered by Selected MRO Firms in Ireland – Part 145 and Part M CAMO Organisations

Market Segment Percentage in Overall

Market Segment

Components overhaul and maintenance 50.0%

Cabins, interiors and entertainment systems 50.0%

Line Maintenance (incl. maintenance activities undertaken by airlines) 50.0%

Continued Airworthiness Management Organisation (CAMO)-related activities 38.5%

Aircraft modifications 30.8%

Base Maintenance 30.8%

Design Organisation Approval & Production Organisation Approval activities 23.1%

Higher-value MRO activities, incl. Composites, Avionics etc. 23.1%

Engine overhaul and components 19.2%

Complete engineering and design services 15.4%

Landing gear maintenance and overhaul 15.4%

APU maintenance and overhaul 11.5%

Aircraft painting 11.5%

Part 147 Approved Training 11.5%

Other 3.8%


Part 145 and Part M CAMO firms in Ireland offer services on a wide variety of aircraft types. As shown in the next table, 70% of firms offer services to narrow-body (single passenger aisle) aircraft, while 60% offer services to wide-body (two passenger aisles) aircraft. Over 60% of the aircraft fleet in Western Europe currently comprises of narrow-body aircraft, with wide-body aircraft accounting for around half (20%) of the remainder (see Section 3, Table 3.2 for further details).




Page 11

Table 2.4: Services Offered by Selected MRO Firms in Ireland – Part 145 and Part M CAMO Organisations

Jet Type Percentage of Firms Providing Services for Jet Type

Wide-Body 59.3%

Narrow-Body 70.4%

Other Types (Including regional jets, turboprops etc.) 70.4%


2.4 Summary of Key Findings

This section provided an overview of the activities of the MRO sector in Ireland. The key findings of the section are as follows:

❑ The aircraft maintenance, repair and overhaul industry is comprised of a diverse range of activities designed to ensure the continued safe operation of civilian and non-civilian aircraft. The vast majority of MRO operations in Ireland are located in, or adjacent to, Dublin and Shannon Airports.

❑ The MRO industry operates in a highly regulated environment, stemming from the requirement to ensure the safe and proper functioning of aircraft during flight. Regulations are coordinated under internationally agreed standards, typically developed by the International Civil Aviation Organisation (ICAO).

❑ In Ireland, the Irish Aviation Authority (IAA) is responsible for the implementation of the EASA continuing airworthiness regulations in respect of aircraft registered in Ireland, approval of organisations to certify maintenance of aircraft, and the licensing of personnel who engage in MRO activities in Ireland.

❑ The MRO industry can be defined based on the following EASA regulatory certifications:

o Part 145-approved organisations (approved to maintain specified types of aircraft);

o Part 147-approved Training Organisations; and

o Continuous Airworthiness Management Organisations (CAMOs).

❑ Half of Part 145 and Part M CAMO firms in Ireland offer line maintenance service, while base maintenance-related services are provided by 30% of firms. Line maintenance typically takes a shorter time (e.g. overnight) than base maintenance, so the cost of using a more distant MRO facility for line maintenance is often prohibitive.

❑ Part 145 and Part M CAMO firms in Ireland offer services on a wide variety of aircraft types. 70% of firms offer services to narrow-body (single aisle) aircraft, while 60% offer services to wide-body (two aisle) aircraft.

3 │ International Developments and Implications



Page 12

3 International Developments and Implications

3.1 Introduction

It is important to understand the international context for the MRO sector, in particular as Irish MRO firms operate within the larger EU market, which represents both an opportunity and a threat. Further, it is important to understand industry trends which are likely to have an impact on the sector in Ireland. In this section Indecon presents a range of industry forecasts for the MRO sector. Indecon examines projections in fleet size and fleet type, as well as revenue by geographic market and by MRO market segment. It then considers the implications of these trends for the sector in Ireland.

3.2 Industry Forecasts for MRO Sector

In order to identify potential future opportunities and challenges for the MRO sector in Ireland, Indecon has reviewed and presented forecasts for the global MRO sector in relation to fleet size; and, revenue. Aircraft Fleet Size

The available published industry projections suggest significant growth in aircraft fleet size across all geographic regions from 2017 to 2037. It is estimated that the global fleet size will reach 47,000 in 2037, increasing from 29,000 in 2017 (a growth of 61%). The Asia Pacific region is expected to see its fleet size more than double from 8,495 in 2017 to 17,481 in 2037. Europe is predicted to become the second largest region by 2037 with growth of 42%, bypassing North America with growth of 14%.

Figure 3.1: Estimated Fleet Size by Geographic Market

Source: Indecon presentation of ICF data2 ©

2 See: https://www.iata.org/whatwedo/workgroups/Documents/MCC-2018-ATL/Day1/1100-1130-mro-forecast-market-trend-icf.pdf

8,49513,704

17,481

8,449

9,156

9,5927,087

9,104

10,094

2,116

3,025

3,822

1,586

2,745

3,328

1,360

1,910

2,561

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2017 2027 2037

Num

ber o

f Air

Tra

nspo

rt F

leet

Asia Pacific North America Europe Latin America Middle East Africa

https://www.iata.org/whatwedo/workgroups/Documents/MCC-2018-ATL/Day1/1100-1130-mro-forecast-market-trend-icf.pdf




Page 13

Separate estimates by aircraft manufacturer Boeing predict an even faster growth rate over broadly the same time period. Table 3.1 contains Boeing’s estimate of global fleet size, with the fleet expected to double between 2017 and 2037. Strong growth is also anticipated in the Asia Pacific region, with the Middle East estimated to be the fastest growing region in terms of fleet size. North America and Europe have two of the slowest predicted rates of growth, but remain the second and third largest regions respectively. As with the ICF forecasts reports in the previous table, European growth is expected to significantly outpace that of North America over this time.

Table 3.1: Estimated Percentage Change in Fleet Size by Geographic Market (2017-2037)

2017 2037 Percentage Change

Asia Pacific 7,360 18,200 147.3%

North America 7,210 10,390 44.1%

Europe 4,900 8,880 81.2%

Middle East 1,500 3,890 159.3%

Latin America 1,560 3,580 129.5%

Russia and Central Asia 1,180 1,970 66.9%

Africa 690 1,630 136.2%

Total 24,400 48,540 98.9%

Source: Boeing3 ©

Forecasts for the breakdown of the type of fleet provided by Oliver Wyman are shown in Table 3.2. This suggests a possible decline in the numbers of regional jets and turboprop planes between 2018 and 2028. Narrow-body planes (single aisle) are anticipated to be the fastest growing, with wide-body planes (twin aisle) also forecasted to grow over the next ten years. Typically, narrow-body planes are used for short/medium haul flights, while wide-body planes are more often used for long-haul flights.

Table 3.2: Estimated Fleet Size by Type

Western Europe World

2018 2028 2018 2028

Narrow-body 3,187 4,688 15,092 25,038

Wide-Body 1,012 1,299 5,273 7,377

Regional Jet 456 368 3,310 3,160

Turboprop 523 443 2,632 2,403

Total 5,178 6,798 26,307 37,978

Source: Oliver Wyman Global Fleet and MRO Market Forecast ©

3 See: https://www.boeing.com/resources/boeingdotcom/commercial/market/commercial-market-outlook/assets/downloads/2018-cmo-09-11.pdf.




Page 14

Figure 3.2 shows that the growth in fleet size is expected to be driven by new generation aircraft. ICF predicts that the number of new generation aircraft will approach 19,000 in 2025, up from 2,993 aircraft in 2015. Meanwhile, the numbers of mid generation and old generation aircraft are estimated to fall by 17% and 70% respectively over the same time frame. The new generation aircraft are expected to have enhanced performance, improved fuel-burn and greater maintenance efficiencies such as longer intervals between major checks.4 For example, computer-based health monitoring systems on new aircraft may result in greater maintenance efficiencies and cost savings which could reduce the demand for MRO services.

Figure 3.2: Projected Growth in Fleet Size by Type of Aircraft


Small aircraft are estimated to account for over 75% of the new deliveries by manufacturer Airbus between 2018 and 2037. Airbus estimates for the number of new deliveries by geographic market are contained in the following table. The Asia Pacific region in expected to have the greatest number of new aircraft deliveries, followed by Europe and North America. This is in line with estimates for the breakdown of aggregate aircraft fleet as reported above, with the three regions consistency estimated to be the largest regions in terms of aircraft over the next two decades. Despite being estimated to be the fourth largest market in terms of overall new deliveries for Airbus, the Middle East is expected to have the most extra-large aircraft and the second most large aircraft deliveries between 2018 and 2037.

4 https://www.mro-network.com/maintenance-repair-overhaul/effects-next-generation-aircraft-mro-prospects

5 https://www.iata.org/whatwedo/workgroups/Documents/MCC-2016-BKK/D1-1000-1030-mro-forecast-icf.pdf

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2015 2025

Size

of

Fle

et

Old Gen Mid Gen New Gen




Page 15

Table 3.3: Estimated Number of New Deliveries (2018-2037)

Category Africa Asia-

Pacific CIS Europe

Latin America

Middle East

North America

Total

Small 843 12,494 998 5,512 2,425 1,214 5,066 28,552

Medium 222 2,306 156 1,097 223 549 931 5,484

Large 52 617 47 332 55 479 182 1,764

X-Large 37 478 58 234 17 637 128 1,589

Total 1,154 15,895 1,259 7,175 2,720 2,879 6,307 37,389

Source: Airbus Global Market Forecast 2018-20376 ©

Revenue

There is strong projected growth in MRO revenues. The figure below presents selected industry estimates for global MRO revenue by MRO market segment for 2018 and 2028. The total MRO market is expected to have revenue of $114.6 billion in 2028, with almost 50% of this revenue generated by the engine market segment. The remaining three segments; airframe (20.5%), components (17.5%) and line (16.1%) are estimated to be of similar sizes. The airframe segment is expected to account for a lower percentage of revenue in 2028 than in 2018.

Figure 3.3: Projected Growth in Global MRO Revenue (2018-2028)

Source: Indecon presentation of Oliver Wyman Global Fleet and MRO Market Forecast data ©

6 https://www.airbus.com/aircraft/market/global-market-forecast.html

24.5% 20.5%

42.2%

45.9%16.7%

17.5%

16.5%

16.1%

0

20

40

60

80

100

120

140

2018 2028

Esti

mat

ed

Glo

bal

MR

O R

eve

nu

e (

€ b

n )

Airframe Engine Component Line

$77.4 bn

$114.6 bn




Page 16

Figure 3.4 contains similar revenue growth projections by market segment, but covers the period 2017-2037. As with previous estimates, the engine market segment is expected to become a larger part of the overall market with it estimated to make up 46% of the overall market in 2037, compared to 42% in 2017.

Figure 3.4: Projected Growth in Global MRO Revenue (2017-2037)


Having discussed the breakdown of the aircraft MRO sector by market segment, Indecon presents a geographical breakdown of estimated revenue in the aircraft MRO sector. The projections presented in the table overleaf suggest that China is expected to be the fastest growing region in terms of MRO revenue over the next decade. North America, however, is expected to remain the largest of the geographic markets, followed by Western Europe.

7 Source: ICF, MRO trends in https://www.iata.org/whatwedo/workgroups/Documents/MCC-2018-ATL/Day1/1100-1130-mro-forecast-market-trend-icf.pdf.

0

20

40

60

80

100

120

140

160

2017 2027 2037

Glo

bal

MR

O D

em

and

($

Bill

ion

)

Engine Component Line Airframe Modifications

$75.5 bn

$117.9 bn

$140.0 bn






Page 17

Table 3.4: Breakdown of Estimated MRO Revenue by Region (2018-2028)

Region 2018 Revenue ($ bn) 2028 Revenue ($ bn) 2018 - 2028 Growth

Africa 2.5 3.4 36.0%

Middle East 8.9 13.5 51.7%

Asia Pacific 14.1 20.9 48.2%

China 6.5 17.8 173.8%

India 1.8 3.2 77.8%

Latin America 3.9 6.2 59.0%


Eastern Europe 3.5 4.3 22.9%

Western Europe 16.2 21.7 34.0%

World 77.4 114.7 48.2%

Source: Oliver Wyman Global Fleet and MRO Market Forecast ©

Figure 3.5 combines includes China and India in the Asia Pacific region which is expected to account for $53 billion in revenue in 2037 (38% of global MRO revenue). North America is estimated to grow from $20 billion in 2017 to $25 billion in 2037, but is expected to have a smaller share of the market in 2037. The European market is expected to become the second largest region by 2027 and is predicted to maintain this position in 2037.

Figure 3.5: Breakdown of Estimated MRO Revenue by Region (2017-2037)


8 https://www.iata.org/whatwedo/workgroups/Documents/MCC-2018-ATL/Day1/1100-1130-mro-forecast-market-trend-icf.pdf

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$117.9 bn

$140.0 bn

$75.5 bn




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Indecon has reviewed a range of industry projections for the global and regional MRO markets and our market research partners, Grand View Research, have also undertaken new research with major MRO players internationally. We have also surveyed the MRO sector in Ireland on their forecasts for their businesses. Indecon estimates suggest significant expansion of over 40% in the period to 2025 as presented in the chart below. Other industry forecasts also expect significant international expansion in the sector.

Table 3.5: Breakdown of Estimated MRO Revenue by Region

Region 2017 2025

2017 - 2025 Growth Revenue (€ bn) Revenue (€ bn)

Asia Pacific 19.4 33.4 72.2%

Europe 16.9 21.7 28.1%


Middle East 5.1 9.0 78.3%

South America 3.8 6.2 61.6%

Africa 2.5 3.3 28.5%

World 64.0 92.2 44.1%

Source: Indecon forecasts


This section provided an overview of the activities of the MRO sector in Ireland. The key findings of the section are as follows:

❑ Forecasts suggest significant growth of 61% in aircraft fleet size globally over the next two decades. The Asia Pacific region is expected to see its fleet size more than double. Europe is predicted to become the second largest region by 2037 with growth of 42%, bypassing North America with growth of 14%.

❑ Separate estimates by Boeing predict an even faster growth rate over the same time period. Strong growth is also anticipated in the Asia Pacific region, with the Middle East estimated to be the fastest growing region in terms of fleet size.

❑ A breakdown of the type of fleet estimated for Western Europe and the World in 2028. There are expected to be declines in the numbers of regional jets and turboprop planes between 2018 and 2028. Narrow-body planes are anticipated to be the fastest growing, with wide-body planes also forecasted to grow strongly.

❑ The total MRO market is expected to have revenue of €92.2 billion in 2025, with over 44% of this revenue generated by the engine market segment. The component segment is forecast to account for 20% of the entire market, with the line segment (15%), airframe segment (12%) and modifications segment (8%) accounting for the remainder.

❑ The Middle East and China are expected to be the fastest-growing regions in terms of MRO revenue over the next decade. Europe is expected to grow by over 29% between 2017 and 2025, reaching an estimated €21.9 billion in MRO revenue in 2025.

4 │ Economic Contribution of MRO Sector to Irish Economy



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4 Economic Contribution of MRO Sector to Irish Economy

4.1 Introduction

In this section we review the direct economic contribution of the sector in Ireland in terms of employment, sales and exports. We also examine the broader knock-on economic effects of these activities in terms of other downstream sectors of the economy.

4.2 Overall Sales Revenue

MRO firms had an estimated revenue in 2017 of around €413 million. This is shown in the next figure. The industry has shown a significant increase in the level of turnover from the previous year, which was lower than turnover in 2015.

Figure 4.1: Revenue of MRO Firms in Ireland (2015-2017)

Source: Indecon analysis of ABSEI data and Confidential Survey of MRO Firms in Ireland

4.3 Export Sales

The following figure shows the developments in the level of exports by MRO firms since 2015. Exports by MRO firms in Ireland reached €355 million in 2017, an increase of over €33 million since 2016.

388.7375.5

413.5

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Figure 4.2: Value of Exports by MRO Firms in Ireland (2015-2017)


A large portion of MRO related activity in Ireland is destined for clients in export markets. In 2017, 85.9% of aggregate turnover of MRO firms in Ireland was destined for export markets, a figure that was slightly lower than the percentage in 2015. This is shown in the next figure.

Figure 4.3: Proportion of Sales of MRO Firms Destined for Export (2015-2017) - %


343.6321.2

355.1

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Europe accounts for a significant element of business for MRO firms in Ireland. The figure below shows the breakdown of exports by destination from agency-assisted firms, and shows that around two-thirds of exports over the period 2015 to 2016 were to EU (ex. UK) markets, with a further 10% to the UK.

Figure 4.4: Destination of Exports from Agency Assisted MRO Firms (2015-2016)

Source: Indecon analysis of ABSEI data

4.4 Employment and Payroll Expenditures

The MRO sector declined significantly in the period 2001 to 2009, though a significant recovery is evident since 2010. There were no new foreign MRO entrants into Ireland in the eleven years from 2001 to 2011. It is estimated that there are 2,643 employees in MRO activities in Ireland in 2018, which includes MRO-related employment in airlines. The growth in employment in MRO firms, including airlines, since 2015 is shown in the next figure.

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Figure 4.5: Employment in MRO Firms in Ireland (2015-2018)

Source: Indecon analysis of ABSEI data and Confidential Survey of MRO Firms in Ireland Note: Estimated employment is based on MRO-related employment only within companies. Thus, only MRO-related employment in airlines, for example, is included.

Indecon’s survey of MRO firms found that respondent firms had an average of 153 employees based in Ireland and accounted for almost 2,000 employees. This represents over 75% of the overall estimated employment in MRO Firms in Ireland.

Table 4.1: Employment in MRO Firms who Responded to Confidential Survey

Number of Employees

Total 1,990

Average 153

Median 80


Payroll accounts for approximately one third of sales indicating this is a labour-intensive sector. This is shown in the next figure. This is far in excess of the figure for agency-assisted firms in the economy, with payroll accounting for on average 9% of sales. While there has been a decline in the percentage of sales accounted for by payroll since 2015, this pattern can also be seen more broadly in the broader export economy. Ireland has lost two key engine MRO facilities in past possibly due in part to high labour costs.

2,340 2,3842,538

2,643

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Table 4.2: Payroll as a Percentage of Sales in MRO Firms

Year Payroll (€m) Value of Sales (€m) Payroll as a % of Sales

2015 123.5 388.7 31.8%

2016 118.5 375.5 31.6%

2017 130.2 413.5 31.5%


Indecon’s survey of MRO firms in Ireland reported a similar level for labour costs as a percentage of overall MRO revenue. Whilst percentages ranged from 10% to 60%, the average respondent MRO firm had labour costs which accounted for 30% of MRO revenue.

Table 4.3: Percentage of MRO Revenue in Ireland Accounted for by Labour Costs

Percentage of Revenue

Average 30.0%

Median 27.5%

Max 60.0%

Min 10.0%


4.5 Non-Labour Costs

Materials accounted for a further 30.3% of revenue in 2017, as shown by the following figure. Whilst this is down from 31.3% in 2015 it is higher than the recession levels of between 24% and 26%.

Figure 4.6: Percentage of MRO Revenue in Ireland Accounted for by Material Costs


31.3%29.7% 30.3%

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Indecon estimates that services costs accounted for 18.2% of total MRO revenue in 2017, an increase on the previous two years (see figure below).

Figure 4.7: Percentage of MRO Revenue in Ireland Accounted for by Services Costs


4.6 Gross Value Added / GDP Contribution

The economic contribution of the MRO sector can be measured based on the Gross Value Added (GVA) of the sector, which in turn contributes to Irelands overall GDP (Gross Domestic Product). The estimated GVA of MRO firms in Ireland was €213.1 million in 2017. This estimate includes both stand-alone MRO firms who serve both Irish and overseas markets, as well as the MRO activities of airlines with operations in Ireland. As can be seen in the figure below, the GVA of the sector remained consistently over €200 million from 2015 to 2017.

Figure 4.8: GVA of MRO Firms (2015-2017)

Source: Indecon analysis of ABSEI data and Confidential Survey of MRO Firms in Ireland Note: 2017 estimated based on revenue for 2017

15.3% 15.8%

18.2%

0%

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2015 2016 2017

Serv

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4.7 Exchequer Contribution

In addition to examining the employment, incomes and GVA/GDP contribution, as part of the assessment Indecon also analysed the contribution of the MRO sector in Ireland to the Irish Exchequer in terms of tax payments. This analysis, which is summarised in Table 4.4, focuses on the key income tax-related payments associated with employment in the sector. Indecon estimates that employees in MRO firms in Ireland contributed a total of €36.5 million in income tax payments to the Exchequer during 2017.

Table 4.4: Estimated Exchequer/Tax Contribution of Employment Supported by MRO Firms

2017

Estimated Employment (FTEs) 2,538

Estimated Payroll €130.2 million

Average Wage €51,295

Average Tax Payable (including PAYE, PRSI and USC) €14,365

Estimated Exchequer Contribution (Income Tax Payments) €36.5 million


4.8 Wider Economic Impacts of MRO Sector in Ireland

Indecon has utilised our Input-Output model of the Irish economy in compiling this report. The fundamental purpose of the Input-Output framework is to analyse the interdependence of industries in an economy, in particular to analyse the impact that economic activity in one sector has on the broader economy. A key output from this analysis is the production of multipliers which analyse the impact of an industry sales on variables such as economy-wide employment, Gross Value Added (GVA) or industry output.

In this section, we provide a brief explanatory note on the operation of the Indecon model. The Input-Output model assesses the cross-sector flow of economic activity using the CSO’s 2015 Input-Output tables. Direct, Type I, and Type II multipliers have been derived for use in this study. These can be explained as follows:

❑ Direct multipliers allow for the estimation of the direct effects of economic activity in terms of Gross Value Added and employment.

❑ Type I multipliers estimate the indirect impacts of economic activity. Indirect impacts include the knock-on business activity that is supported through direct economic activity, e.g., the positive economic impacts of upstream suppliers would be captured by this multiplier. Type I multipliers are concerned with knock-on business-related activity.

❑ Type II multipliers include both indirect and induced effects. Induced effects are concerned with the knock-on impact of household consumption due to direct economic activity. This will include the impact of additional employment wages directly supported through the activity of firms in the MRO sector industry. As such, Type II impacts are concerned with business and household-related activity.




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The figure below presents these impacts graphically.

Figure 4.9: Model of Wider Economic Impacts of MRO Sector in Ireland

Source: Indecon

The direct initial effect is captured by sales to final demand, which in the case of activity of the MRO sector comprises two elements, namely:

❑ Aggregate exports of the MRO sector; and

❑ Estimated expenditures of airlines on MRO.

The multipliers calculated from the Input-Output model are applied to this estimate of aggregate sales to final demand as defined above to create the estimates of direct, indirect and induced economic activity, which are reported in this section.

In addition to the direct impact of €213.1 million GVA in 2017 in the sector, a further €67 million can be associated by the activity of the industry in terms of indirect impacts, and a further €85.7 million in terms of induced impacts. For example, an aircraft overhaul at Dublin or Shannon-based MRO will provide indirect demand for component overhaul companies, interior configuration designs for DOAs (Design Organisation Approvals) and continued airworthiness reviews for CAMOs. These all, in turn, create employment and value added which contributes to the broader Irish economy. This suggests an overall impact of the MRO sector of €365.8 million. The next figure sets out the broader economic impact in Ireland in terms of GVA/GDP contribution.

Output from MRO Firms in Ireland

DirectEffects

IndirectEffects

InducedEffects

Households Organisations Government Imports

Households Organisations Government Imports

Households

Organisations

Government

Imports




Page 27

Figure 4.10: Estimated Gross Value Added of MRO Firms in the Irish Economy (2017)


The activity of the MRO sector in Ireland also results in additional downstream employment. As can be seen in the next figure, while direct employment in MRO is estimated at 2,643 jobs in Ireland, a further 761 jobs are created in downstream industries (the so-called indirect effects) while a further 1,133 jobs are due to expenditure of incomes (so-called induced effects). The total number of jobs in Ireland associated with MRO activity is therefore 4,536 jobs. Indecon would, however, note that there is a very high opportunity cost for skilled labour in the Irish economy and all sectors of the economy have impacts on other parts of economic activity.




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Figure 4.11: Estimated Employment Supported by MRO Firms in the Irish Economy (2017)


The estimated payroll of MRO firms in the Irish economy is presented in the following figure. When the indirect (€29.9 million) and induced (€32 million) impacts are taken into account MRO firms had an estimated €192 million impact in terms of payroll.

Figure 4.12: Estimated Payroll in MRO Firms in the Irish Economy (2017)





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Figure 4.13 shows the wider economic impact of exports by MRO firms on the Irish economy. The estimated €355.1 million of exports in 2017 has knock on impacts through business and household expenditure leading to an aggregate economic impact of €515.9 million in 2017.

Figure 4.13: Estimated Economic Impact of Exports by MRO Firms on the Irish Economy (2017)



In this section we reviewed the economic contribution of the sector in Ireland in terms of employment, sales and exports. This included an examination of the so-called indirect and induced effects of MRO activities in terms of downstream sectors of the economy. The key findings of this assessment are as follows:

❑ MRO firms had an estimated revenue in 2017 of around €413 million. The industry has shown a significant increase in the level of turnover.

❑ The majority of MRO related activity in Ireland is destined for clients in export markets. In 2017, €355 million or 85.9% of the aggregate sales revenues of MRO firms in Ireland was destined for export markets.

❑ It is estimated that there are 2,643 employees in MRO activities in Ireland in 2018, which includes MRO-related employment within the commercial airlines. In 2017, MRO firms spent €130.1 million on payroll costs / wages & salaries.




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❑ The economic contribution of the MRO sector can be measured based on the Gross Value Added (GVA) of the sector, which in turn contributes to Irelands overall GDP (Gross Domestic Product). The estimated GVA of MRO firms in Ireland was €213.1 million in 2017. This estimate includes both stand-alone MRO firms who serve both Irish and overseas markets, as well as the MRO activities of airlines with operations in Ireland.

❑ The above direct impacts of the MRO sector also give rise to wider impacts on the Irish economy. These include indirect and induced impacts. In terms of GVA/GDP contribution, in addition to the above direct contribution of €213 million, a further €67 million can be associated by the activity of the industry in terms of indirect impacts, and a further €85.7 million in terms of induced impacts. This suggests an overall impact of the MRO sector of €365.8 million.

❑ In terms of exports, the estimated €355.1 million of exports in 2017 has knock on impacts through business and household expenditure leading to an aggregate economic impact of €515.9 million in 2017.

❑ In relation to employment, while direct employment in MRO is estimated at 2,643 jobs in Ireland, a further 761 jobs are created in downstream industries, while a further 1,133 jobs are due to expenditure of incomes. The total number of jobs in Ireland associated with MRO activity is therefore 4,536 jobs. When the indirect (€29.9 million) and induced (€32 million) impacts are taken into account MRO firms had an estimated €192 million impact in terms of payroll impacts. Indecon would, however, note that there is a very high opportunity cost for skilled labour in the Irish economy and all sectors of the economy have impacts on other parts of economic activity.

❑ Indecon estimates that employees in MRO firms in Ireland contributed a total of €36.5 million in income tax payments to the Irish Exchequer during 2017.

5 │ Skills Development and Enterprise Supports



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5 Skills Development and Enterprise Supports

5.1 Introduction

There are a range of supports available to firms in the MRO sector, both in terms of supports for skills development, and more broadly in terms of a range of enterprise supports which have the aim of promoting employment creation; innovation; investment; and the development of new export markets. In this section we review these supports. We begin in Section 5.2 with a discussion of skills development supports, while in Section 5.3 we discuss other supports available to the sector. In Section 5.4 we set out survey results which show the industries priorities, while Section 5.5 provides a summary of the key findings of the section.

5.2 Skills Development

The MRO sector is a relatively labour-intensive industry with a continued demand for skilled workers, many of whom must meet strict regulatory requirements. As set out in Indecon’s assessment of the economic contribution in Section 4, the MRO industry employs 2,643 workers directly in Ireland, and accounts for a further 1,894 workers when the indirect and induced demand for labour is factored in. Further, the skills gained in the MRO sector are also utilised in other related sectors. Aircraft leasing companies in particular rely on the MRO sector to generate staff with technical expertise needed in their sector, though this in turn creates competition for scarce labour for the MRO sector. Industry consultations indicate that leasing firms can offer levels of remuneration for these staff that cannot be matched by the MRO sector. The leasing sector itself employs approximately 1,700 workers in Ireland.9

In this section we review the current skills profile of the sector, and give an overview of the training courses available at both Higher Education (HE) and Further Education and Training (FET) levels to meet on-going and future labour demand.

Education and Age Profile of MRO Workforce

The technical skills used in the MRO sector are clustered around ‘Level 6’ (Higher or Advanced Certificate) on the National Framework of Qualifications. The following table shows the breakdown of those in employment in aircraft maintenance and related trades by the highest level of education they have attained. Over half of those employed in the sector have at least a technical, advanced or higher certificate, with a further 27.5% having a Bachelor Degree or higher.

9 “Taking Flight 2018: An economic and employment analysis of the aviation leasing industry in Ireland.”




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Table 5.1: Educational Attainment Levels of Employees in Aircraft Maintenance and Related Trades (2016)

Highest Level of Education Attained NFQ Level Percentage of Population

Lower Secondary or Below Levels 1-3 5.6%

Leaving Certificate Levels 4-5 9.0%

Technical/Advanced/Higher Certificate Level 6 57.9%

Bachelor Degree Levels 7-8 22.9%

Postgraduate diploma/degree or Ph.D. Levels 9-10 4.6%

Source: Indecon analysis of Census data Note: Percentages based on total who have finished education and declared their highest level of education

The employment of Part 66 licensed engineers (also known as an EASA Aircraft Maintenance License) in Ireland has grown consistently in recent years. Figure 5.1 depicts the number of licensed Part 66 engineers in Ireland since 2009. After a fall in 2010, the number of licensed Part 66 engineers has increased each year, reaching 1,700 in late 2018. This represents an increase of over 40% since 2010.

Figure 5.1: Licensed Part 66 Engineers in MRO Sector in Ireland

Source: Indecon presentation of IAA data Note: 2018 figures as of October 2018

The average age of licensed Part 66 engineers is just under 44 years old. The figure below (Figure 5.2) shows a breakdown of Licensed Part 66 Engineers in the MRO sector in Ireland by age grouping. This shows that there were fewer than 30 (2%) engineers under the age of 25, with over 650 (43%) aged between 30 and 44. The industry is also overwhelmingly male, with women only accounting for 1% of Part 66 Engineers. Irish nationals represent a large majority of employees in the sector.

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Figure 5.2: Age Profile of Licensed Part 66 Engineers in MRO Sector in Ireland

Source: IAA

The age profile of Licensed Part 66 Engineers is somewhat older than for the overall national workforce. However, the main difference lies in the 20-24 age group, when a significant number of this cohort are still largely to be in training. From age 25 upwards the age profile of Part 66 Engineers is similar to the overall national workforce. This is illustrated in Figure 5.3 below.

Figure 5.3: Comparison of Age Profile of Licensed Part 66 Engineers with Overall Labour Force

Source: Indecon analysis of IAA and LFS data

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Turning to the age profile of total employees in the sector, the average age in 2016 was just under 42 years old, an increase from 40 in 2011. This is slightly older than the average for the national working population, which was just over 40 years old in 2016. The age profile of both the sector and nationally have increased since the 2011 Census.

Table 5.2: Average Age of Those at Work in Aircraft Maintenance and Related Trades

2011 2016

Average Age (Years) Total National Working Population 39.1 40.3

Aircraft Maintenance and Related Trades 40.1 41.7

Percentage Change 2011-2016 Total National Working Population 4.0%

Aircraft Maintenance and Related Trades 3.1%

Source: Indecon analysis of Census data

Industry sources indicate that, while there is a significant demand in Ireland for Aircraft Maintenance Technicians, a large volume of applicants require a work permit, and many candidates do not have sufficient training to satisfy the requirements of the European Aviation Safety Agency (EASA).

Apprenticeships and Traineeships

A majority of employees in the MRO sector are at a technical/Advanced/Higher Certificate level on the National Framework of Qualifications (see Table 5.1 above). Much of the training in the sector is provided through privately run specialist schools (so-called Part-147 Approved training organisations), which are in turn regulated by the IAA. A full list of all organisations currently approved by the IAA are as follows:

❑ Dublin Institute of Technology, Dublin;

❑ Institute of Technology Carlow;

❑ Dublin Aerospace Ltd, Dublin Airport;

❑ Aertrain, County Dublin;

❑ Shannon Training Centre, Shannon Business Park;

❑ Atlantic Aviation Group Ltd, Shannon Airport;

❑ CityJet, Swords Business Campus, County Dublin;

❑ Lufthansa Technic Shannon Ltd, Shannon Airport; and

❑ Technical Training School, Air Corps College, Casement Aerodrome Baldonnel.

In this section we review the training programmes in the FET (Further Education and Training) sector, in particular in relation to Levels 5 and 6 on the National Framework of Qualifications. In the subsequent section we examine the courses offered by Higher Education institutes, covering Level 6/7-10.




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The figure below sets out the phases of the Aircraft Mechanics Apprenticeship programme.

Figure 5.4: Aircraft Mechanics Apprenticeship Trainee Programme (4 Years)

Source: SOLAS

A key issue for the industry is the adequacy of the future supply of trained workers in meeting growth plans of MRO industry. In terms of State supports, the number of apprentice registrations for an Aircraft Mechanic Apprenticeship has more than doubled in three years. There were 74 new apprentice registrations in 2018. The increase in Aircraft Mechanic Apprentices is in line with the broader increase in electrical apprentices offered by SOLAS in recent years. One aspect that has been pointed out to Indecon is that despite the high level of technical proficiency attained, the apprentices are classed at below a degree-level qualification. This may have adverse implications for attracting new talent into the MRO industry, as well as enabling the industry to bring qualified engineers into Ireland.

Consultation with industry undertaken as part of this assessment indicates that there is a lack of awareness among students regarding aircraft maintenance as a career option, which may impede the future growth of the industry.

Phase 1: With EmployerIntroduction

Introduction to Health and SafetyIntroduction to Tools and Equipment

Introduction to Basic Skill

Phase 2A: Delivered in Training Centre (32 weeks)Course Content: (EASA Category A)

InductionMathematics

PhysicsElectrical Fundamentals

Digital TechniquesMaterials and HardwareMaintenance Practices

Basic AerodynamicsHuman Factors

Aviation LegislationTurbine Aeroplane Aerodynamics, Structures and SystemsPiston Aeroplane Aerodynamics, Structures and Systems

Helicopter Aerodynamics, Structures and SystemsGas Turbine Engine

Piston EnginePropeller

Phase 2B: Delivered in Training Centre (8 weeks)Course Content: (EASA Category B1/B2)

MathematicsPhysics

Materials and HardwareBasic Aerodynamics

Human Factors

Phase 3A: With EmployerWork Based Training and Assessment with portfolio of evidence

Phase 3B: With EmployerWork Based Training and Assessment with portfolio of evidence

Phase 4: Delivered in Educational Colleges (35 weeks)Course Content: (EASA Category B1/B2)

Electrical FundamentalsElectronic Fundamentals

Digital TechniquesMaintenance Practices

Aviation LegislationTurbine Aeroplane Aerodynamics, Structures and SystemsPiston Aeroplane Aerodynamics, Structures and Systems

Helicopter Aerodynamics, Structures and SystemsPropulsion

Gas Turbine EnginePiston Engine

Propeller




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Figure 5.5: Number of New Apprentice Registrations for Aircraft Mechanic Apprenticeship

Source: SOLAS

An occupation profile for an Aircraft Mechanic, as provided by SOLAS, is shown below.

Table 5.3: Aircraft Mechanic Occupational Profile

Craft Occupation Aircraft mechanic

Industry Served Aircraft maintenance

Profile of Craft Servicing, maintenance, fault diagnostics, repair and installation of mechanical and electrical equipment and systems of aircraft structures and engines

Core Skills Service, replace, fault diagnose, repair, function test, inspect, adjust test, rig trouble-shoot, adjust and test aircraft structures, systems and engines and their components

Specialist Skills Composite repairs; Non-destructive inspection; Sheet Metal repairs

Common Skills

Safety - Hazards avoidance, correct use of tools and equipment, correct use of personnel protective equipment, manual handling and evacuation procedures

Standard practices - Read and Interpret relevant technical documentation, read and interpret drawing and the relevant use of computers

Personal Skills Communications, adaptability, ability to work as a team member, working independently, using initiative, problem solving, planning and organisation, record keeping, manual handling, IT skills, customer relation

Source: SOLAS

One challenge identified in industry consultations is that under the current traineeship model, candidates only receive a training allowance if they are already in receipt of a welfare payment, which may act as a barrier for those on a lower skill level applying for the course in an effort to upskill.

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Higher Education Courses Offered in MRO Sector

The following figure shows the courses offered by Higher Education Institutions in MRO fields of study by the level of award based on the National Framework of Qualifications. Courses offered at Ordinary Bachelor Degree are offered by Dublin Institute of Technology, Institute of Technology Carlow, and Limerick Institute of Technology. Information on the number of places in the course, where available from the CAO, is also shown.

Figure 5.6: Courses Offered by Higher Education Institutes in MRO Fields by Level of Course/Degree

Source: Indecon academic advisor, CAO

There has been a strong increase in the number of graduates from Irish Universities and Institutes of Technology in the Field of Motor Vehicles (Ships and Aircraft) is recent years (see table overleaf). The total number of graduates in 2017/8 was more than double the numbers who graduated in 2012-2013. By 2017 63% of these were aviation-related graduates. There were additional graduates in the areas of aviation management and aircraft leasing.

PhD Aeronautical Engineering

University of Limerick

Dublin Institute of Technology

Institute of Technology Carlow

Limerick Institute of Technology

MSc Aeronautical Engineering

SpecDip ContAirworthiness & Maint

Module EASA Part 21 Design Engineering

ME/BE Aeronautical Engineering

BSc Aircraft Maintenance & Airworthiness

Engineering

BSc Transport Operations & TechnologyPlaces: 40

BEngTech Aviation TechnologyPlaces: 40

BEngTech Military Aviation Technology

BE Aerospace EngineeringPlaces: 15

BE Aircraft SystemsPlaces: 28

Cert Business Technical Aircraft Management

SpecPurp Aircraft Records Technician

SpecPurp Part 21 Design Technician

Cert Aviation

10

9

8

7

6

NFQ

Lev

el




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Table 5.4: Graduates from Irish Universities and Institutes of Technology in the Field of Motor Vehicles (Ships and Aircraft)

Academic Year Universities Institutes of Technology Total

2012/13 0 176 176

2013/14 0 159 159

2014/15 14 231 245

2015/16 34 213 247

2016/17 56 281 337

2017/18 75 283 358

Source: HEA

Other Training

An additional training resource available to the industry is the Aviation & Aerospace Skillnet. As with other organisations based on the Skillnet model, the aim of the Aviation & Aerospace Skillnet is to promote and facilitate workforce learning, and operates on the basis of partial State/company funding of training. The Aviation & Aerospace network provides a suite of training from level 5 to level 9 with a focus on softer skills to support the more technical programmes. They also provide management programmes and events to support member company needs. In the first eleven months of 2018, over 50 companies availed of training through the Aviation & Aerospace Skillnet, accounting for over 5,000 training days across 250 employed trainees. The average number of training days per learner in 2018 (20) reflects the fact that Skillnet focuses more on shorter in-employment training and upskilling.

5.3 Enterprise Supports provided by Development Agencies

There are a number of enterprise grant-based and other supports available nationally, with many of these supports provided to firms assisted by the industrial development agencies, including IDA Ireland and Enterprise Ireland. In terms of the MRO sector, approximately 70% of employment is in agency-assisted firms.

The range of enterprise supports available nationally from Enterprise Ireland is summarised in Table 5.5. MRO firms may not, however, be eligible for some supports, due to State Aid rules, scale or other factors, while some supports may not be appropriate to the needs of MRO clients.




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Table 5.5: Selected Enterprise Supports Available from Enterprise Ireland

Access to EU Programmes, EU Finance and EU Markets Internationalisation Grant

Technical Feasibility Study Grant Innovative HPSU Fund (Equity)

Tailored Company Expansion Package Innovation Voucher for start-up companies

Strategic Consultancy Grant Innovation Voucher for established companies

Seed & Venture Capital Programme Innovation Partnership Grant Programme

R&D Fund (Small Projects) HPSU Feasibility Study Grant

R&D Fund (Large Projects) GreenStart

New Geographic Market Research Grant (Large) GreenPlus

New Geographic Market Research Grant Development Capital Fund

New Frontiers Entrepreneur Development Programme Competitive Start Fund

Mentor Grant for HPSU clients Competitive Feasibility Fund

Mentor Grant for established companies Be Prepared Grant

Key Manager Grant BDO Development Capital Fund

Job Expansion Fund Agile Innovation Fund

Source: Indecon presentation of Enterprise Ireland data

IDA Ireland also provides a range of supports to its client firms, though as with EI supports, MRO clients may not be eligible for certain supports, or supports may not be suitable/appropriate. Some of the supports provided (e.g. Innovation Partnerships) are offered to clients of both IDA and Enterprise Ireland. The IDA currently assists a total of 12 client companies in the MRO sector (including CAMO and other firms which provide MRO-related services). However, only a subset of six MRO airframe and engine clients are eligible for grant support. As can be seen in Table 5.6, the extent of take-up of supports among IDA Ireland MRO clients is highest for the RD&I Grant, followed by global trade conferences, and training grants. The take-up of these and other supports may, however, be constrained by State Aid rules and other factors. According to the development agencies, there are only five IDA Ireland MRO clients and 3 Enterprise Ireland MRO clients that are presently eligible for support, and we understand that all of these clients have received grant support.




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Table 5.6: Selected IDA Ireland Supports – Client Firms in MRO Sector

Number of Firms

Total Number of IDA grant eligible clients in MRO (airframe and engine) 6

RD&I Grant (MRO-related only)* 4

IDA / EI Global Trade Conferences 3 (2018)

Employment Grants for new activities (MRO only) 2

Innovation Partnership 2

Training Grants 3

IDA-approved Capital Grants (MRO only) for new activities 1

Innovation Vouchers 1

RD&I Feasibility Study (projects under €500,000) 0

Source: IDA Ireland * Total of 11 individual R&D projects approved since 2014. However, some projects are clustered together under single approvals.

There are other tax-based supports which can be availed of by MRO firms. The most significant of these nationally is the R&D Tax Credit. However, according to IDA Ireland, only two of the agency’s twelve MRO client firms have availed of this support. (See table below.)

Table 5.7: Taxation Support Measures –IDA MRO Client Firms

R&D Tax Credit 2

Energy Efficiency Tax Scheme 2

PRSI Tax Rebate (Dept. Social Protection) 1

Source: Indecon

There are also other supports for R&D activity which can be availed of by MRO firms. Science Foundation Ireland (SFI) runs an Industry Fellowship Programme to develop and support industry-academia research partnerships through the temporary placement of academic researchers in industry, and of industry researchers in academia. Fellowships can last up to two years, and is subject to a maximum award of €100,000 direct costs. Over the last number of years, two MRO firms have availed of this support. Two firms also have drawn down funding from the Horizon 2020 Fund which supports investment in R&D. (See table overleaf.)




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Table 5.8: Research Support Measures – MRO Firms

FP7 / Horizon 2020 R&D Programme 2

Industrial Fellowships (MRO only)* 2

Source: Indecon * Can only be used where clients have actual research projects and capability to carry out research

There are restrictions on state aid allowed, dependent on the geographical location of the firm. This is illustrated in the figure below. It shows that while capital grant aid is available for firms based in or near Shannon Airport, these grants are not available for firms based in Dublin Airport or Cork Airport.

Figure 5.7: IDA Grant Aid Areas

Source: IDA




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5.4 Industry Perspectives on Prioritisation of State Enterprise Supports

As noted above, the small number of MRO firms in Ireland securing enterprise supports is likely to reflect a number of factors, eligibility criteria as well as the nature of the sector’s current operations. However, it is important where feasible that enterprise supports are provided which assist the sector to develop. As part of Indecon’s research among MRO industry participants, we also sought firms’ perspectives on the importance or otherwise of the availability of different state-provided enterprise supports for the expansion of their business. Respondents reported that training programmes were the most important form of enterprise support offered by the government. A large majority of firms rated industry-led skill development training programmes (77%) and apprenticeship initiatives (75%) as being very important. The third most important form of support was in relation to measures to enhance the international profile of the Irish MRO sector. The results of the survey of industry participants in this regard is shown in Table 5.9.

Table 5.9: MRO Providers’ Views on Importance or Otherwise of Various Enterprise Supports

Respondents’ Views on Importance of Enterprise Supports Very

Important Important

Not Important

Industry-led skill development training programmes 76.9% 15.4% 7.7%

Increased apprenticeship initiatives 75.0% 16.7% 8.3%

Measures to enhance international profile of Irish MRO sector 66.7% 25.0% 8.3%

Enhanced information from leasing companies on timing of MRO requirements

58.3% 16.7% 25.0%

Attraction of investment in Ireland by OEMs (to generate additional MRO business)

53.8% 38.5% 7.7%

Financial assistance with cost of training 53.8% 38.5% 7.7%

Management development supports 53.8% 38.5% 7.7%

R+D and Innovation Supports 46.2% 38.5% 15.4%

Additional Engineer Degree courses 30.8% 30.8% 38.5%



In this section we reviewed the enterprise supports available to firms in the MRO sector, with a particular focus on skills development supports given the labour-intensive nature of the sector. The key findings of this section are as follows:

❑ The MRO sector is a labour-intensive industry with a continued demand for skilled workers, many of whom must meet strict regulatory requirements. The technical skills used in the MRO sector are clustered around ‘Level 6’ levels of educational attainment (Higher or Advanced Certificate) in the National Framework of Qualifications. Over half of those employed in the sector have at least a technical, advanced or higher certificate, with a further 27.5% having a Bachelor Degree or higher.




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❑ The employment of Part 66 licensed engineers in Ireland has grown consistently since 2010. After a fall in 2010, the number of licensed Part 66 engineers has increased each year, reaching 1,700 in 2018 to date, an increase of over 40% since 2010. The average age of licensed Part 66 engineers is just under 44 years old, and is overwhelmingly male. The average age of all employees in the sector in 2016 was just under 42 years old. This is slightly older than the average for the national working population, which was just over 40 years old in 2016.

❑ A key issue for the industry concerns the adequacy of apprenticeship numbers in meeting the growth plans of the MRO industry. The number of apprenticeship registrations for the Aircraft Mechanic Apprenticeship has more than doubled in three years. There were 74 new apprentice registrations in 2018. The increase in Aircraft Mechanic Apprentices is in line with the broader increase in electrical apprentices offered by SOLAS in recent years.

❑ There are a number of bodies nationally which provide support to companies in the MRO sector. Many of these supports are dedicated to those firms eligible to support from IDA Ireland (foreign-owned firms) or Enterprise Ireland (indigenously-owned firms). In terms of the MRO sector, approximately 70% of employment is in these agency-assisted firms. However, there are also more general supports, such as the R&D Tax Credit. MRO firms may not, however, be eligible for some enterprise supports, due to State Aid rules, scale or other factors, while some supports may not be appropriate to the needs of MRO clients.

❑ There are restrictions on state supports available to MRO (as well as other) enterprises arising from State Aid rules in particular, which are dependent on the geographical location of the firm. While capital grant aid is available for firms based in or near Shannon Airport, these grants are not available for firms based in Dublin Airport or Cork Airport.

❑ There is limited take-up of IDA supports by MRO Firms, with the take-up rate being highest in relation to the RD&I grant. Overall, according to the development agencies, there are only five IDA Ireland MRO clients and 3 Enterprise Ireland MRO clients that are presently eligible for support, and we understand that all of these clients have received grant support.

❑ As part of Indecon’s research among MRO industry participants, we also sought firms’ perspectives on the importance or otherwise of the availability of different state-provided enterprise supports for the expansion of their business. Respondents reported that training programmes were the most important form of enterprise support offered by the government. A large majority of firms rated industry-led skill development training programmes (77%) and apprenticeship initiatives (75%) as being very important. The third most important form of support was in relation to measures to enhance the international profile of the Irish MRO sector.

6 │ Opportunities and Challenges facing the MRO Sector



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6 Opportunities and Challenges facing the MRO Sector

6.1 Introduction

The MRO sector in Ireland has experienced significant growth in recent years, both in terms of aggregate output and employment. However, the sector has a number of opportunities and challenges which will determine its future growth trajectory, both in terms of factors specific to the industry, as well as factors relating to the broader economy. In this section we review the issues facing the MRO industry in the medium term.

6.2 Opportunities for the MRO Sector

The MRO sector in Ireland has a number of opportunities, both relating to the overall growth of airline traffic globally, as well as a potential evolution of the position that Irish firms play in the global MRO sector. These are discussed in this section. However, these potential opportunities must be seen in light of the challenges faced by the sector, particularly in relation to accessing skilled labour, which are discussed in Section 6.3.

Industry participants expect significant growth in their businesses over the next five years. This is shown in Table 6.1 below. It shows that over 90% of firms expect a significant growth in their business, with half of all firms surveyed forecasting that this will be in the region of 26%-50% growth. This will be supported by the continued growth in the airline industry more generally, both in Ireland and internationally, as previously reported.

Table 6.1: MRO Providers’ Views on Growth Prospects for their Business in the MRO Sector in Ireland in the Next 5 Years

% of Respondents

No significant change 8.3%

0 – 25% growth 16.7%

26 – 50% growth 50.0%

51 – 75% growth 8.3%

75 – 100% growth 16.7%

Weighted Average Growth Forecast for Next 5 Years 39.0%


Firms report that they will face significant challenges in meeting expected growth, particularly in terms of skills availability. This is reported in Table 6.2 below. It shows that 92% of firms reported that they had insufficient skilled staff for expected future growth, while almost half reported that they had insufficient physical infrastructure. It is important to note, however, that the MRO sector involves a number of diverse organisations, including airframe MROs (which require airside and hangar infrastructure) and component MROs (which can undertake their operations in non-airside locations and in smaller-scale facilities). For confidentiality reasons, the table overleaf presents the views of MRO sector respondents to Indecon’s research in aggregate form. However, through Indecon’s separate engagements with the industry, we understand that physical capacity constraints are focused on airframe MRO providers who require additional hangar capacity.




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Table 6.2: MRO Providers’ Views on their Businesses Capacity in Physical Infrastructure and Skilled Staff to Accommodate Growth Plans

Please indicate to what extent you currently have sufficient capacity in your infrastructure and in skilled staff to accommodate your growth plans:

Physical Infrastructure

Existing Skilled Staff

Sufficient Capacity to Accommodate Expansion 58.3% 7.7%

Insufficient Capacity to Accommodate Expansion 41.7% 92.3%

Total 100% 100%


Industry participants reported that the main market driver for the MRO sector in the medium-term related to the growth in the overall size of the aircraft fleet globally. This is shown in the next table. Half of all respondents reported this has having a very significant impact, while no respondent said that this would have no impact. This is consistent with the projected growth of the global fleet size of 61% from 2017 to 2037 as reported in Section 3.2. The demand for maintenance and overhaul of older aircraft was cited as being significant or very significant by a large majority of respondents. The growing importance of ‘new generation’ aircraft, which are expected to have lower maintenance needs, was seen as only having a moderate impact on business volumes.

Table 6.3: MRO Providers’ Views on Specific Market Drivers for Opportunities for Growth in MRO Business in Ireland in General

Very

Significant Impact

Significant Impact

Moderate Impact

Low to No Impact

Negative Impact on

Growth

Growth in overall size of the global aircraft fleet

46.2% 30.8% 23.1% 0.0% 0.0%

Growth of 'New Generation' aircraft

15.4% 15.4% 46.2% 15.4% 7.7%

Demand for maintenance and overhaul of older aircraft

38.5% 53.8% 0.0% 7.7% 0.0%


The geographic market with the greatest growth potential identified by market participants was Ireland and the rest of Europe. This is illustrated in the next figure. Ireland is home to two large airlines, both of whom have significant demand for MRO services. Around two-thirds of respondents forecasted that Irish-based airlines would result in moderate growth opportunities, though one-fifth believed that the growth would be significant. Almost all industry participants believed that Europe (ex-Ireland) markets offered either moderate or significant growth opportunities. The overall level of passenger traffic from Irish airports is currently increasing at a rate of 7% per annum.10 The smooth operation of airlines is facilitated by access to MRO facilities locally. Most notably, such services are needed for on-going line maintenance, as well as in the event of ground accidents or occurrences.

10 https://www.cso.ie/en/releasesandpublications/er/as/aviationstatisticsquarter22018/




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While annual base maintenance can be scheduled and completed overseas, the availability of such services locally could potentially reduce cost in terms of relocating a plane to the overseas facility.

Figure 6.1: MRO Providers’ Views on Growth Potential in Specific Geographic Markets over the Next Five Years for their MRO Business


When asked which sub-sectors of the industry had the greatest growth potential, respondents reported that growth was going to be broadly based, with similar growth potential for cargo jet aircraft; end-of-lease aircraft in transition; and demand from scheduled airlines. This is shown in the figure below.

Figure 6.2: MRO Providers’ Views on Growth Potential in Specific Sub-Sectors Over the Next Five Years for their MRO Business

Source: Indecon analysis of responses to Confidential Information Request to MRO Firms Note: ‘VIP’ refers to Business Aviation, and ‘Scheduled Airline’ refers to Scheduled Passenger Airline.

0% 20% 40% 60% 80% 100%

Serving Irish-based Airlines

Other European opportunities

North America

MEA (Middle East and Africa)

Asia Pacific

Latin America



0% 20% 40% 60% 80% 100%

Scheduled Airline

End-of-Lease Aircraft

Cargo Jet

VIP






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The sub-sectors forecasted by industry participants to have the greatest growth prospects over the medium term related to components; opportunities arising from airlines transitioning by lessors; and CAMO/Part M related activities. This is shown in the next figure.

Figure 6.3: MRO Providers’ Views on Growth Potential in Specific MRO Activities over the Next Five Years for their MRO Business


It is notable that the potential from aircraft transitioning is ranked as the second most important in terms of growth potential. Each year, about 2,000 aircraft globally are moved by leasing companies from one airline to another, which requires substantial work to meet the new company and regulator’s requirements11. The potential importance of aircraft transitioning in Ireland is in part related to the size of the aviation leasing industry in Ireland. Irish lessors manage more than €100 billion in assets, 22% of the global fleet of aircraft, and over 40% of the world’s fleet of leased aircraft. 14 of the top 15 lessors by fleet size globally have a presence in Ireland12. The nature of the demand by this sector also differs significantly from the demand from scheduled airlines in a number of respects:

❑ Less predictable demand patterns: A lessor can have a significant number of planes returned at relatively short notice, requiring transitioning to another lessee. This ‘lumpiness’ of demand is challenging for MRO firms, particularly when it occurs in winter time when many MRO firms are at their busiest completing base maintenance for scheduled airlines;

11 National Aviation Policy for Ireland.

12 IDA Ireland.

0% 20% 40% 60% 80% 100%

CAMO/Part M-related activities

Components

Opportunities arising from Aircraft Transitioning

Aircraft modifications

Line Maintenance

Part 147 Training Provision

Airframe

Base Maintenance

Higher value MRO activities, incl. Composites, Avionics etc.

Engine

UAV maintenance

Significant Growth Potential Moderate Growth Potential

No Growth Potential Potential for Moderate Decline

Potential for Significant Decline Not Applicable / Company Does Not Operate in this Market




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❑ Diversity of Aircraft Make and Model: Many MRO firms specialise in specific aircraft based on model or manufacturer, and scheduled airlines can choose an MRO firm based on that specialisation. However, a leasing firm may as part of their portfolio have a significant diversity of aircraft model and/or manufacturer, requiring specific skillsets and training; and

❑ Price: While the MRO sector as a whole is typified by intense price competition, work to transition planes is typically higher-margin, reflecting the challenges noted above. This represents an opportunity for an MRO firm who can establish a business model which caters for this sector.

6.3 Challenges Facing MRO Sector in Ireland

The ability of the industry to realise the opportunities set out above will depend on it overcoming the challenges facing the sector. This section examines the findings of Indecon’s research among MRO providers in relation to firms’ views on different challenges. Figure 6.4 below summarises the views of MRO providers on the relative significance of a range of challenges/constraints on their business over the next five years.

Figure 6.4: MRO Providers’ Views on Challenges/Constraints facing their Business over the Next Five Years


0% 20% 40% 60% 80% 100%

Regulatory resources to oversee heavy maintenance

Growth of 'Next Generation' aircraft

Scale of existing MRO companies

Market profile of sector

Shortages of other supporting infrastructure

Cost of hangars

Lack of apprenticeship/training courses in off-peak periods

Level of commercial rates

Shortages of suitable airside locations/hangars

Insufficient engineer and technician training courses to servicerequirements

Presence and scale of OEMs in the aftermarket MRO sector

Price competition from international competitors

Cost of skilled labour

Difficulties in recruiting/retaining of qualified staff

Percentage of Respondents Stating Very Significant or Significant Challenge / Constraint







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Among the main areas of challenge/constraint cited by MROs, difficulties in recruiting/training of qualified staff, the cost of skilled labour, and price competition from international competitors in the MRO market were each cited by the largest majorities (of almost 85%) of responding firms as likely to represent either a very significant or a significant challenge/constraint on their business over the next five years. The challenges around supply of skilled staff are also evident in the findings that 69% of firms indicated insufficient engineer and technician training courses to service requirements as a very significant or a significant challenge/constraint, while 62% of MRO providers cited a lack of apprenticeship/training courses in off-peak periods as likely to present a very significant or a significant challenge/constraint on their business. The issue of skills supply and development is further discussed in Section 6.4 below.

Among the other factors which a majority of MRO providers responding to Indecon’s research have indicated as likely to constitute a challenge/constraint for their business include the cost of hangars and the level of commercial rates. Notably, each of these factors is cited by the highest proportions (41.7%) of responding MRO firms as likely to represent a very significant challenge/constraint on their business over the next five years, while 69% of firms cited shortages of suitable airside locations/hangars are likely to be a very significant or significant challenge/constraint. Aircraft overhaul and heavy maintenance MRO activities require access to suitable hangars at airside locations (as opposed to components MRO, which may be undertaken at other, non-airside locations). Many MRO firms rely on having access to suitable airside locations on an airport complex owned and managed by an airport authority. However, the access to hangar facilities, particularly in Dublin Airport as by far the largest and busiest airport in the State, remains uncertain.

In relation to cost factors, the cost of building hangars can be very substantial (for example, a single wide-body aircraft hangar could entail capital expenditure in the region of €15-20 million). This may be prohibitive for a smaller-scale MRO, though this does not necessarily represent a ‘market failure’ that requires rectification through Government policy. In other countries (e.g. the UK), MRO firms can make use of ex-military hangars and runways, facilities which have a very low opportunity cost. This gives these firms a competitive advantage over firms in Ireland and other countries who must build and pay for hangar facilities themselves.

In relation to local authority commercial rates, some MRO providers have reported that commercial rates represent 6-10% of their indirect costs13. The level of commercial rates is determined in part by the large size of hangars, and rates do not bear any relation to MRO revenues. Some MRO providers operating at the State’s largest airports have stated that they are paying for services such as road maintenance and improvement, fire services and environment services twice, as they must also obtain and pay for these services from their landlord, the airport authority as part of their rent.

In relation OEMs, a majority of MRO providers also viewed the presence and scale of OEMs in the aftermarket MRO sector as representing a very significant or significant challenge or constraint on the development of their business over the next five years. Within this, however, it should be noted that for some MROs the absence of OEMs may act as a constraint on the potential business they can secure, while for others the potential entry of OEMs may be seen a threat to their business. In addition, it is important in this context to differentiate between major airframe OEMs (e.g. Boeing; Airbus) and OEMs that specialise in components.

13 National Civil Aviation Development Forum.




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In addition to the above findings, specific challenges facing the industry, which were highlighted in Indecon’s engagement with the industrial development agencies as part of this assessment, include:

− The move to composite aircraft, which represents both an opportunity and a threat due to costs of training, tooling and possible additional capex. This also demonstrates the importance of supporting skills development (including ‘iComp’) and knowledge of composites for the aviation industry.

− Exchange rate developments: including adverse movements in the Euro/Dollar rate, which can undermine Ireland’s competitiveness as an MRO supplier.

− The potential withdrawal of engine component repair licenses: this could represent a major threat to some engine MROs.

Indecon also sought the perspectives of MRO industry members in relation to the capacity of the sector in Ireland by sub-sector. As reported in the figure below, capacity constraints were identified across the sector, affecting components; wide-body base maintenance; and engines. This result mirrors the finding above in relation to the limited capacity of the overall MRO sector in Ireland, as well as the difficulty in attracting skilled staff.

Figure 6.5: MRO Providers’ Views on Existing MRO Capacity in Ireland to Handle New Business


0% 20% 40% 60% 80% 100%

Engines

Wide-body base maintenance

Components

Landing Gear Wheels / Brakes

Very Significant Capacity Constraints Significant Capacity Constraints

Moderate Capacity Constraints No Capacity Constraints




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6.4 Views of MRO Firms on Skills Development

As noted above, the issue of skills availability is a key one for the MRO sector. Further, the leasing industry also depends on the skills developed in the MRO sector as many technical skills that they require are sourced from the MRO sector. This in turn represents a short-term challenge to the MRO sector in terms of staff retention, given the higher pay levels available in the leasing industry. However, it may also increase the attractiveness of MRO-related careers in the long run. In terms of the availability of skills, most MROs surveyed reported that the lack of suitably qualified staff represented a significant or very significant challenge. This is shown in the figure below.

Figure 6.6: MRO Providers’ Views on Skills Related Constraints on Growth in MRO in Ireland


The skills shortages reported by MRO firms covered an array of skills, with a majority of firms reporting current/future skills shortages in many skills categories. This is illustrated in the next figure.

0% 25% 50% 75% 100%

Difficulties in recruiting/retraining ofqualified staff

Insufficient engineer and technician trainingcourses to service requirements

Lack of apprenticeship/training courses inoff-peak periods







Page 52

Figure 6.7: Percentages of MRO Providers who Deem There to Be Significant Skill Shortages


The rate of unemployment nationally has fallen rapidly, and is now close to pre-recession levels. This is likely to exacerbate the challenges faced by the MRO sector in attracting suitable qualified staff.

Figure 6.8: Overall Unemployment Rate in Ireland

Source: CSO. Rate of unemployment relates to ages 25-74

0% 20% 40% 60% 80% 100%

Other skill category

Part 147 Training Personnel

CAMO-related personnel

Experienced component maintenance technicians

Experienced component maintenance engineers

Project lead / check management personnel

Aircraft maintenance traineeships (Part 66 Cat A, sheet metal,composite, interiors etc)

Other aircraft maintenance qualified engineers

Aircraft maintenance apprenticeships (Part 66 Cat B)

Experienced aircraft maintenance technicians (unlicensed)

Part 66 Category B qualified engineers

Percentage of Respondents

Significant Skill Shortage Currently Expected Significant Skill Shortage in Future

0%

2%

4%

6%

8%

10%

12%

14%

16%

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

Jan

-16

Jul-

16

Jan

-17

Jul-

17

Jan

-18

Jul-

18




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The table below shows in more detail the views of firms on the adequacy of skills supply for the sector

in Ireland to handle new business. As can be seen, the industry is facing significant challenges in skills

recruitment across a range of occupations.

Table 6.4: MRO Providers’ Views on Future MRO Capacity and Capabilities in Ireland to Handle New/Additional Business

Adequate Skill

Availability Moderate Skill

Shortage Significant

Skill Shortage

Experienced aircraft maintenance technicians (unlicensed)

0.0% 12.5% 87.5%

Project lead / check management personnel 11.1% 11.1% 77.8%

Part 66 Category B qualified engineers 0.0% 25.0% 75.0%

Other aircraft maintenance qualified engineers 12.5% 12.5% 75.0%

Aircraft maintenance apprenticeships (Part 66 Cat B) 0.0% 28.6% 71.4%

Experienced component maintenance engineers 11.1% 22.2% 66.7%

Experienced component maintenance technicians 11.1% 22.2% 66.7%

Aircraft maintenance traineeships (Part 66 Cat A, sheet metal, composite, interiors etc.)

0.0% 37.5% 62.5%

CAMO-related personnel 12.5% 37.5% 50.0%

Part 147 Training Personnel 25.0% 25.0% 50.0%

Other skill category 0.0% 25.0% 75.0%



In this section we review the opportunities and challenges facing the MRO industry in the medium term. The key findings of this section are as follows:

❑ The main market driver for the MRO sector in the medium-term relates to the growth in the overall size of the aircraft fleet globally. Half of all respondents to Indecon’s survey of the sector reported this has having a very significant impact, which is consistent with the projected growth of the global fleet size of 61% from 2017 to 2037.

❑ The demand for maintenance and overhaul of older aircraft was cited as being significant or very significant by a large majority of respondents. The growing importance of ‘new generation’ aircraft, which are expected to have lower maintenance needs, was seen as only having a moderate impact.

❑ The geographic market with the greatest growth potential identified by market participants was concentrated on Ireland and the rest of Europe. The overall level of passenger traffic from Irish airports is currently increasing at a rate of 7% per annum. The smooth operation of airlines is greatly facilitated by access to MRO facilities locally.

❑ When asked which sub-sectors of the industry had the greatest growth potential, respondents reported that growth was going to be broadly based, with similar growth potential for cargo jet aircraft; end-of-lease aircraft in transition; and demand from scheduled airlines.




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❑ The potential from aircraft transitioning is ranked as the second most important in terms of growth potential. Irish lessors manage more than €100 billion in assets, 22% of the global fleet of aircraft and over 40% of the world’s fleet of leased aircraft. 14 of the top 15 lessors by fleet size globally have a presence in Ireland. The nature of the demand by this sector differs significantly from the demand from scheduled airlines in a number of respects. In particular, it is typified by less predictable demand patterns; there can be a greater diversity of aircraft make and model; and is typically higher-margin.

❑ Difficulties in recruiting/training of qualified staff, the cost of skilled labour, and price competition from international competitors in the MRO market were each cited by the largest majorities (of almost 85%) of responding firms as likely to represent either a very significant or a significant challenge/constraint on their business over the next five years.

❑ It is also notable that the cost of hangars and the level of commercial rates were each cited by 41.7% of MRO firms responding to Indecon’s research as likely to represent a very significant challenge/constraint on their business over the next five years, while 69% of firms cited shortages of suitable airside locations/hangars are likely to be a very significant or significant challenge/constraint. Aircraft overhaul and heavy maintenance MRO activities require access to suitable hangars at airside locations. The cost of building hangars can be very substantial and this may be prohibitive for a smaller-scale MRO. However, this does not necessarily represent a ‘market failure’ that requires rectification through Government policy.

❑ In relation to local authority commercial rates, some MRO providers have reported that commercial rates represent 6-10% of their indirect costs. The level of commercial rates is determined in part by the large size of hangars, and rates do not bear any relation to MRO revenues.

7 │ Recommendations to Support Future Development of MRO Sector



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7 Recommendations to Support Future Development of MRO Sector

7.1 Recommendations

Based on the detailed analysis and assessment set out in the preceding sections, Indecon has identified a number of specific recommendations in relation to policy and industry interventions to support the future development of the MRO industry in Ireland. These recommendations are set out in the table below and are elaborated upon the subsequent paragraphs.

Table 7.1: Recommendations to Support Development of MRO Industry in Ireland

Infrastructure Provision




Ecosystem






Enhancing Cost Competitiveness




Government Policy





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Infrastructure


The aircraft MRO industry requires specialised infrastructure to meet the requirements of its customers. In relation to heavy maintenance specifically, these activities require access to suitable hangar facilities to house aircraft when they are undergoing extensive and invasive processes. The precise requirements in terms of specifications for MRO hangars will be influenced by a range of factors, notably including the types of aircraft using the facility, the nature of MRO activities being undertaken and the pattern of demand for such services. MRO industry participants have indicated as part of Indecon’s research their expectation of significant growth in their businesses in the medium term, with over half of all firms surveyed forecasting that revenue growth will be in the region of 26%-50% growth. However, meeting this growth will require sufficient capacity in terms of infrastructure and access to specialist skills. Shortages in relation to suitable airside locations/hangars were cited by 69% of MRO providers responding to Indecon’s research as a very significant or significant challenge or constraint on their business development, while 58% of organisations reported that the cost of hangar infrastructure represented a very significant or significant challenge/constraint on the growth of their business in Ireland. The available capacity to service wide-body aircraft is seen as a very significant constraint in particular.

The scale and specialised nature of hangar infrastructure means that the level of capital expenditure required to construct new facilities can be very substantial (for example, some industry estimates suggest that a single wide-body aircraft hangar could entail investment in the region of €15-20 million). Unless such infrastructure is provided by other parties this requires an MRO provider to be of sufficient scale to generate a commercial return on a new hangar investment. This can be a major challenge for individual MRO firms. However, Indecon believes that unless there is investment in hangar infrastructure, the potential for the sector will be constrained. To address this challenge, and ensure that an adequate level and configuration of infrastructure is available to support the growth opportunities for the MRO industry in Ireland, innovative approaches should be explored on the financing of investments in new hangar capacity. In this context, we believe that continued emphasis should be given by the enterprise development agencies (IDA Ireland and Enterprise Ireland) to working with airports and bodies such as the Ireland Strategic Investment Fund (ISIF) and the European Investment Bank (EIB) to evaluate the potential for funding to support investment in new hangar infrastructure. Indecon accepts that such investments have to be commercially viable and there are state-aid constraints unless viability is established. Indecon would recommend that airport companies examine the possibility to provide greater flexibility in relation to ownership and leasing options for new hangars. As part of our review individual airport groups have indicated a willingness to consider structures to facilitate investment in such infrastructure.


Indecon notes that IDA Ireland and Enterprise Ireland have recently announced the welcome commissioning of an assessment of property options and capital costs associated with new MRO hangar development. This study inter alia aims to understand the current capacity and future demand for MRO services from Ireland, and will provide a basis to assess any investment in infrastructure to serve expected demand. The study will also examine options and associated cost considerations for building new hangars on a commercial basis. However, we understand that this research is subject to a tendering process. Regardless of the outcome of this, further assessment of




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the hangar and infrastructure facilities is required. This is directly aligned with our recommended approach and it is hoped that the analysis in this report will be of assistance to this initiative.

Given the significance of the availability of hangar infrastructure as a constraint on the future growth of the MRO industry in Ireland, it is important that this assessment is completed at any early stage and that a decision is made on the most appropriate options, including funding mechanisms, to support appropriate investments in new hangar capacity. This will primarily require decisions by airports, MRO firms and investors. Subject to meeting State Aid requirements there may also be a role for policymakers to facilitate such decisions.


Flexibility by airport companies concerning ownership and leasehold terms for investors in new hangars is likely to be one factor influencing future investments. However, Indecon fully accepts the need for airports to operate commercially and also to ensure that their overall mandates are reflected in their master-planning. However, we believe that there is merit in airports showing flexibility on whether they are willing to sell or offer long-term leasehold options on this issue in specific cases if this proves to be a critical issue in investment decisions on hangars.

Ecosystem


There is presently no significant presence of aircraft OEM companies in Ireland. Internationally, OEMs, which include Boeing, Airbus, Bombardier and Embraer as well as other niche OEMs, are increasingly expanding their presence in aftermarket MRO activities, and can offer complete lifecycle engineering and maintenance packages on the aircraft they manufacture. This includes MRO involvement from airframe OEMs as well as component OEMs. While OEMs may represent competition for some MROs in some areas of activity, such firms are likely to be competitors regardless of location. Overall, we believe that the presence of additional OEM operations in Ireland would be positive for the MRO industry. In this context, we would recommend that MRO providers work closely with the enterprise development agencies, including IDA Ireland, Enterprise Ireland and Shannon IASC, to continue to actively promote and market Ireland as a location for OEM investment and operations. While the attraction of the major OEMs in terms of investment in significant tier 1 primary manufacturing in Ireland is likely to be challenging, these organisations could be attracted to undertake tier 2 sub-system design and manufacturing activities, while smaller scale niche OEMs could also provide manufacturing or service operations that would strengthen the MRO market and wider aerospace ecosystem, and the overall attractiveness of Ireland as a location for investment in this area. Indecon recognises that the development agencies and Shannon IASC have been engaged in marketing Ireland as a location for aviation activities over recent years but continued focus on this should be pursued. In addition, IDA Ireland should also continue to seek to attract overseas firms and activities which can help increase the competitiveness of the Irish MRO industry.




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Ireland now plays a major role internationally as a centre for financing and leasing of aircraft as well as aircraft engines, with Irish leasing companies managing 22% of the global fleet of aircraft and over 40% of the world’s fleet of leased aircraft. Each year, about 2,000 aircraft globally are moved by leasing companies from one airline to another, which requires substantial work to meet the new company and regulator’s requirements14. Indecon’s research among MRO providers indicated that the potential from aircraft transitioning is ranked as the second most important driver of growth potential for MRO business, with 73% of firms judging that transitioning would provide growth in the next five years. Indecon’s assessment indicates that the nature of the demand for MRO from the leasing sector differs significantly from the demand from scheduled airlines in a number of respects, notably less predictable demand patterns, and the diversity of aircraft types, but also in relation to price, with work to transition aircraft being generally less price sensitive, thereby offering an opportunity MRO firms which can establish a business model that caters for the lease transition market. For the MRO industry in Ireland to avail of the opportunities around aircraft end-of-lease transitioning, there is merit in the development of closer ongoing linkages between MRO providers and leasing companies, particularly in relation to the sharing of information on timing of transition and scheduling of any associated MRO requirements. Indecon’s research found that 75% of MRO providers regard the provision of enhanced information from leasing companies on timing of MRO requirements as being very important or important. To support closer linkages, Indecon would recommend a greater role for industry representative bodies including Aircraft Leasing Ireland and the Federation of Aerospace Enterprises in Ireland. Indecon recognises existing initiatives which have been undertaken including the annual SILC conference in Limerick and existing linkages between lessors and various MROs and CAMOs. Indecon however, believes that mechanisms should be supported by the development agencies if required to assist in enhancing the sharing of information with the MRO sector while maintaining confidentiality for the leasing companies.



The availability of skilled labour has come to the fore as a key constraint facing the MRO industry in Ireland. This is evident in Indecon’s research among MRO providers, which found that difficulties in recruiting/retaining of qualified staff was cited by 85% of firms responding to Indecon’s research as representing a very significant or significant challenge/constraint on growth in their business in Ireland. In addition, 69% of firms also highlighted insufficient engineer and technician training courses to service requirements as being a very significant or significant challenge/constraint. The skills shortages reported by MRO firms covered an array of skills, with a majority of firms reporting current/future skills shortages in many skills categories. In any industry, the requirement for newly trained staff will be dictated by the need to service additional demand as well as the need to replace departing staff (staff turnover). As previously noted, MRO firms are predicting strong growth in demand for their services over the next five years. Responding to this opportunity will require sufficient supply of engineers, technicians and other skilled staff. In addition, analysis of the age

14 National Aviation Policy for Ireland.




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profile of licensed aircraft engineers indicates a potential issue concerning ageing of the workforce, which would signal the need to replace older workers who are reaching retirement.

The training of individuals to work in the MRO industry is understandably highly regulated. Training providers must have EASA / IAA Part 147 approval, while engineers and technicians who work on aircraft must be licensed under Part 66 of the EASA regulations to undertake MRO work to specified type ratings. At present in Ireland, the primary channel through which new entrants to the MRO industry are trained is through the joint industry-state provided apprenticeship. This is overseen by the state training body, SOLAS. The ‘L6 Aircraft Mechanics Apprenticeship’ consists of four on-the-job phases with an approved employer and three off-the-job phases in an educational organisation. In 2018, a total of 74 new apprentices registered, which Indecon understands represents full utilisation of available capacity at present. While the number of apprentices has increased significantly since 2017, this is a key area where we believe additional investment will be needed to expand joint industry-state apprenticeship training capacity if the skill requirements of the MRO industry are to be met over the medium to longer term. In addition to meeting demand for core training, it is important that additional training capacity also reflects the particular areas of MRO growth projected by the industry.


A particular aspect of training provision for staff working in the MRO industry which has been highlighted by MRO providers as part of Indecon’s research concerns the timing of training during the year. Specifically, this relates to the reported misalignment between the seasonal patterns of MRO demand, which peaks during the winter months, and the timing of class-based training, which also takes place during the winter period. The lack of availability of apprenticeship/training courses in off-peak periods was cited by 92% of MRO firms responding to Indecon’s research as representing a challenge/constraint on business growth.

This is an area where we believe innovative approaches could be examined in relation to reviewing the structuring and timing of delivery of apprenticeship class-based training components in particular, so that the latter is better aligned with the seasonal requirements of the MRO industry. However, it is noted that significant changes in relation to the timing of college/school-based training components are constrained by the structure of the academic year. One approach to mitigating the impacts of the existing training delivery structures which we believe should be given consideration concerns the development of additional approved training courses provided by Skillnet Ireland or other private providers. Currently Skillnet Ireland’s aviation Skillnet provides a range of specialised industry-state co-funded aircraft general familiarisation and other programmes, and these can be structured to take place at times of the year which best suit staff working in the MRO industry or in the leasing sector. The possibility of expanding such provision should be examined by Skillnet Ireland jointly with the MRO sector and with regulatory bodies. The objective of this recommendation is to complement existing training supports and ensuring closer alignment with the seasonal pattern of MRO demand.




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Cost Competitiveness


Ensuring cost competitiveness is of critical importance in an industry such as aircraft MRO, where business is heavily influenced by cost per hour of service provided in what is a highly competitive and globalised market. Cost efficiency and competitiveness in the MRO industry is influenced by a range of factors, including but not limited to scale of operation, labour costs and non-labour costs. Organisational efficiency in the operation of hangars and other facilities will also play an important role in this context. The enterprise development agencies, including IDA Ireland and Enterprise Ireland, offer and/or promote a wide range of grant- and tax-based instruments to help support the development and competitiveness of their client companies. Indecon’s review of the existing utilisation of these supports indicates, however, that there have only been limited supports provided to MRO firms.

As part of Indecon’s research, the views of MRO industry participants were sought in relation to the importance or otherwise of the availability of different state-provided enterprise supports for the expansion of their business. The provision of industry-led training programmes, increased apprenticeship initiatives, management development training, and financial assistance with the cost of training, were each cited by over 90% of MRO firms as representing very important or important enterprise supports, while provision of R&D and Innovation supports was highlighted by 85% of firms as being very important or important. A further area of importance for MRO providers concerns measures to enhance the international profile of the Irish MRO sector. Indecon understands the State Aid and other constraints on providing enterprise supports. However, given the importance of cost competitiveness in the globalised MRO industry, it is also important that the enterprise development agencies continue to ensure that MRO firms are fully aware of the range of supports available and their potential benefits, and that if adjustments are needed to align supports with specific sectoral requirements this should be undertaken as it is essential that supports are relevant for the sector. In addition to training and marketing supports, enterprise supports include grants for R&D and innovation, which could play a greater role in underpinning MRO investments to enhance productivity and competitiveness. There may also be potential for some tax incentives such as EIIS to support the expansion of MRO firms or businesses providing infrastructure to the sector.


The level of local authority commercial rates was cited by over two-thirds (69%) of MRO providers responding to Indecon’s research as representing a very significant or significant challenge/constraint on their business over the next five years. According to the National Civil Aviation Development Forum, some MRO providers have reported that commercial rates represent 6-10% of their indirect costs. The level of commercial rates is determined in part by the large size of hangars, and rates do not bear any relation to MRO revenues.

Given the importance of revenue from commercial rates in the funding of local authority service provision, the provision by local authorities of general reductions in commercial rates for the MRO firms is likely to be strongly resisted by local as well as central government, as other sectors would seek similar treatment and this could seriously undermine local authorities’ funding. However, there




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is potential for a recent initiative initiated by the Minister for Housing, Planning and Local Government to provide a basis to support new hangar and other infrastructural investments by MRO providers. This relates to the Local Government (Rates) Bill 2018, which proposes to modernise and consolidate the existing legislative framework governing commercial rates in Ireland. Significantly, the Bill provides for the introduction of targeted rate alleviation (waiver) schemes to support specific national and local policy objectives. Section 14 of the Bill provides that “local authorities may introduce a scheme to provide a waiver for all or a portion of the rates due in order to support the following:

❑ The implementation of the National Spatial Strategy;

❑ The implementation of a development plan;

❑ The implementation of a local area plan;

❑ The implementation of a local economic and community plan.”15

The Bill indicates that “the making of such a scheme will be a reserved function and the local authority cannot make a scheme until the adjustment period ceases in respect of its administrative area. The Minister may make regulations specifying the maximum percentage of rates that may be waived, the period of such waiver and any other matter necessary or expedient”.

While the Bill has yet to proceed to enactment, this initiative does suggest that there is potential, in the context of the objectives of the National Aviation Policy, to utilise commercial rates alleviation/waiver to support MRO hangar investments in instances where such investments are aligned with national and local spatial and economic planning objectives. Indecon would therefore recommend that progress on this initiative is closely monitored by policymakers, the enterprise development agencies, local authorities and MRO organisations.


Another area where we believe the MRO industry in Ireland could secure enhanced competitiveness concerns the benefits of co-operation between MRO companies. This can be achieved without compromising the requirements of the Competition Act and reflects the benefits of clustering of companies. Some co-operation currently exists but there is potential for additional initiatives in a range of areas including joint purchasing of services and raw material inputs, training supports and the sharing of best practice. While MRO providers’ cost base is heavily determined by labour costs, overall costs also include very significant non-labour costs in relation to areas such as components and other raw materials, as well as various non-labour services. As the MRO industry in Ireland is comprised of a relatively small number of firms, and including only 3-4 larger-scale providers, the ability of the majority of firms to individually achieve economies through purchasing of larger volumes is constrained. However, Indecon believe that there could be potential for the industry to secure cost savings and enhance competitiveness through group purchasing of raw materials and services, as well as through sharing of best practice on specific areas of business development.

15 Local Government (Rates) Bill 2018. Bill No. 96 of 2018. Houses of Oireachtas Bill Digest. See: https://data.oireachtas.ie/ie/oireachtas/libraryResearch/2018/2018-10-26_bill-digest-local-government-rates-bill-2018_en.pdf.

https://data.oireachtas.ie/ie/oireachtas/libraryResearch/2018/2018-10-26_bill-digest-local-government-rates-bill-2018_en.pdf




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Government Policy


Indecon’s assessment represents the first independent examination of the economic characteristics and contribution of the MRO industry in the Irish economy. The MRO sector in Ireland has a strong international reputation and provides a significant contribution as an export-focused sector. Indecon’s analysis indicates that the sector supports over 2,600 high-skilled jobs directly and over 4,500 jobs overall across the economy. Importantly from the perspective of regional development, many of these jobs are located in Shannon and other regional locations outside the Dublin area.

Our research among MRO providers in Ireland indicates that firms are projecting strong growth in their businesses over the medium term, driven by continued growth in the global aircraft fleet, as well as by demand for maintenance and overhaul of older aircraft and components, and opportunities arising from airlines transitioning by aircraft leasing companies. The sectors ability to continue to generate new business will, however, be dependent on maintaining Ireland’s market share in what is a highly competitive, globalised industry as this will require ongoing priority by the Government in supporting the sector.

7.2 Overall Conclusion

Indecon’s assessment represents the first independent examination of the economic characteristics and contribution of the MRO sector in the Irish economy. The assessment finds that the MRO sector in Ireland provides a significant contribution as an export-focused sector, supporting 2,600 high-skilled jobs directly and over 4,500 jobs overall across the economy, with many of these jobs in Shannon and other regional locations outside the Dublin area. Indecon’s research also notes that MRO firms in Ireland are generally positive with regard to growth prospects for their business over the medium term. The sector’s ability to continue to generate new business will, however, be dependent on maintaining Ireland’s market share in what is a highly competitive, globalised industry. This will require priority by the Government in supporting the sector, as well as a focus by individual firms to enhance competitiveness and to respond to changing market opportunities. This report sets out a number of recommendations in relation to policy and industry interventions, which, if implemented, have the potential to assist in the development of this important high-skilled sector.

Annex 1 │ Listing of Organisations Consulted



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Annex 1 Listing of Organisations Consulted

List of Organisations Consulted

Government Departments

Department of Transport, Tourism and Sport

Department of Education and Skills

Department of Foreign Affairs and Trade (Trade Division)

State Agencies

Irish Aviation Authority

Expert Group on Future Skills Needs

IDA Ireland

Enterprise Ireland

National Treasury Management Agency / Ireland Strategic Infrastructure Fund

Higher Education Authority

SOLAS

MRO (Part 145 and CAMO certified organisations, including Airlines)

Aer Lingus

Airbus Helicopters International Services Ltd.

Ryanair DAC

Aero Engines Ireland

Aero Inspection International

ASL Airlines (Ireland) Ltd

Atlantic Aviation Group

ATA 25

CityJet DAC

Dublin Aerospace

Eirtech Aviation Services Ltd

EirTrade Aviation Ireland Ltd

International Aerospace Coatings

ND Technologies Ltd

TEAM Accessories (Dublin)

Technical Engineering & Tooling Services Limited

Camtronics MRO Ireland

Lufthansa Technik Shannon Limited

Lufthansa Technik Turbine Shannon

NAAS Triumph

CAE Parc Aviation Engineering Services

SR Technics Airfoil Services Ltd

Starlite Aviation Group

STS-Ujet Interiors Ltd

Stobart Air

TRS Global Ireland

Annex 1 │ Listing of Organisations Consulted



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List of Organisations Consulted – Continued

UTC Aerospace Systems (Shannon)

Vortex Aviation Ireland Ltd

Atlantic Aviation Group

Eirtech Aviation Services Limited

Gain Jet Ireland Limited

Haotong Aerotech Ltd.

Part M Aviation Ireland Ltd.

Santos Dumont Technical Services Ltd.

SR Technics Aircraft Design Services Ltd

Westair Aviation Ltd

Airports/County Councils

DAA

Ireland West Airport Knock

Kerry Airport

Shannon Group, incl. International Aviation Services Centre (IASC)

Waterford Council

Aircraft Leasing Companies

AerCap Ireland Limited

GECAS

Genesis Aircraft Services

SMBC Aviation Capital

Education/Training Providers

IT Carlow

University of Limerick

Aertrain

Aviation Skillnet

IBEC Federations

Aircraft Leasing Ireland

Federation of Aerospace Enterprises in Ireland

OEMs/Aircraft Manufacturers

Boeing Global Services