Headwinds On Horizon For Local Airline Repair Companies

Airline carriers like American and United are bringing planes back into use after years parked in the desert. Combine that with an improving economy and lower fuel prices, and the industry's profits are soaring.

That's good news for local companies like Northstate Aviation and Piedmont Propulsion Systems, which fix and maintain the planes. But will that momentum continue? Triad Business Journal's Katie Arcieri covers the industry and says a few factors could slow down the growth.

“You know, oil prices are rising and that could mean less demand for maintenance, repair and overhaul—like [when] airline carriers cut routes that are no longer profitable at say sixty dollars a barrel, as opposed to forty dollars a barrel,” says Arcieri. “You're also seeing the dollar rising, which means that it's going to be more expensive for U.S. airline companies to purchase services in the U.S.”

Arcieri says a shortage of skilled labor here, and aggressive new competition from maintenance, repair and overhaul shops (MROs) abroad may also force local MROs to dial back their growth forecasts. Mexico and some Central American countries have begun providing quality work that leaves their U.S. carrier clients satisfied, according to Arcieri.

“So they're getting better and better on their production turn times, and the dollar exchange rate is pretty favorable. So, that's where the worry comes from for companies like Northstate Aviation, based in Winston-Salem, which is competing head-to-head for work with those MROs. And they're seeing major companies like United Airlines, and Southwest [Airlines] putting big packages together [for] the competition in the South.” 

Meanwhile, the airline industry itself is set for another banner year in 2017. The International Air Transport Association expects the global airline business to reach a net profit of nearly $30 billion this year.