Strategic Analysis of Military Maintenance, Repair, and Overhaul (MRO) in Europe

In response to the changing geopolitical environment, European NATO countries have increased defense budgets, a significant share of which are expected to go to new equipment. As munition stocks grow and existing equipment ages, mission readiness—the ability to deploy military assets for their intended use—is an increasingly important priority for countries. This, in turn, is likely to boost demand for maintenance, repair, and overhaul (MRO) services. But it will be no simple matter for industry stakeholders to meet this growing demand in an era of tightening operations and maintenance budgets, supply chain constraints, and talent shortages.

In this article, we build on a proprietary survey of military MRO experts in the air domain to explore how MRO providers can improve their operations to generate a mutually beneficial environment for MROs, OEMs, and military operators (see sidebar, “Our analysis”). We also consider how MRO providers who do not currently operate in this space could broaden their service offerings, not only to capture additional value but also to contribute to the defense industrial capacity in Europe.

Increasing equipment stocks: What does this mean for MRO partners?

Since the invasion of Ukraine in 2022, European NATO countries have announced increases in defense budgets amounting to an additional cumulative €700 billion to €800 billion by 2028—an increase of more than 60 percent compared to their pre-2022 baseline. The largest share of this additional budget is likely to be allocated to equipment acquisitions to help replenish Europe’s low stocks. Countries are already making new purchases—for example, in the air domain, Germany purchased 35 F-35 aircraft for approximately $8.5 billion in 2022.

Across the 15 European countries with the largest air forces, 26 percent of all in-service aircraft were purchased before 1990. With aging equipment in service for longer, it requires significantly more MRO services. Adding to this challenge is an expected increase in the complexity of fleets as new aircraft transition in, along with a shortage of trained personnel in the aerospace and defense industry. As countries seek to maximize the return on their defense spending, increasing the availability of military air platforms in a cost-effective way will become crucial.

However, our survey data indicates that turnaround times in military MRO still lag behind those for commercial aircraft. By taking a proactive stance in the changing geopolitical environment, MRO providers, whether they already serve military platforms or not, could meet growing customer demand and thereby contribute to European security. Both new players and existing military operators could improve their efficiency through strengthening processes and adopting digital solutions—thereby enhancing operations.

The effect of aging equipment and decreasing MRO budgets

More than half of the industry experts surveyed expect aging and heavily used aircraft to be the top drivers of future MRO demand growth as older platforms will require more intensive—and expensive—MRO (relative to the original platform cost) as they approach the end of their intended lifespan.

However, while European NATO countries are allocating a greater share of the budget to equipment acquisitions, the operations and maintenance (O&M) budget for existing equipment is relatively stable, increasing by only one percentage point.

From 2015 to 2020, European NATO countries’ O&M spend was about $1.4 for every dollar spent on equipment; in the 2023 to 2028 period, this ratio is expected to be closer to $1.0 for every dollar spent on equipment, despite the average aircraft age already having increased from 23.0 years in 2014 to 25.8 years in 2024. Improving mission readiness with this lower ratio would only be feasible if required maintenance for new aircraft is significantly lower during their lifecycle, or maintenance experiences a step-change in efficiency.

Commercial MRO capabilities could be applied to military

A comparison between military and commercial MROs shows considerable performance differences, indicating that military MRO providers could look to their counterparts to potentially increase their effectiveness and efficiency.

According to the air-domain MRO experts we surveyed, military aircraft spend an average of 40 to 50 days per year undergoing scheduled maintenance, compared to 25 to 35 days for commercial aircraft—with some cases exceeding this average significantly. An additional 30 to 40 days a year are spent on unscheduled maintenance in comparison to commercial aircrafts’ 10 to 20 days. MRO turnaround times for military aircraft often exceed the planned number of days: Our experts surveyed estimate that the planned turnaround time for the C-Check equivalent for military platforms is exceeded, on average, by 10 to 40 percent. However, it should be noted that in addition to differences originating from the bespoke nature of military equipment, such as the complexity of cabin maintenance or the challenges associated with defense-specific equipment, there are also obvious mission-related differences that make a direct comparison between commercial airline operations and defense aircraft missions challenging.

However, lessons from commercial MROs can still be incorporated into military MRO planning to maximize availability. These include taking full advantage of an aircraft’s downtime, reducing turnaround times of standard checks, and improving on-time-performance (OTP) of checks:

• MRO providers could optimize work packages to balance green time and ground time. This means comparing scenarios of performing tasks prematurely (giving away green time but bundling MRO activities) versus adding additional ground events (maximizing green time but reducing aircraft uptime).
• MRO providers could increase productivity to reduce turnaround times of standard checks. They could learn from best practice commercial MRO providers to increase density (the number of work package hours performed per hour) and enhance labor productivity which is typically analyzed by looking at the “hands on metal” (HoM) of the qualified technicians. Based on expert interviews, we learned that productivity in defense is often more than 20 percent lower than in commercial settings. HoM could be improved by increasing operational steering.
• The experience and process standards of commercial MRO providers could help military MROs improve the OTP of their checks by focusing on aircraft leaving a check at the planned time. An OTP of over 90 percent is considered best in class.

In recent years, the commercial aviation market has seen even more volatility and unpredictability. Many commercial MROs have, therefore, gained relevant expertise to address these challenges, namely, supply chain disruptions, increasing costs of spare parts and raw materials, and a competitive talent market. However, these issues are becoming increasingly relevant for the military MRO sector as well and thus present an opportunity for commercial MRO providers to step into this space. By expanding their business into defense, commercial MRO providers could turn their expertise into a value-generating, competitive advantage.

How MRO providers could improve efficiency

The experts in our survey identified four root causes as having the greatest impact on effectiveness and efficiency in military MRO. These, and potential measures to address them, are:

Spare part availability

The most cited reason for impeded efficiency is spare part availability, often affected by supply chain disruptions or insufficient inventory planning. To overcome this challenge, MRO providers could include flexibility in collaboration agreements, with an improved split between partners. Collaboration with other MROs could improve their data platforms to establish an “early warning system,” achieved by monitoring supply chains (such as tracking change requests and procurement anomalies to identify issues) while also training staff in scenario and risk analysis.

Additional service provider involvement

Another cause of inefficiency cited is when additional technical expertise needs to be pulled in during maintenance from the airframe or engine OEMs—for example, when advice is needed on heavy structural findings. To ensure shorter waiting times and limited disruption, MRO providers may reassess their working relationships with OEMs. In best cases, response times and service levels are contractually agreed with the OEM during the initial purchasing process.

Unexpected findings

In maintenance, unexpected findings are common and can lead to inefficiencies. These include increased waiting and process times due to additional coordination requirements (say, with the customer); unexpected demand for resources, such as spare parts or materials, critical capabilities, or machine availability; and the postponement of relevant nonsafety concerns, leading to an accumulation of issues and schedule overruns, for example, in base maintenance. Improving practices for managing unscheduled maintenance can improve these inefficiencies. Commercial MROs have established best practices and technologies: They use stochastic models and predictive maintenance linked to inventory management, which can reduce waiting times and increase equipment turnaround times. Military MRO providers could adopt similar solutions.

Lack of talent

The aerospace and defense industry is struggling with a workforce shortage, largely due to an aging workforce and recruitment challenges. Many commercial MROs have recognized these talent challenges, taken steps to overcome them, and could advise military MROs on talent strategies, as well as explore collaborative setups. For example, commercial MROs have designed recruiting programs to attract new talent by improving their employee value propositions, enhancing monetary and qualitative conditions to attract suitable candidates, and sourcing talent from new locations. Similarly, they have addressed retention challenges through improved career journeys, offering clear development paths and new capabilities, and incentivizing long-term loyalty. However, it should be noted that commercial MROs are more flexible in crafting talent paths and adjusting salaries and nonmonetary perks compared to military MRO providers.

By applying the suggested levers to improve military MRO, European NATO countries could potentially reduce the investment needed in new aircraft and increase the speed at which they reach their defense capability goals. For example, in a hypothetical calculation, increasing equipment availability by 10 percent would be equivalent to gaining 40 additional aircraft.

The role of digital in improving MRO efficiency

Given the potential of new technologies to improve operational efficiency and effectiveness across all industries, we asked the MRO experts for their perspectives on digital solutions in military aircraft MRO. (For further information on gen AI in aircraft MRO, see “The generative AI opportunity in airline maintenance.”)

They considered predictive maintenance to be the most impactful technology. Since AI collects and analyzes asset condition data to identify patterns and algorithms that can predict when failures may occur, predictive maintenance can help maximize asset operability for military MRO providers and allow components to be replaced or repaired before they fail.

Half of the respondents whose organizations have adopted digital reported that revenues increased by over 5 percent and engineering productivity by over 10 percent. More than a quarter of respondents indicated they have realized around a 10 to 20 percent reduction in maintenance costs, enabled through digital.

Improved military MRO could benefit industry stakeholders

Enhancing military MRO capabilities could be a mutually beneficial opportunity for industry stakeholders, including MRO providers, OEMs, and operators or customers, such as ministries of defense (MoDs).

MRO providers: Based on our survey, we learned that air forces have reduced their in-house MRO spend by approximately 5 percent over the past ten years, with both OEMs and commercial MRO providers benefitting. Commercial providers could further expand their market share by broadening their service offerings for the military market and applying advanced capabilities—securing new and potentially countercyclical revenue streams and even opportunities to design and test new solutions or products. Market-entry strategies could be tailored around specific aircraft platforms where MRO providers have the deepest capabilities or for countries that have sufficient fleet size and MRO budget and are open to engaging with new entrants. Actively competing for this business, however, may require commercial MRO providers to consider partnerships with another market incumbent, a joint venture, or M&A activities.

OEMs: Airframe, component, and engine OEMs are already providing MRO services to operators but could consider strengthening their capabilities as described above. Depending on the service contract, this may improve profitability or competitiveness, particularly considering new market entrants or the expansion of commercial MRO providers. OEMs benefit from capitalizing on proprietary aircraft and engine data, which are required to train predictive and preventive maintenance solutions. Partnerships with commercial MRO providers could accelerate capability buildup or unlock capacity expansion.

Both MROs and OEMs: They could build new cornerstone capabilities that are expected to grow in demand over the next decade (for example, heavy vertical lift or air-to-air fueling). They could improve their coverage of types of systems—such as unmanned aerial vehicles and onboard avionic systems with advanced capabilities—which would require more efficient MRO services than currently predicted for sophisticated platforms. Additionally, they could develop solutions to provide services at decentralized, movable, and concealed hubs for armed forces that may need to adapt to new threats. This would mean deploying OEM personnel at a base that is neither a home nor a frontline one, enabling maintenance operations to be concentrated across platforms, thus increasing efficiency.

Operators: Some operators have already improved their MRO capabilities or achieved cost reductions through increased competition. Operators could further incentivize capability buildup through availability-based contracts (moving from cost-plus to performance-based) or transfer some control of their maintenance personnel and infrastructure to OEMs or MROs to free up capacity or optimize costs.

With the changing geopolitical landscape, European NATO countries are looking to rapidly increase their defense capabilities—effective MRO is a cost-efficient way to improve the availability of mission-ready systems. In the face of decreased military O&M budgets, MRO providers in the military air domain, as well as new providers, could capture this opportunity by taking steps to improve their operational efficiency. That could optimize fleets, reduce costs, and contribute to Europe’s security.