How I See IT – 2014New Year’s resolutions and annual predictions are like earnings forecasts; the longevity of their accuracy is often short lived. Although the lifespan of predictions may be short, here are some of my predictions for the aerospace and aviation industries for 2014:

1. Most airlines reach sustainable profitability. Decades of analysis show a high correlation between country gross domestic product and air travel, a trend we continue to see in 2014 as the global economy continues to recover from the financial meltdown of 2007.
2. Fuel prices will remain relatively low and stable. Fuel prices are not expected to increase[i]. Of course, the problem is that the benefit of an improving global economy also causes increased demand for oil and raises jet fuel prices.
3. The rosy future for operators overall does not necessarily translate into a rosy everywhere. Air carriers in India will continue to suffer from the combination of a weaker economy, too many carriers providing excess capacity, and laws that increase costs while preventing direct foreign investment. Australia is another country where government regulations and over capacity are resulting in air carrier financial losses.
4. Merger mania is over. Mergers in the Americas seem to be complete with the AA/US and LAN/TAM marriages. With the exception of Alitalia, Europe, too, seems to have finalized its M&A consolidations. For the rest of the world, consolidation and its associated capacity discipline are unlikely, as carriers will be bolstered by good enough financial returns to avoid bankruptcy but not good enough to spur M&A.
5. The short-term outlook for providers of MRO services is positive. Forecasts of MRO spend, measured in labor hours, material and overhead, are strongly correlated to increased asset utilization, labor and supply costs as well as asset lifecycle stage. The continued introduction of new-generation aircraft will, however, put downward pressures on the industry as demand wanes.
6. MRO skill shortages continue to increase. Technologically advanced new-generation aircraft require higher skills in an industry already suffering from aging demographics and geographic skills shortages. This trend, coupled with the cost of ferrying aircraft, will level the offshore outsourcing playing field and, to some degree, result in repatriation of work both on-shore and in-house.
7. OEMs’ land grab for increased aftermarket revenues will accelerate via control of IP. OEMs’ move in to the more lucrative aftermarket by bundling asset acquisition, financing, logistics and maintenance are commonplace. OEMs are now increasing the intensity of IP protections and IT mandates on new-generation aircraft. They are betting on the long view that affordable bundling of asset acquisition, financing, logistics, and maintenance today will reap high margins in the coming decades and lock in cash-strapped operators. The expansion of MRO Networks and OEMRO joint ventures continue to negatively impact fully independent, non-airline affiliated MROs.

So what do these predictions mean for MRO IT in 2014?

• Mobility solutions that increase labor productivity and dispatch punctuality will become ubiquitous.
• Service parts optimization technologies that improve parts distribution, turn times, and pooling will continue to see increased usage.
• As OEMRO ventures expand, integration of Product and Service Lifecycle Management technologies will increase.
• Mergers are an impetus to replace mainframe legacy systems resulting in enterprise-wide IT modernizations.
• B2B integration of MRO business networks will continue to increase demand for MRO IT networks with modern industry data exchange standards (SPEC2000, S1000D, S5000F).

Or at least that’s how I see IT.