Meggitt – servicing behaviour & coronavirus impact

Aerospace components market facing turbulent times

The specialist provided estimates for EBIT margins on equipment and aftermarket servicing and spares. In general, there are low margins for some divisions, with the company making money predominantly via the aftermarket. One exception, however, is engine systems, where Meggitt can add value through OEM sales and servicing.

When asked why the company’s market share in aftermarket servicing is so low, it was pointed out that “it’s just the way that Meggitt has developed”. Many of the companies that Meggitt has acquired did not have MRO (maintenance, repair and overhaul) facilities. But this was made a focus during the restructure last year, and the company was seeing success here pre-coronavirus.

Meggitt’s market exposure varies according to plane sizes. For engines, “I would say probably 80% narrow-bodies, 20% wide-bodies”. There’s a similar story for braking, with most exposure laying with Airbus owing to Meggitt’s single-source deal for the A220. The specialist also gave their thoughts on Meggitt gaining or losing share as a result of coronavirus in dual-supplier models.

Once the COVID-19 situation settles, there’s a chance that OEMs will seek price negotiations. “The problem that Meggitt always has in that sort of market is the competitors, in general, are bigger companies than Meggitt are and hence, often have deeper pockets.” Another issue is that, in this industry, once prices are reduced these are seen as the new norm and it takes several years to return to former levels.

To access all the human insights from Third Bridge Forum’s Meggitt – Servicing Behaviour & Coronavirus Impact Interview, click here to view the full transcript.