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Fri, Apr 18, 2003

Short-Term Outlook for Aero-Maintenance: Down Slightly (More)

SAI Forecast Says Decline of 4.5% Expected

Worldwide aviation maintenance, repair and overhaul (MRO) activity in 2003 will decline at least 4.5% versus last year based on a forecast just released by SAI -- Strand Associates.

The industry was a $42 billion business as recently as two years ago. This year it will barely make the $36 billion level and could drop to below $34 billion if world travel uncertainties do not improve. Bruce Strand, SAI CEO, in his opening day presentation at McGraw - Hill's annual North American MRO Conference today cautioned that any worsening of geopolitical events beyond the war in Iraq, SARS threat or new terrorist event could "literally tear the bottom out of this important segment of the airline industry."

"Airline restructuring, in or out of bankruptcy, is driving more MRO activity to lower cost non-airline vendors who specialize in MRO activity," according to Strand. "A decade ago, one third of world MRO activity was performed by more efficient specialist vendors. The split now stands at 50% airline and 50% MRO vendors."

SAI forecasts that North American MRO activity will experience modest growth over the next 10 years of between 2 and 3% depending upon the strength of the North American economy. Worldwide, annual growth will follow a 3% to 5% pace.

At the Latin American special session of the MRO Conference, Bill Bottoms, SAI Principal and Vice President, predicted that the outlook for Latin America is better than that for North America. According to Bottoms, "Latin America will experience expansion of its share of the world market from 5.0% in 2003 to 6.2% in 2013, reflecting a 5 to 6% annual growth rate."

(SAI is a Denver-based company specializing in strategic and technical aviation operations and financial consulting, as well as engineering support services and retained executive searches.)

FMI: www.teamsai.com

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