A fast-growing revenue stream to watch at Atlanta-based Delta Air Lines doesn’t have to do with Sky Clubs, new routes or airplane seats.
It has to do with maintaining and fixing engines and airplane parts for other companies — a line of business known as third-party maintenance, repair and overhaul — or MRO.
“That business could eventually approach a $5 billion run rate business for us,” Delta CEO Ed Bastian told The Atlanta Journal-Constitution last year, calling it a “great opportunity.”
It has grown so much that Delta began individually reporting the segment’s performance in its financial results for the first time last week.
MRO revenue in the first quarter more than doubled over the same period last year — the team’s best quarter ever. It expects to bring in a record of more than $1 billion by the end of the year.
Marc Meredith, the segment’s chief commercial officer, said it is “booming.”
In a few years, it could be $2-3 billion annually, he said, and yes, someday, $5 billion.
Credit: arvin.temkar@ajc.com
Credit: arvin.temkar@ajc.com
While still a fraction of Delta’s 2025 total revenue of $63 billion, it’s business more insulated from things like jet fuel price spikes. And it has higher margins than plane tickets, Meredith said.
Today, Delta says it is the “largest MRO provider in North America,” in terms of volume of work.
Meredith said the hope is to become the largest in the world.
High hopes
Delta — like most airlines — has been maintaining and repairing its own planes and engines for basically as long as it has been flying them.
Today, the airline’s maintenance arm of about 13,000 employees between Minneapolis and Atlanta is known as “TechOps.”
But the external work for other customers began 25 years ago.
It started out as, “‘Well, we have some extra capacity, so we could do that. We could bring one (in). You have the people. You’ve got the room. Let’s do it,’” recalled John Laughter, Delta’s outgoing chief operating officer and president of TechOps. He started as an engineer in the division three decades ago.
“Then we got in the mindset that, we’re going to do this as a real business and put structure around it,” he said.
Credit: abbey.cutrer@ajc.com
Credit: abbey.cutrer@ajc.com
Top executives have big plans for that business, after growth stalled during the COVID-19 pandemic.
The disruption forced the Atlanta-based airline to prioritize its own engines and aircraft, given supply chain delays and slow deliveries of new planes.
But last year was the first in which the external business saw growth since the pandemic.
“I think over the next several years, we’ll continue to see double digit growth easily on a year-over-year basis in that business,” Bastian told the AJC.
Laughter has heard these sky-high hopes for MRO for several years.
And while they don’t have an exact road map to it, he said, “There really is momentum here to do something much bigger than what we’re doing today.”
Engine overhauls and other big jobs
Most airlines, especially legacy carriers, have varying degrees of in-house maintenance, said Dan LeBlanc a partner at McKinsey & Company’s travel, logistics, and infrastructure practice and leader of its global MRO service line.
“It’s because they had to do it for themselves for decades,” he said.
Today, “Some choose to only do it for themselves. Others also choose to serve other airlines.”
Notably, Delta stands alone among its biggest U.S. competitors in the contract MRO space.
Its largest airline MRO counterparts are abroad: Lufthansa Technik and Delta partner Air France-KLM.
Credit: abbey.cutrer@ajc.com
Credit: abbey.cutrer@ajc.com
The services they provide are generally the longer-duration maintenance jobs like engine overhauls and long-term repairs, not the quicker “line maintenance” that happens on parked airplanes constantly while in service.
Laughter said the strategic focus for Delta’s MRO work is on engines and components, items that are individually shipped to the airline’s Atlanta and Minnesota shops.
Components refers to all kinds of parts of an airplane, from landing gears and brakes to coffee machines. TechOps has 3D printing capability for things like cabin interiors and parts, tools and other aircraft parts.
Bringing in entire planes for line maintenance generally takes up too much space to be profitable, he said.
But the company does have certain contracts for broader maintenance work — including for the U.S. military, he noted.
That’s why high-profile government planes are occasionally spotted parked at Delta TechOps.
Credit: Jason Getz / Jason.Getz@ajc.com
Credit: Jason Getz / Jason.Getz@ajc.com
The advanced planning required for engine and component repair is also what neutralizes any risk that Delta might have to choose between its own engine or part repair, and a customer in urgent need.
The bigger maintenance tasks take weeks and are planned months in advance.
To properly offer engine maintenance, Delta has invested in certified “shops” for the world’s top engine makers, making it a registered third-party maintenance provider for CFM International, GE Aviation, Pratt & Whitney and Rolls-Royce.
Their employees are present on site, too, as the companies retain control over their engines’ maintenance for their life cycle.
Delta has added lines of business to maintain eight new engine models in the last decade — two of them the airline itself doesn’t even use — including both older and more fuel-efficient “Next Gen” engine technology.
“While there’s Delta engines in there, really those shops have been built to work on whatever engine comes,” Laughter said.
Credit: arvin.temkar@ajc.com
Credit: arvin.temkar@ajc.com
‘Barriers to entry’
Having the space and capacity to do this kind of work — like taking tens of thousands of pieces of an engine apart to make sure it’s in tiptop shape — is expensive.
It requires highly skilled labor, space and the investment in the engine shops.
One of the company’s three massive concrete-walled engine test cells, where engines are turned on and tested at full blast, is considered the world’s largest. It cost $100 million to build.
The expertise in particular is not easy or cheap to build up, says David Thompson, TechOps’ senior vice president.
Delta TechOps was established in 1929, four years after the creation of Delta Air Lines.
“It’s a complicated business, and barriers to entry are really high from complexity, investment, intellectual property,” he said. “I think if you don’t have the talent already … then it’s really hard to start from the ground up.”
The labor market is fierce, with companies including Delta and metro-area competitors like Lockheed Martin reaching into technical colleges and high schools to cultivate talent.
Full-time aviation maintenance technicians at Delta can earn up to $140,000 in annual compensation, a spokesperson said.
Credit: arvin.temkar@ajc.com
Credit: arvin.temkar@ajc.com
But leveraging TechOps’ in-house experience for its customers is something that separates Delta from non-airline maintenance providers, Laughter said.
“We are seeing 900+ Delta aircraft worth of product flow through the shop. We have tremendous scale and experience, and so we get to bring our own ‘on wing’ experience into what we’re delivering for a third-party customer,” he said.
There are other advantages to an airline offering external MRO work, LeBlanc said, though he declined to comment specifically on Delta’s operation.
“You amass a lot more knowledge in troubleshooting, building centers of excellence, all the good things that come with scale,” he said.
“If you add twice as much of the work coming from third party, you just have twice as much intelligence information, data points to be able to feed that back into the overall repair ecosystem,” he said.
It also enables a uniquely close relationship with the very same engine manufacturers that Delta is also a customer of.
Meredith, who previously worked for engine makers, confirmed Delta “can command a level of deal from the (manufacturers) and a level of closeness” that is an advantage.
For example, the airline negotiates for access to internal technical data, he said.
Finally, the MRO work also benefits its own flying operation, Delta argues.
“We see issues in real time, on real aircraft and that experience sharpens our ability to drive reliability, on time performance and continually enhance our capabilities,” Delta spokesperson Stephanie Stinn told the AJC in a statement.
Credit: abbey.cutrer@ajc.com
Credit: abbey.cutrer@ajc.com
One issue for legacy airlines, LeBlanc noted, is they can be burdened by the complicated “legacy systems” used for decades.
The industry is still using a lot of paper, he said, and there’s a lot of opportunity for generative artificial intelligence to revolutionize it.
Thompson said Delta also sees opportunity with AI in maintenance analytics and is starting to integrate the technology into decision-making.
Credit: arvin.temkar@ajc.com
Credit: arvin.temkar@ajc.com
The path to $5 billion
Laughter said between its Atlanta and Minneapolis locations, TechOps has the space to at least double its current capacity.
It already has allocated the space to build another engine test cell in Atlanta in the years ahead.
But to get past $2 billion-$2.5 billion annually, “we need other solutions,” Meredith said.
Some avenues to $5 billion include more components work, new piecemeal engine parts work and additional work with the military, he said.
They’re also having “ongoing discussions” with international partners like Air France-KLM and Korean Air about ways to grow together, he said. And there’s the possibility of “some kind of merger or acquisition activity.”
The money spent on an in-house maintenance operation is the key risk for airline MROs in a famously low-profit-margin business, said Bijan Vasigh, a business professor at Embry-Riddle Aeronautical University.
It can amount to a “barrier to exit” and leave airlines vulnerable, he said.
“There’s a balance between fixed costs and variable costs. Some airlines don’t have that much investment in equipment, hangars … they pay for mechanics and parts.”
That makes using outside maintenance providers “much more attractive.”
LeBlanc noted another risk for an airline MRO is it must compete, capital-wise, with the airline’s core business and things like new plane purchases.
“The airline has a finite amount of resources to deploy. Does maintenance get that level of attention?”
Meredith acknowledged there is “always a risk.”
“But we’re trying to de-risk that with continuous improvement on the operations side” as well as their growth plans.
For now, MRO has Delta executives’ attention.
Chief Operations Officer Dan Janki told investors in January, when he was chief financial officer, that even though Delta has “fed” MRO capital, “it’s one of those things that you just have to consistently stay after.”
“We’re quite excited about it. We do think it is one of those elements that truly is unique to Delta.”
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