Although the civil aviation maintenance, repair and overhaul (MRO) market declined an estimated 7.5 percent to US$42.5 billion in 2010, with most service providers seeing a drop of 22-25 percent in revenue, analysts say the longer-term outlook remains positive.
Mike Bride, executive vice-president and chief financial officer of consultancy TeamSAI, said the global rebound in travel demand has renewed arilines’ fleet expansion plans. While the MRO industry typically lags behind recovery in the airline sector, service providers will soon feel the benefits of renewed growth.
To be sure, newer aircraft models coming into service will require less-intensive maintenance than older types. The introduction of new aircraft into the global fleet has pushed costs per aircraft down from US$2.4 million in 2008 to US$2.1 million in 2010.
Yet despite that, maintenance providers will inevitably see revenue expand as more aircraft return to the air, flying more frequently than in the lean times now coming to an end.
Bride predicted the MRO industry will bounce back in 2011, with 7.3 percent growth, settling to a compound annual growth rate of 4.4 percent up to 2020, when the market will be valued at about US$65.3 billion. The Americas and Europe will each account for 31 percent of the market, while the Asia-Pacific will account for 17 percent.
China will represent 9 percent of the global market, with the Middle East at 6 percent, Africa at 3 percent and India 2 percent. China, India and the Asia-Pacific region will have the strongest growth rates, at 9.6 percent, 9.4 percent and 5.3 percent respectively.
Asian gateway
The Hong Kong Special Administrative Region (SAR), a gateway to mainland China and other destinations in Asia, stands to benefit particularly from the rebound in Asian travel demand. Hong Kong International Airport (HKIA) enjoyed a record-breaking year in 2010, with 10.3 percent growth in passenger numbers, a 23.4 percent surge in cargo volumes and a 9.7 percent increase in aircraft movements.
That’s good news for the MRO service providers located in the SAR: Hong Kong Aircraft Engineering (HAECO) and Hong Kong Aero Engine Services (HAESL), as well as business aviation specialists Jet Aviation Hong Kong and Metrojet.
HAECO celebrated its 60th anniversary in November last year. In its six decades of operation, the company has grown from a shoestring operation to one of the world’s leading MRO facilities, ranking in the top five by total airframe man-hours in 2009.
Today, the company says it offers “a full spectrum of services”, from airframe heavy maintenance, line maintenance and engine overhaul, to mechanical and avionic component repair and overhaul and inventory technical management.
Despite the slump of the past two years, HAECO has been busy with expansion both in Hong Kong and through foreign joint ventures. In September 2009, the company opened its third hangar, a two-bay facility able to accommodate two Boeing 747 jetliners.
Mainland expansion
The company last year also expanded its reach into mainland China by opening a new joint venture in Sichuan, Taikoo Sichuan Aircraft Engineering Services, focusing on carry out heavy maintenance on single-aisle Airbus A320 aircraft operated by Chengdu-based Sichuan Airlines. HAECO holds a 40 percent stake in the venture, with another 42 percent owned by Sichuan Airlines Group and 9 percent in the hands of Haite High-Tech.
Other HAECO affiliates in China include Taikoo (Xiamen) Aircraft Engineering (TAECO), in Xiamen, Fujian province, and Taikoo (Shandong) Aircraft Engineering (STAECO), based in Jinan, Shandong province. The Hong Kong company also operates a facility in Singapore, called Singapore (HAECO) – abbreviated as SHAECO – and Bahrain. HAECO has also established joint ventures with major original equipment manufacturers (OEMs) to offer customers ‘Total Care’ support services.
TAECO, too, has been expanding, with the construction of its sixth hangar in mid-2010, also accommodating as many as two 747s. In addition, the company, which mostly focuses on MRO services for widebody aircraft, said it would start providing heavy check on A320s operated by Hong Kong-based Dragonair.
“TAECO’s sixth hangar at Xiamen’s Gaoqi International Airport is on track to commence operations in mid-2011 and we are actively considering an extension to HAECO’s third hangar in Hong Kong,” said HAECO Chairman Christopher Pratt. “We will continue to grow our start-up joint ventures on the Mainland.”
HAESL, another HAECO affiliate, specialises in MRO services for Rolls-Royce engines. The company is a joint venture, with 45 percent owned by the Hong Kong MRO company, another 45 percent in the hands of the UK-based engine manufacturer and the final 10 percent owned by Singapore Airlines’ SIA Engineering (SIAEC) unit.
The venture offers full MRO capabilities covering the Rolls-Royce RB211 and Trent engine families, which power aircraft such as Boeing’s 747 and 777 models, respectively. HAESL currently services about 230 engines a year and has handled 2,200 powerplants since it was established. The company says its new Phase IV workshop enables it to further increase its engine throughput by up to 25 percent, improving workflow efficiency and increasing capacity to meet rising demand for component repair services.
Business aviation specialist Jet Aviation Hong Kong was originally set up by its Zurich-based parent Jet Aviation as the company’s aircraft management and charter division for Asia. Since obtaining approval from the Hong Kong Civil Aviation Department (CAD) in May 2008, the facility has expanded its maintenance operation and carries out scheduled and unscheduled line maintenance, airframe and engine repairs, avionics modifications, inspections and defect rectifications, as well as offering aircraft-on-ground (AOG) support.
Expanding services
The company specialises in servicing Bombardier, Cessna and Gulfstream aircraft types. In May last year, the company expanded its US Federal Aviation Administration (FAA) type ratings scope to accommodate the Boeing 737-700 and -800 single-aisle jetliner, as well as the Gulfstream G200 super mid-size business jet.
“The extension of our FAA approval provides clients and operators with more flexibility in the types of aircraft we can accommodate at our Hong Kong operation, or that can be served in other regions by Jet Aviation Hong Kong,” said Nigel Parker, the company’s managing director of maintenance.
Metrojet services
Hong Kong’s other business aviation MRO specialist is Metrojet, which is the exclusive provider of third-party maintenance at the Hong Kong Business Aviation Centre at HKIA. The company’s maintenance department is an authorised Gulfstream Warranty Repair Facility and manages more than US$20 million of on-site Gulfstream and other spare parts inventory.
The company is also a Bombardier Authorised Service Facility for Global, Challenger and Learjet models, as well as an Authorised Honeywell Dealership and a Pratt & Whitney Authorised Service Facility and Mobile Repair Team.
Last August, the company achieved Part 145 certification from the Taiwan Civil Aviation Authority (CAA).
“Metrojet’s maintenance department is currently a fully certified Repair Station with approvals from the Hong Kong CAD, the United States FAA and is fully authorised to carry out maintenance on aircraft registered in China, Macau, Malaysia, Bermuda, Canada, Isle of Man and Cayman Islands,” said Chief Operating Officer Lester Ingram. “With the approval from Taiwan CAA, Metrojet will be better able to respond to our customers in the Asian-Pacific region through our expanding maintenance certifications from regional regulatory authorities.”
