After a depressed 2008 and, to a lesser extent, 2009, the commercial aviation maintenance, repair and overhaul (MRO) market is a business still facing up to the need to adapt to aviation industry trends, increase efficiency and minimise costs.
The downturn forced service providers to compete by shortening turnaround times for scheduled maintenance even more, without compromising on quality. At a time when airlines were cutting capacity and parking aircraft due to the economic crisis, the MRO industry suffered correspondingly, with a massive loss of revenue. This drove struggling MRO companies to focus even more on costs.
Now, with airlines planning to acquire new more fuel-efficient aircraft in large numbers as indications of recovery grow stronger, some companies see an opportunity to once again consider expansion of capacity and capability for new aircraft and engine types, while pursuing additional work on aircraft they already serve.
The growth of the low-cost carrier business model is also prompting full-service airlines to reconfigure their cabins to adapt to the changing market, while increased cargo loads stimulate the market for passenger-to-freighter conversions. All these factors create new opportunities for MRO companies as travel and cargo demand rebounds.
Still, despite the rebound, MRO providers are now concerned that aircraft Original Equipment Manufacturers (OEM) are gaining a competitive advantage in aftermarket support. This is prompting MRO companies to seek new ways to compete effectively.
Full-service integrators
Some maintenance providers plan to adopt the full-service integrator business model by 2012.
MROs will continue to face pressure from airline customers demanding total maintenance programmes, which has become a major selection criterion when for carriers deciding on a service provider.
Pricing, quality and turnaround times are decisive for airlines selecting a service provider. MAS Aerospace Engineering (MASAE) Managing Director Mohd Roslan Ismail says airline customers are getting increasingly demanding, making the business highly competitive.
Roslan says that, although there are signs of recovery, it will probably take three to four years before the market stabilises.
The Asia-Pacific region is forecast to maintain its competitive advantage in the field – especially over high-cost North America. According to US-based aviation consultancy Team SAI, MRO spending will drop 7.5 percent in 2010, to about US$42.3 billion.
Fleet capacity reductions will account for a decline of about 4.2 percent. Furthermore, airframe and line-maintenance costs have dropped, bringing the market down by another 1.4 percent.
Reduced aircraft utilisation will drive the market down a further 9 percent for the year. The engine MRO sector alone will see a 1.6 percent increase, as labour costs ease. Of the projected total US$42.3 billion spend, engine MRO will account for 43 percent, followed by heavy maintenance and modifications (21 percent of the total) and line and component maintenance (18 per cent each).
With the introduction of new aircraft, requiring less maintenance, the average MRO cost per aircraft per year has dropped from US$2.4 million in 2009 to US$2.1 million this year.
The global MRO industry is projected to grow 4.4 per cent a year to US$65.3 billion through to 2020. The engine MRO market is set to become even more competitive, as more MRO service providers expand their product offering, responding to airline fleet changes and expansion.
Realigned strategies
With airlines having realigned their business strategies to deal with the crisis, operators are increasingly favouring more flexible commercial MRO solutions that provide value-added services justifying their cost. Carriers have been seeking to maximise profitability through increased aircraft utilisation, which leads to heightened demand for maintenance services.
Incumbents and entrants in the MRO market face the challenge of being more competitive while also offering greater flexibility in their product offering to achieve sustainable growth and long-term profitability.
Air travel demand in the Asia-Pacific is rapidly gaining momentum, driven especially by burgeoning economies such as those of China and India. Analysts predict that this will continue over the next few decades.
Growth in air travel demand is closely linked to economic expansion and an increasingly affluent population. China’s domestic air travel sector recovered faster than projected last year thanks to the country’s healthy economy.
In the first half of this year, China’s domestic civil aviation market grew an impressive 31.5 percent, as the economy expanded 11.1 percent to 17.28 trillion yuan (US$2.55 trillion).
LTP expands product offering
Lufthansa Technik Philippines (LTP) is expanding its product offering to cover overhaul layovers – base maintenance covering C-checks – and cabin refurbishment aimed at low-cost carriers (LCCs).
LTP secured Malaysian long-haul LCC AirAsia X as a customer four months ago. With five hangar bays and workshops, the company offers C-checks, C4, and C8 capability for Airbus A340/A330 and A320 family aircraft. It also offers stripping and painting of the same aircraft types as well as Boeing 747-400s.
Additional capabilities include repair and overhaul of galleys, lavatories, passenger and crew seats, rescue and safety equipment, in-flight entertainment (IFE) and avionics modifications, and structural programmes. LTP plans to convert of one of its hangars for use by LCCs, accommodating three to four single-aisle A320-family aircraft light C-checks and C4/C6- checks.
LTP is an engine parts and accessories repair centre for Lufthansa Technik, specialising in shroud repair. It is the first subsidiary under the Lufthansa Technik Group to receive the EASA 21 Design Organisation Approval, paving the way for the company to develop minor repairs and alterations without the assistance of original-equipment manufacturers (OEMs) like Airbus and Boeing.
Vice president for marketing and sales Dominik Wiener-Silva said the approval has been instrumental in helping LTP achieve reduced turnaround times.
LTP, which started operations in 2000 with a workforce of 1,300 at Ninoy Aquino International Airport in Manila, has expanded it to 2,700. It has 24 aircraft overhaul customers.
“In view of growth, especially in the Asian market, and our competitive product, we aim to expand our customer base [and] not just in the region,” said Bernhard Krueger-Sprengel, the company’s president and chief executive officer.
LTP is a joint venture of Germany’s Lufthansa Technik, which owns 70 percent of the company, with MacroAsia Corp of the Philippines, which holds the remaining 30 percent.
New hangar, new customers for Boeing Shanghai
Boeing Shanghai Aviation Services was set up in June 2006 as a joint venture between US manufacturer Boeing, Shanghai Airlines and Shanghai Airport Authority.
It is based at Shanghai Pudong International Airport, and started out using Shanghai Airlines’ engineering hangar. It has since added a new, two-bay hangar that opened in September 2009.
The company recently celebrated a new success, with the signature of a five-year heavy maintenance contract for Boeing 767 jetliners with Aeroflot Russian Airlines. The company has not revealed the value of the contract.
At the same time, Boeing Shanghai has signed a Memorandum of Understanding with Boeing Commercial Airplanes to be a supplier of Fleet Management and GoldCare MRO services, covering line and scheduled maintenance, component management, engineering and planning.
During the past year the MRO venture has won approval from the US Federal Aviation Administration (FAA), European Aviation Safety Agency (EASA) and Thailand’s Department of Civil Aviation (DCA) for all levels of scheduled maintenance on Next-Generation 737 and 767 jetliners.
Boeing Shanghai also offers cabin upgrades, and maintenance of avionics and in-flight entertainment systems, as well as being an approved passenger-to-freighter conversion centre for 737 aircraft.
