With Asia expected to lead growth in air traffic over the next two decades, the region’s MRO providers are expanding engine maintenance capabilities to tap that segment of the market, writes William Dennis. Aircraft engine maintenance, repair and overhaul (MRO) is the largest segment of the global MRO market and a highly competitive sector for the Asia-Pacific region’s commercial aviation industry. While dedicated MRO service providers are set to benefit from massive expansion in airline fleets over the next two decades, engine makers themselves are also making efforts to expand their share of the market with after-sales support packages.
6th Dec 2011
Engine maintenance in Asia big business
With Asia expected to lead growth in air traffic over the next two decades, the region’s MRO providers are expanding engine maintenance capabilities to tap that segment of the market, writes William Dennis.
Aircraft engine maintenance, repair and overhaul (MRO) is the largest segment of the global MRO market and a highly competitive sector for the Asia-Pacific region’s commercial aviation industry.
While dedicated MRO service providers are set to benefit from massive expansion in airline fleets over the next two decades, engine makers themselves are also making efforts to expand their share of the market with after-sales support packages.
According to Mike Bride, executive vice-president and chief financial officer of US-based aviation consultancy TeamSai, MRO providers carefully devised strategies to deliver maximum value and stable costs to the customer over the long-term, in order to compete with original equipment manufacturers (OEMs).
OEMs offer the advantage of being able to offer unique expertise in their own products, while also being able to provide a single source for all maintenance needs. With comprehensive ‘power-by-the-hour’ solutions, OEMs have the edge over other maintenance providers.
According to Mohd Roslan Ismail, executive vice-president of Malaysia Airlines’ engineering arm MAS Aerospace Engineering (MASAE), OEMs are able to offer customers maintenance packages bundled together with engine sales, to provide a lower total-cost offering for the operator. Some, however, offer deals that help airlines develop their own MRO capability.
“We see some OEMs are coupling their ‘power-by-hour’ solutions with assistance in developing readily available, airline-affiliated MRO engine shops,” Roslan notes. While this potentially expands the portfolios of local MRO service providers, industry observers say that component repairs are typically done at a regional location by OEMs.
“The heavy funding required for investing in an engine MRO outfit by an independent company or airline-affiliated MRO would be a big challenge,” Mohd Roslan notes.
Major engine MRO service providers in Asia include companies such as: Evergreen Technologies in Taipei, which focuses on General Electric (GE) CF6-80C2 and International Aero Engines (IAE) V2500 powerplants; Eagle Services Asia (ESA); Singapore Aero Engine Services (SAESL); GE Engine Services Malaysia (GEESM); Hong Kong Aero Engine Services (HAESL); Beijing-based Aircraft Maintenance and Engineering (Ameco Beijing); MTU Maintenance Zhuhai, one of the largest repair shops in China; and Sichuan Services Aero Engine Maintenance (SSAMC).
SAESL, which is one of the biggest companies in the region, is a joint venture involving Singapore Airlines’ SIA Engineering (SIAEC) unit, which holds a 50 percent stake, Rolls- Royce, with 30 percent, and HAESL, with 20 percent. The venture is Rolls-Royce’s Asia-Pacific centre for excellence for the repair and overhaul of Trent-family turbofan engines.
SAESL started operations in 2001 and has since expanded its capabilities to support the full range of Trent family engines globally. The venture is now an integral component of Rolls-Royce’s aftermarket services capability.
The Singapore venture’s in-line gantry system for engine strip assembly is the first in the region, while its fully automated engine parts cleaning line is the first in the world. Rolls-Royce has appointed SAESL as the first Trent 900 centre of excellence, supporting Singapore Airlines’ fleet of 19 Airbus A380s.
GEESM, which was set up in 1997 at the Sultan Abdul Aziz Shah Airport in Subang, 25km outside Kuala Lumpur, is a joint venture between GE Aviation (with a 70 percent stake) and Malaysia Airlines (with 30 percent). The company offers MRO services for Pratt & Whitney (P&W) PW4000 engines and CFM International CFM56-3/5B, as well as an engine test cell that can handle powerplants with up to 72,000lb thrust.
HAESL is a joint venture of Rolls-Royce, Hong Kong Aircraft Engineering (HAECO) and SIAEC. It focuses on services for Rolls-Royce RB211 and Trent engines. ESA, meanwhile, is a joint venture between SIA Engineering (with a 51 percent stake) and P&W (with 49 percent). ESA offers MRO services for PW4000-series engines.
China’s Ameco offers full MRO capability for RB211-535 E4 and E4B engines. It also has an engine test cell handling up to 100,000lb of thrust.
Air China, CFM venture
SSAMC is a joint venture between Air China, which holds 60 percent stake, and CFM, with 40 percent. The company was set up in December 2010, after three years of complex negotiations between Air China and CFM before the Chinese government gave the green light for the venture.
SSAMC’s facility at Chengdu-Shuangliu airport provides overhaul services for CFM56-5B and -3/7B engines, which power Air China’s narrowbody fleet of about 200 Airbus A320 and Boeing 737 Next-Generation jetliners. Air China’s four, widebody Airbus A340-300 quad-jets are powered by CFM56-5C engines, which are also overhauled at the joint venture.
In the wake of the global economic downturn, which stifled demand for air travel, things are once again looking brighter for the global aviation industry.
Continued economic uncertainty, resurgent fuel prices and external factors such as the European volcanic ash cloud slowed the industry’s growth in 2010, leading to a number of aircraft being grounded, which resulted in a decline in the engine MRO market.
However, with analysts predicting a fresh surge in air traffic over the next two decades, led by Asia, the engine MRO market is set to grow apace. TeamSai says the value of the global MRO market will expand by about 10.8 percent in 2011, to US$46.9 billion, with engine MRO being the largest segment, accounting for US$21.6 billion of that amount.
Bride forecasts that this growth will continue, with the market expanding to US$27.1 billion in 2016, then US$32.6 billion by 2021.
China is projected to claim a major slice of global engine MRO revenue. Several joint ventures are clamouring to set up shop to tap growing MRO demand for the CFM56, which powers 737, A320 and A340 jetliners.
CFM56 and IAE V2500 engines – which are also offered on the A320 – are widely-used in Asia. MRO service providers describe the powerplants as ‘cash cows’, helped by the growth of low-cost carriers, which tend to operate 737 or A320 fleets.
An estimated 3,000 CFM56 engines are operating in the region, with China-based carriers accounting for more than half of that total.
The latest foreign MRO service provider to enter the Chinese market is Singapore’s ST Aerospace, which has formed a partnership with Xiamen Aviation Industry (XAIC). Known as ST Aerospace Technologies (Xiamen) (STATCO) the joint venture will provide engine MRO and total-support services, initially for CFM56-7B and -5B series turbofans.
The venture’s US$78 million 38,620 square metre facility – located near Xiamen Gaoqi International Airport – opened on 11 October, offering capacity to support as many as 300 engines annually. STATCO received Part 145 certification from the Civil Aviation Administration of China (CAAC) the day the company opened its doors. It also has certification from the US Federal Aviation Administration (FAA) and Korea’s Ministry of Land, Transport and Maritime Affairs, covering the maintenance of CFM56-7B engines used by airlines registered in those two countries.
The first engine accepted for maintenance at the STATCO facility was a CFM56-7B from Xiamen Airlines, which required full performance restoration, including the replacement of life-limited parts, engine testing and engine parts repairs.
STATCO offers a state-of-the-art, fully computerised data-acquisition engine-test facility, capable of testing engines up to 90,000lb thrust. The facility complements ST Aerospace’s engine MRO site in Singapore, which can handle up to 350 engines annually.
STATCO is one of the few Chinese MRO joint-ventures that lacks the involvement of a major local airline partner. XIAC is a high-technology, export-oriented company, mainly focused on the development of the aerospace, aircraft maintenance and related industries in Xiamen.
GFM AeroAsia ambitions
In Indonesia, meanwhile, Garuda’s Jakarta-based maintenance unit GFM AeroAsia has plans to expand its engine capability to include the CFM56-7B. CFM International, which has a 15-year contract to provide MRO services for the engines that power Garuda’s 737-800 fleet, is also helping to provide AeroAsia with the expertise required to add this capability.
Most CFM56-7B engines now in service worldwide are becoming due for maintenance, while some of their life-limited parts may need replacing. The -7B model was built specifically for the 737NG.
One challenge facing engine MRO providers in Asia is the shortage of skills for specialist process. Poaching of local skilled and trained personnel is widespread, with many lured away to lucrative jobs in the Middle East.
According to one training manager, it is often the case that as soon as specialised technicians gain some experience, they are courted with attractive job offers from one big engine MRO service provider.
”There is nothing much that we could no, and there is only so much that we could counter offer,” he says.
Although labour costs are rising in Asia, they remain lower than in Europe and the US. Hong Kong and Singapore have the highest labour costs, while rates in China and Malaysia are also on the rise, as skilled engineers demand larger pay packets.