The civil aviation maintenance, repair and overhaul (MRO) industry is estimated to have declined 7.5 percent to US$42.5 billion in 2010, with most service providers seeing a drop of 22-25 percent in revenue. Yet the longer-term outlook remains positive.
According to Mike Bride, executive vice-president and chief financial officer of consultancy TeamSAI, airlines are once again expanding thanks to a rebound in global travel. Newer aircraft models coming into service will require less-intensive maintenance, but even so future growth will be strong.
With the introduction of new aircraft into the world fleet, MRO cost per aircraft has fallen from US$2.4 million in 2008 to US$2.1 million in 2010.
Bride says the 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.
The global aircraft fleet will expand at a compound 3.3 percent per annum, from 19,675 aircraft in 2010 to 27,303 in 2020, with the Americas accounting for 35 percent, Asia for 29 percent, Europe 27 percent and the Middle East/Africa 9 percent.
“Profits have been elusive in many regions but Asia has been a different story in the last decade, being most profitable,” Bride says.
Airlines have increasingly begun to re-examine their maintenance programmes in an effort to increase efficiencies and minimise cost drivers. “Efforts are underway to examine industry standards for best practices and appropriate intervals in between checks,” Bride says.
MRO service providers must identify new market needs and value-added services that support airline requirements, reinvent their business model and develop new processes to optimise customer service, he adds.
While there is optimism for growth of the industry, there are concerns that Original Equipment Manufacturers (OEM) are gaining a competitive advantage in the MRO market. Boeing has been aggressively marketing its GoldCare support programme, with some success.
In September, meanwhile, Singapore Airlines signed a Flight Hour Services (FHS) deal with Airbus, covering full MRO component support, line and heavy maintenance and technical management services for its fleet of five A340-500s. The carrier has two other FHS agreements signed with Airbus – in July 2008 for A330-300 and in 2007 for component support for A380.
AMECO adds A330 maintenance capabilities
Beijing-based Aircraft Maintenance Engineering (Ameco Beijing) is expanding its airframe heavy maintenance capabilities to cover the Airbus A330 widebody twinjet.
Ameco Senior Director Bin Teng says that, with AMECO already having capabilities to maintain the four-engine A340, it makes business sense to complete the portfolio by adding the A330, which is in service with many airlines in Asia.
Ameco, based at Beijing Capital International Airport, expects to do its first heavy-maintenance check on an A330 soon. The company also offers maintenance and component-repair services for Boeing 747, 777, 767, 737 and Airbus A320 airliners.
The company says it is not planning to offer Boeing 757 services, as that is a shrinking market. All MRO work for 757 aircraft is contracted out to sister company Air China Technics in Chengdu, Sichuan Province.
AMECO’s 41,000 square metre A380 hangar, which is now operational, can accommodate as many as six widebody aircraft at the same time. It also has a 10,000 square metre, temperature-controlled hangar for stripping and painting aircraft types up to the size of the 747.
The company has component workshops covering 20,000 square metres, including temperature-controlled avionics and electric workshops, a landing-gear overhaul shop and mechanical, pneumatic and hydraulic workshops.
Guangzhou-based China Southern Airlines is the only Chinese carrier so far to have ordered the A380 – the world’s largest airliner. China Southern will start taking delivery of its five A380s in 2011, after a delay of two years.
Ameco has started providing line-maintenance services for Lufthansa’s A380s, deployed on the daily Frankfurt-Beijing route.
The MRO provider has engine overhaul and component-repair capabilities covering Pratt & Whitney PW4000 and Rolls-Royce RB211 turbofans. Ameco is also equipped with a test-cell for engines up 100,000lb thrust.
Teng says Ameco is looking to expand its engine capabilities to cover additional types, but has yet to decide on which. The company has also been planning to offer passenger-to-freighter conversions for the last five years, but is still not ready.
“We will continue with our core business of airframe maintenance and engine overhaul,” Teng said.
High taxes on the import of aircraft parts are stalling the growth of the Indian MRO industry.
The taxes of 42 percent comprise 18 percent for customs duty, a 12 percent sales tax and a 12 percent service charge. This is prompting Indian carriers to outsource heavy maintenance of their aircraft to third parties outside the country, mainly in Europe, Malaysia and Singapore.
“This is not only a high cost for the airlines concerned, but also a loss of foreign exchange,” says Raghu S Menon, executive director of Air Works India.
Air Works is an independent MRO centre based at Mumbai International Airport, servicing Augusta Westland, Bell Helicopter, Bombardier, Gulfstream and Honeywell products. The company, which started operations in 1951, is owned by the Menon family in India.
Over the years, Indian carriers have held talks with authorities to abolish or at least reduce the import taxes but the effort has so far been in vain.
“These high taxes are stifling the development and growth of the Indian MRO industry,” Menon says.
Another hurdle the national industry faces is that Indian carriers are not prepared to invest their money into setting up maintenance facilities and purchasing the required tooling and equipment. Lack of space to build MRO facilities at airports and harsh regulatory restrictions are other factors cited by Menon that need to be addressed by the Indian authorities.
Another problem is the shortage of qualified personnel. “The success of MRO depends on the availability of skilled labour, but India is confronted with a shortage of licensced aircraft maintenance engineers,” Menon says.
SIAEC, Panasonic form IFEC joint venture
Singapore Airlines Engineering (SIAEC) has signed an agreement with Panasonic Avionics to set up a joint venture offering MRO services for in-flight entertainment and communications (IFEC) systems and components produced by the Japanese company.
PAC will own 57.5 percent of the Singapore-based venture, while SIAEC will hold the remaining 42.5 percent. Work on the state-of-the-art MRO facility is expected to start early next year.
The venture will help meet growing demand for IFEC support on new-generation aircraft. It will enable airlines in the Asia-Pacific region to benefit from one-stop solutions and support from the original equipment manufacturer.
SIAEC Chief Executive Officer William Tan said the venture will support Panasonic’s latest products, including the eX2 IFEC system installed on the Airbus A380.