Sunday, June 3, 2012

MRO Asia: on the up


With air transport operations ballooning throughout Asia, it is little wonder that OEMs and third-party providers are expanding MRO facilities across the region. In fact Asia’s MRO market is projected to reach parity with that of the Americas and Europe by 2021.

But which are the real growth zones?
Neelam Matthews reports

Things are moving in Asia. Rolls-Royce opened its first ever purpose-built field services hub at Kuala Lumpur International Airport to support the company’s growing civil aerospace customer base in South East Asia including Malaysia Airlines and AirAsia X. It’s just part of a global MRO trend to be close to growing Asian customers. “The facility (at KLIA) will be the focal point of all our civil large-engine support in Malaysia,” Mark McGuinness, Chief Service Representative, Civil Aerospace, Rolls-Royce, said. "And it will play an increasing important role in the surrounding region.”

Rolls-Royce is not the only one bullish about Asia. Fabrice Defrance, SVP Commercial, AFI KLM E&M, is also behind an expansion into the Asian region. “It is interesting for us to be in Asia not just to sell MRO services. If we wish to serve the customer, it means more local support,” he said. AFI KLM is developing a component shop in India and China, and in Singapore, it has a specific component inventory dedicated to Asian customers. “In Asia, after Vietnam Airlines and Philippine Airlines, we now have an agreement with PIA for the overhaul of the GE 90 engine. It is a recent deal, something that is just the start,” added Defrance.

Analysts agree. “While North America and West Europe have the largest fleets and MRO markets, the growth is coming from India, China, and East Europe,” says a report by consultancy Team SAI. With some of the fastest-growing regions, Asian operators need to prepare for that growth with some urgency.

Low-cost carriers drive growth All this is good news for the Asia-Pacific MRO industry. The year 2010 represented the bottom of the MRO business cycle from which it has moved up. The challenge will be to align MRO business strategies for success with the new reality of a delicate recovery. Cost will remain a singular focus by airlines, and MRO operators need to plan for this.

Leading the customer pack are budget carriers. Asia had around 40 at last count, and in India alone around 75% of seats are sold as budget seats. Within Japan, the impact of LCCs is expected to be highly disruptive for full-service carriers. LCCs are expected to account for one in five passengers soon. Major LCCs
such as Air Asia, Lion Air and IndiGo have big orders for new aircraft and because budget carriers tend to outsource MRO, business for MRO providers is set to boom.

Interestingly, unlike the West, Asia has fewer older aircraft with plenty of new generation aircraft like the B787, B747-8, A320neo and A380 making their presence felt. All these have new technologies, resulting in the forging of new partnerships and service offerings. In parallel with this, OEM s are getting more aggressive by including aftermarket support as a major revenue source – so some third party providers are increasingly finding themselves being squeezed.

Airbus Flight Hour Services (FHS), for instance, delivers a comprehensive platform of solutions from components, repairs and spare parts services, to airframe maintenance, engineering and fleet technical management. Thai Airways recently signed an FHS contract with Airbus to provide aircraft inventory and maintenance support for its A380 fleet. The 15-year contract provides an extensive scope of A380 line replaceable units and spare parts availability, component repairs, logistics services, and tools availability, as well as APU and nacelle services to Thai Airways.

“Having Airbus supporting our aircraft inventory and maintenance will enable us to optimise our A380 daily operations around the world,” said Montree Jumrieng, MD of Thai Technical Department. Late last year, Sepang Aircraft Engineering, a new MRO subsidiary company of EA DS at KLIA , was appointed the performance-based logistics partner for handling FHS component support solution for the region. All A380 rotables (landing gear and parts) will be located at Sepang to support existing and future Airbus customers – like Thai – under a full support maintenance contract.

“This is another step forward for SAE Sepang in its growth to offer customised solutions for Airbus operators involving airframe, component and logistics” said Christophe Desages, CEO of Sepang Aircraft Engineering. But it means independents have to work harder to maintain a proportional slice of the MRO pie.

Howdy partner

As a major ‘MRO for hire,' AFI KLM sees 30% of business in Asia, has three local sales offices, and around 20 customers in the region, mainly for engine or component support. They include AirAsia X, Air New Zealand, IndiGo, Airblue Limited and Garuda. The company operates an advanced logistics platform
in Singapore, which handles storage and distribution of spares for Boeing 777s and Airbus A330. Spares for A320s are to be added shortly. It has decided that being specialist can bring dividends in the new Asian boom zone.

“As far as AFI KLM goes, we are developing market share in Asia. Our turnover in Asia is 60% on engines repair and 40% on components because we do not carry out airplane maintenance in Asia – we are very focussed,” said Defrance. He describes the company’s Asian business as very important. “Our geographical ratio of 30% of business here is growing. For instance on A330/340 component support (on which we are number one worldwide), we have customers such as AirAsia X, Qantas, SriLankan Airlines and AirCalin. To make (component support) consistent, we are developing further partnerships,” he added. For example, AFI/KLM has an agreement with PIA for the overhaul of the G90 engine and recently inked acontract with SriLankan Airlines covering A340 and A330 component support.

In India, AFI KLM signed a strategic partnership agreement with Mumbai-based Max Aerospace, a major player in the Indian MRO market. This makes them the first global MRO to offer a component repair capability in India.

“This partnership will help us to achieve our component support ambitions, and to have the resources to stay abreast of the vigorous growth on our market,” said Bharat Malkani, Chairman and MD of Max Aerospace. The JV’s new facility is being built in Nagpur and is expected to be completed by 2013.

Like AFI KLM, Lufthansa Technik has long been active in the region through local joint ventures, including Ameco Beijing – 60% owned by Air China, with the rest held by LHT’s parent Lufthansa. Also in China is Lufthansa Technik Shenzhen, specialising in aircraft thrust reversers and high-value components.

Lufthansa Technik Philippines recently opened a third 8,500 m2 hangar in Manila for work on wide-body aircraft. “With the new hangar, we will be able to keep up with the increasing demand for technical services for long-haul aircraft, particularly in the Asian market,” said August Wilhelm Henningsen, Lufthansa Technik Chairman of the Executive Board.

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