ISSUE ONE
2011
w w w. a v i a t i o n n e w s - o n l i n e . c o m
TeamSA I provides consulting and technical ser vices to aviation industr y clients including
airlines, MRO’s, corporate /fractional operators, OEM’s, airpor t authorities, and investment
banks around the world with a focus on strategy, operations improvement, cost reduction,
safet y, cer tification, and supply chain.
4
THE MRO MARKET IN 2011
A review of the past 12 months in the MRO market and a look at what’s ahead for 2012
16 Who combines the data?
Amalgamating two or more data systems is a costly and time consuming affair Swiss Aviation Software has the solution
22 More MRO for your money
MRO Global looks into the maintenance providers market.
32 Smoke and mirrors
The PMA parts market has enormous potential for growth if it can fight back against the OEMs.
44 Solving lessor issues
Ideas about how to handle third-party maintenance contracts
47 More than an afterthought
Inventory management planning from Inform
50 Pulled apart
Kellstrom shares how it intends to retain its share of the fragmenting parts market.
54 MRO Americas
62 MRO Americas Directory
66 A320-family maintenance
MRO Global surveys the best maintenance providers for A320-family aircraft
78 MRO Europe
90 MRO Europe Directory
94 High-tech, low maintenance
Boeing designed the 737NG with a reduced scheduled maintenance in mind
98 MRO Middle East
105 MRO Africa
108 MRO Middle East/Africa Directory
110 A340 maintenance
MRO Global examines the history of the A340
117 MRO Asia-Pacific
121 MRO Asia-Pacific Directory
2 Airline Economics: MRO Global 2011 www.airlineeconomics.co
CONTENTS
MRO GLOBAL 2011 EDITORIAL TEAM Victoria Tozer-Pennington [email protected] Philip Tozer-Pennington [email protected] Kaleyesus Bekele [email protected] SUBSCRIPTIONS Annual subscription: £250 / €250 / $300 Subscription enquiries to:[email protected] ADVERTISING SALES John Pennington [email protected] Philip Tozer [email protected]
PRODUCTION AND ONLINE Dino D’Amore
Kathy Alys, subeditor DIGITAL ISSUE
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KEEPING YOU IN THE AIR
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44 Airline Economics: MRO Global 2011 www.airlineeconomics.co
MRO GUIDE
M
aintenance repair and overhaul (MRO) is big business, worth some $46.9 billion and rep-resents 12-15% of an airline’s cost base.Although many airlines carry out their own line maintenance, 60% of the world’s carriers outsource heavy work in an effort to lower costs, for the 40% who keep line maintenance in-house huge investments in infrastructure, facilities and parts are required it is no wonder then that many airlines have been unable to make it work on a cost effective basis.
Some 30% to 50% of MRO work is estimated to be completed by third par-ties. While some airlines are getting out of MRO, others believe they can find econo-mies of scale by bulking up the amount of work they do and keeping MRO in house. Airlines with their own in house MRO argue that it is an integral part of their overall business plan and that a third party provider would not be able to understand the complete operational environment.
For third party MROs to expand, in many cases they must adapt to be more than just a maintenance and parts supply partner. They must become more involved
in the day to day running of an airline so they know what is going on at any given time and recommend solutions.
MROs also need to reduce costs: This can be done by suppliers working together to purchase parts, but more cooperation is needed than is currently taking place, at least in the European market. Some major MROs are cooperating on staffing at vari-ous locations so that they in effect establish a joint partnership. Some major firms have cut jobs at certain bases because they are using employees from a competitor to keep contracts running. In some cases an engineer will be servicing a number of
air-MAINTENANCE REPAIR
www.airlineeconomics.co Airline Economics: MRO Global 201155
MRO GUIDE
craft in a day under contracts with two or more separate MRO providers. The shar-ing of staff has resulted in a large number of engineers flooding the jobs market but it has subsequently drastically cut the cost base of many MRO firms and relieved some pricing pressures for MROs. During 2011 airlines increased capacity once again and MROs have forecast a much improved pic-ture for this year, however the latter months of 2011 are seeing dramatic cuts to sched-ules across the globe as airlines react to yet another sharp slowdown and plot a course for winter 2011/2012 that forecasts passen-ger numbers below that of 2009. Another problem for the sector has always been over regulation. Audits are hurting the industry and, with the FAA trying its best to intro-duce new draconian measures, it can only get worse before it gets better. However it should be noted that the efforts of the Air Transport Association to highlight and deal with the problems may yet bear fruit.
The MRO sector is reactionary, fitting services with client needs or perceived needs. The problem is how do you per-ceive the needs of a client, or potential client when the client has no clue what-soever as to what tomorrow may bring?
At the close of 2011 and into early 2012, the only thing that is certain is that liquidity, especially within the European sphere, is drying up, banks are laying off staff, busi-ness are having problems raising capital and politicians seem willing to continue kicking the can down what is left of the road to fiscal collapse. Although unemployment within most geographical zones is holding flat or even reducing, this silver lining does not mean that business travel is secure – it is not. Unemployment within the all-impor-tant financial services sector is increasing rapidly throughout just about every region other than South East Asia and Australasia, although even the latter has signs of weak-ness. So as financial services executives
either cease to fly or take a one-way trip to Hong Kong or Mumbai, over capacity on major routes is at this time a real and pres-ent danger. It can also therefore be assumed that fit orders for aircraft to have re-vamped or extended premium seating, as seen in 2010, is now a thing of the past at least for the next fifteen months and maybe more depending on the possibility and nature of any sovereign defaults within the Eurozone during the same period. Previ-ously an MRO was judged on the service it provided and its client/orderbook, going forward they are now also being judged on the strength of their finances and financial backing. Any company at this point wishing to refinance will have to look to investment which may also lead to MRO market con-solidation, something that would indeed be welcome at this time.
What to watch out for in 2012
The acquisition of TIMCO by SR Technics was, and maybe still is, on the cards. This would be a good move for SRT but every-one is a little bit afraid of what is happening in Zurich at the moment. Nobody really understands what direction the Mubadala group wishes to go. Heavy maintenance out of Switzerland with a cost base in Swiss francs (CHF) has been crippling for the MRO. Only timely and decisive Swiss gov-ernment intervention saved the day, but the pressure is still on. It would be a challenge for Mubadala to look for new business opportunities in the near future with SR Technics under pressure. That said oppor-tunities are bound to present themselves. SR Technics is not alone but simply an example, even the mighty Lufthansa Tech-nic is feeling the pressure of late. Everyone is very cautious. The smaller MROs have their market niche and they have a stable customer base, but for the big MROs the current market and 2012 outlook is a chal-lenge at best.
The MRO industry outlook currently shows that in 2011, global MRO spend will be up 10.8% over 2010, to $46.9 bil-lion. Global growth is expected to maintain a 3.9% CAGR through 2021 seeing the current $46.9billion industry grow to one worth some $69 billion, within these figures the engine repair market is the seg-ment with the highest growth rate, in part this is due to new aircraft requiring less maintenance as per design specifications. It remains to be seen if this will be the case.
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2011 2016 2021Engines Compenent Line HMV&Mod $56.4 $69.0 $46.9 CAGR 3.8% CAGR 4.1% $8.7 $21.6 $8.6 $8.0 $9.9 $27.1 $10.1 $9.3 $12.4 $32.6 $12.5 $11.5 */2%$/052)25(&$67 727$/9$/8(%
QUICK VIEW FACTS:
MRO in 2011
Global MRO spend will be up 10.8% in 2011, to $46.9B. The drivers of the year-over-year change are important to understand.
Fleet change alone drives a 3.2% increase, due to fleet renewal
Utilization increase drives market up a small amount (utilization up 1.5% for the year driv-ing 0.4% for market)
Component increases outpace declines to airframe and line for a small net increase of 1.0%
Engine MRO drives a significant 6.4% increase
And last, labor rates have eased down ever so slightly. MRO in 2011 Fleet 2010 19,675 + Deliveries + 1,076 - Retirements - 396 - Stored - 152 Fleet 2011 20,203
Source: TeamSAI Consulting
Source: TeamSAI Consulting
6 Airline Economics: MRO Global 2011 www.airlineeconomics.co
MRO GUIDE
1,000,000 2005 2006 2007 500,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 2008 2009 2010 2011 $15.0 $10.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 $50.0 $5.0 $0.0 0ASM (M) Total MRO ($B)
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The global business cycle has a strong influence on MRO activity as it does with most areas of aviation and the last few months of this year could change the 2011 outlook sharply. 2010 marked a notable leveling of capacity. ASMs declined 1% in 2010 (mostly long-haul traffic). But the 1% decline in capacity has taken a dramatic toll on the associated MRO business with 2010’s MRO market down 7.5%. With airlines now able to adjust very quickly to global events and econom-ic changes, it is time that MROs acted in the same manner. For the remainder of 2011 and into 2012, a pattern mirroring that of 2009 will emerge with the world fleet continuing to grow but with aircraft being parked; newer, less maintenance intensive aircraft will show their influ-ence, with the contribution of the older vintages in decline as retirements acceler-ate. Meanwhile, younger vintage aircraft have significantly lower unit costs and in just under two years there has been a sig-nificant shift in the share of the younger vintage fleets which in turn has resulted in the average MRO cost per aircraft per year falling by some US$300,000. 2010 should have been a tipping point as fleet size and utilization increased to meet demand, but the economic health of the globe of late has lead to a return to fleet contraction whilst at the same time
MRO costs per aircraft continue to fall rapidly. It is a worrying time indeed for the MROs.
So is the MRO sector ripe for in-vestment or is it a bit of a minefield? Overcapacity and OEMs are marching into the aftermarket very heavily and there is the ongoing war between the PMA, DER and OEM strategies. SR Technics managed to pull in some very heavy weight investors to help them in the form of Mubadala Development Company. Airline Economics asked Chris Doan, CEO of Team SAI, what his experience was in trying to secure in-vestment into the maintenance market.
“The playing field is somewhat inter-esting,” he says. “It is cautious but pri-vate equity seems to have a fair amount of interest in the sector. They recognise the potential of consolidation, the frag-mentation that exists. That is the key. It is not vying to make it grow because there are a lot of minefields that have to be navigated today but to bring appro-priate businesses together into a bigger platform that has a very purposeful end. It is an interesting play. We are starting to see a little bit of that play out.” Investors do worry that the long-term future for the MRO industry will require mergers but this is also one of the attractions. Investors are looking
at the plans around the world to lower fleet ages, lower retirement ages and of course they have taken note of the amount of new aircraft on order and the lower maintenance requirements of the same and they are worried for MRO and aftermarket suppliers. At the same time many have clamoured to invest in new aircraft through funds such as Doric Air Nimrod 1 and 2. Aircraft maintenance will always be required; the question is whether there will be very serious overcapacity in the market in the short-to-medium-term making the investment a prolonged affair? One large private equity investor of note told
Airline Economics under condition of
anonymity that an MRO can only be a serious prospect in the long term if it is global with strategic hubs that can
service just about anything in the air and has serious exposure to South East Asia. And even then the get-in point has to be a good one as the continued investment would need to be dramatic to secure market share. In this market-place, the appetite for this sort of invest-ment intervention is weak, but as MRO providers move into leasing and other new areas, barriers start to remove themselves.
Even so Chris Doan; when asked about the interest from private equity (PE) firms, stated: “I would say there has been a serious acceleration in the past 12 months. In fact in the first quar-ter of 2011, in quar-terms of transactions, equalled the entire 2009 – four times the transaction volume.” Unfortunately this very encouraging trend has been stifled by the Eurozone crisis and the global economic melee currently play-ing out on the world stage. When asked if he thought PE firms were looking at the maintenance market because they were hoping for buyouts, Doan replied: “Probably not in the short term. Most
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MRO GUIDE
AMOS
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PE firms are going to be buying into a business for three to five years before a turnover, but you do have a number of MROs that are owned by PE today that would be interested in that play. There are a couple of PE firms that own some of the big MRO firms that would typi-cally be interested, after they have had the company for four or five years…” Some of those PE firms that invested in MRO before the crash are now in difficulty and wanting to get out of the market but they are now, due to falling values, more or less stranded. Doan says: “Timing into the market is very critical and those that came in five, six or seven years ago with the intention of having a three to five year turnaround got hit pretty dramatically in the world economic downturn. Then the question becomes where are we in the business cycle – at the bottom and starting to grow and how stable is it? Of course the stability question is an interesting one today because we do see airlines and therefore the MRO business being quite a bit more sensitive to events in the world. Even with the earthquake in Japan, there was a huge downturn in airline business and it is going to have an impact in due course on the MRO
business. So there is that factor of sen-sitivity that we have never seen before. I think that there is more likelihood of world events causing quick adjustments on airlines to maintain their own profit-ability.”
The future for third party MRO market share lies in geography. The Middle East, the conduit for travel between the APAC region and Europe is seen as the perfect location and Turkey seems to hold many aces for the future of third party MRO. Turkish Technic’s new HABOM facility is built with this thought in mind, however it could all come to grief if Turkey were ever to join the European Union (EU) and be subjected to Emissions Trading Scheme (ETS) charges. As it is, and with the EU preoccupied with the survival of current members, it is likely that Turkey will benefit hugely from being at the centre of global trading routes.
The facility is so very large and the MRO growth rate in the Gulf region so prolific that one wonders if Turk-ish Technic will be able to fill it at any given time. This facility is enough to cause regional overcapacity in the short term, provided that Turkish Technic is prepared to hire the colossal numbers of
engineers that will be required to man the entire facility. Global fleet growth projections show wide variations and give some cause for concern.
While North America and West-ern Europe have the largest fleets and MRO markets, the growth areas lie in emerging regions such as Eastern Europe, India and China. While these emerging regions are growing fast, their overall size represents just a fraction of the total market. Nevertheless, the fleet forecast clearly indicates a shift to the east, which is expected to drive a level of parity when combining the Americas, Europe (Western & Eastern) and Asia, including China & India:
As a result, the APAC, European and the Americas MRO markets are esti-mated to reach parity within 10 years, due to the population and fleet growth in the APAC region. Over the next ten years, the Asian MRO market will come into parity with Europe and the Ameri-cas. Today the Americas commands 35% of the market; Europe is about 25-6% and Asia is below that; this will level out, which is a staggering statistic. The growth has definitely shifted East and from an investment standpoint that is where the excitement is going to be over
8 Airline Economics: MRO Global 2011 www.airlineeconomics.co
MRO GUIDE
$0.0 $10.0 $15.0 $20.0 $25.0Americas Europe Asia Middle East Africa $5.0
2021 2011
Americas Europe Asia
$17.0 $13.7 $11.6 $3.1 $1.5 36% 29% 25% 7% 3% 2.4% 4.7% 6.8% 5.3% 3.5% Market ($B) Market Share (2011) CAGR (2011-21) 29% 30% 30% 7% 3% Market Share (2011) Africa Middle East
NOTE: Americas = North America and Latin America & the Caribbean Europe = Western and Eastern Europe
Asia = Asia Pacific, China and India
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MRO SPEND ($M) PER AIRCRAFT
Vintage Jan-08 Jan-09 Dec-10 1970’s $2.9 $2.5 $2.2 1980’s $3.0 $3.0 $2.8 1990’s $2.0 $2.1 $1.9 2000’s $0.8 $0.8 $1.1 Grand Total $2.4 $2.4 $2.1 $0.3 $0.5 $0.6 2006 2007 2008 2009 2010 $0.4 Line HMV
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the next ten years.
The airline MRO industry has been in a state of rapid transition for many years as airlines, seeking cost and ser-vice improvements, have shifted from in-house to outsourced maintenance as the dominant model. The emergence of MRO competitors in low-labour-cost regions has also radically changed the competitive dynamics of the industry, forcing traditional MRO competitors to adapt to offer more sophisticated services in order to remain relevant. This pace of change then sped-up dra-matically over the past five years as the OEMs entered the market in what could be described as a forceful manner. This OEM intervention lead to increasingly sophisticated support services being offered, bundled ‘full-service’ offerings, global footprints and relentless effi-ciency improvements. MROs are now also unlocking unrealized value through mergers, acquisitions, alliances and the sale of non-strategic assets. Mean-while, turmoil in the broader aviation industry is creating significant pressure as airlines seek to cut costs, and ac-celerated retirement of old-generation fleets is reducing forecast demand. The rapid growth and evolution of the MRO industry is offering smarter and
more responsive competitors seeking significant opportunities for growth and profitability.
Preliminary estimates for the 2011 global MRO forecast indicate a return to positive, albeit small, growth (2.1%) with growth expected to increase slowly at 3.4% CAGR through 2015 and 4.4% CAGR through 2020. That said, 2011 has seen a sharp falling away of busi-ness over the past six weeks to October 20 and the preliminary growth figure could well fall. But total global MRO is just starting a new growth cycle with large numbers of narrow and wide body
Source: TeamSAI Consulting
Source: TeamSAI Consulting
Sour
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A STORY OF SUCCESS
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“IMPACTING OUR BUSINESS POSITIVELY IN TERMS
OF PROCESS OPTIMISATION AND INCREASE OF
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2007 2008 2009 Africa 2010 2011 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 Middle EastAPAC Europe North America Central/South America
Number of A
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MRO GUIDE
Narrowbody 60% Widebody 23% Regional Jets 17% 2010 19,675 2021 28,591 2.7% CAGR 3.5% CAGR 2011 20,203 Narrowbody 60% Widebody 23% Regional Jets 17% Narrowbody 57% Widebody 24% Regional Jets 19% /21*7(50)/((7*52:7+5(0$,1662/,' Latin America & Caribbean Asia Pacific Africa Eastern Europe North America 2011-2021 Regional CAGRs Western Europe Middle East China India 3.2% 3.5% 4.4% 4.9% 5.7% 8.4% 9.1% 9.6% 1.0% %879$5,(6&216,'(5$%/<5(*,21%<5(*,21 2001Historic MRO Market and Fleet Size
$42.2 2002 2003 2004 2005 2006 2007 2008 2009 2010 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 $50.0 0 5,000 10,000 15,000 20,000 25,000 $37.8 $36.1 $37.0 $38.3 $38.8 $41.0 $45.1 $45.7 $42.3 16,030 17,206 17,903 17,627 18,816 19,330 19,675 MRO Mark et ($USB) F leet Siz e
MRO Market Fleet
aircraft requiring heavy maintenance checks in the months and years to come. So taking overcapacity in the market to one side, there should be a steady growth in the number of aircraft being maintained during this decade. MROs find themselves having to re-design the way they do business, from how they handle and agree a contract with a client to how they maintain aircraft, en-gines and parts and flow them through on a shop visit – All in the name of cutting turnaround times while also cutting cost to the operator at the same time. This is something that to an
out-side investor would seem worrying as market pressures are so extensive in the aerospace aftermarket that MROs are being forced to enhance their services while also reduce the cost to the client on what seems to be an ongoing basis. The MROs are in effect doing more for less with less and thus many have been cutting their cost base and redesigning their facilities to cut turnaround times.
Most long-term forecasts, be they OEM, MRO or consultant forecasts, are all relying on one thing: Population growth and the growing middle class. It is these factors which drive long term
aviation forecasts across the board with MRO and the aftermarket being no exception. Fleet growth forecast at 3.5% CAGR (compound annual growth rate) to 28,591 in 10 years with ASM growth set to increase at 5.3% CAGR over the same period with aircraft utilization rates going into October 2011 remaining high. As of August 2011, fleet growth was on pace for the year with the global fleet standing at 20,617, up 2.0% for the year thus far from a 2011-21 CAGR forecast of 3.0% in Jan 2011, this in part is due to the continued expansion of the North American fleet.
Source: TeamSAI Consulting
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MRO GUIDE
these services
THE BENEFITS
Provides total cost advantage Offers more flexibility to operators Shift risks and costs away from
airline
Gives independent MROs opportu-nity to form credible network with extensive capabilities
Regulation could temper outsourc-ing growth somewhat, but large players will adapt
The most successful MROs will be those able to offer a full array of services across all aircraft types offering total maintenance through a long term partnership. This is the key for MROs independent from OEMs. The real benefit of opting for an independent third-party or in-house provider is data share. If an MRO is able to service a mixed fleet at any time in any zone with one service provider, that will be a significant benefit as the provider will share data at all times over all types that will also embrace the latest cost saving technologies be they PMA, DER or whatever is needed. This provides a cost aftermarket remaining independent of
the OEMs and this will lead to lack of data and choice for the operators on a scale not imaginable just ten years ago. Once the OEMs control the data then there is no going back. This is why there has been a scramble for maintenance providers to be a part of the OEM pro-grams, which has served to accelerate the whole process.
Airlines are going to ask in ten years’ time just how this has happened, just as the lessors are today asking many questions about their future handling of aircraft and maintenance reserves on the same. The key for the future will be the control of price escalation, but without viable alternatives to the OEM programs, the airlines will not be in a position to do a great deal other than pay.
TECHNICAL SUPPORT SERVICES
Includes all “back office” functions such as engineering, planning and supply chain
Early stages of the emergence of Tech Services outsourcing
Lately, larger carriers are recogniz-ing the leverage of outsourcrecogniz-ing
The bottom line for the MRO sector
The operator will continue to: manage core operations (flying) outsource maintenance as it
choos-es, basing outsourcing decision on key guidelines
MROs therefore must:
identify new market needs and value added services that support airline requirements
reinvent the business model to position itself to meet needs develop business processes to
opti-mize service
Key decisions guidelines for choosing maintenance services/outsourcing Labour Material Terntime Performance Quality
The mainstay for MROs remains the global narrowbody fleet, this will continue to expand for the foreseeable future providing increasing amounts of business over the long term: Or at least that is the overriding message from the MROs. The truth of the matter is that MRO business will not increase over the next five to ten years on anything other than the current expanding narrowbody fleet.
Aircraft age ranges and the effect on the maintenance market over the next five to 10 years, in the US especially where there are many MD and 757 air-craft, is going to be monumental. Once they are removed from the market and the new aircraft come online the MRO will lose business. The phenomenon of new aircraft taking less maintenance re-quirement leads to a very black market for the Americas especially over the next ten years with very low growth.
What can be said for global MRO as a whole is that new airframes in produc-tion will require less maintenance while the new engines, which will cost more to maintain, are on the whole being captured by the OEMs by design with the same scenario applying to compo-nents also. Thus it is hard to see the
0% 20% 30% 40% 50%
HMV (Check) Engines Components Line Tech Support
10% 70% 80% 90% 100% 60%
Note: Outsourced MRO includes work outsourced to independent MROs or to OEMs but not work done by operator-affiliated MROs
*/2%$/2876285&,1*
www.airlineeconomics.co Airline Economics: MRO Global 201113
MRO GUIDE
efficient service that an operator will be at pains to refuse. This is the blunt truth of MRO moving into 2012 and it is a truth that for many will require either expansion, acquisition or invest-ment. There is no middle ground and although an MRO may inform you that they are secure in their sphere of influ-ence, if they do not meet the aforemen-tioned criteria, then they are operating on borrowed time as globalisation of the aviation aftermarket speeds. An MRO provider must be global particularly with carbon taxes arriving in many corners of the globe and fuel prices con-tinuing to rise on a long term basis. An operator cannot afford to fly an aircraft across the globe for maintenance checks in the future, this is the silver lining for the independent MROs. The operators and OEMs alike will in the end need them. As Chris Doan states: “It is more about firms setting up partnerships within existing MROs in the growth regions. You are not seeing opportunity for a LHT or SRT to go in and set up, but there is an interest in joining forces in joint venture with MRO shops in the Middle East, including India and China. That is the way it is heading as it really brings experience in with local inter-est and creates a very robust business model for the MRO.
Four basic strategies for MRO growth
LABOUR
Capitalize on outsourcing needs of airlines
Develop expertise in core activ-ity areas and outsource non-core activity
With upward wage pressures, focus on efficiency and productivity Actively develop new talent as a
Comparison of popular Narrowbody and Widebody aircraft order books Manufacturer Aircraft type Model Aircraft in
service
Backlog No. of airline operators
No. of aircraft on operating lease (approx)
Production years (to date)
Boeing 737NG -700 1138 501 78 380 14
-800 2037 1445 130 957 14
777 300ER 247 198 23 114 8
Airbus A320 A319-100 1217 254 103 520 16
A320-200 2302 1756 210 1193 23
A321-200 528 214 64 214 15
A330 -200 377 256 65 191 13
Relationship Based
Inventory Tolerant
Asset Utilization Not a Focus
Little Accountability
Limited Competitive Threat
Metal & Mechanical
Western Focused
Performance Based
Inventory Tolerant
Turn-Around Time Prioritized
Accountability for Results
Global Competition
Composites & Electronic
Eastern Focused
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hedge against a labor shortage
VALUE CREATION
Implement cost reductions and new efficiencies
Adopt supply chain innovations Focus on reliability & dependability Embrace new, smart aircraft
sys-tems
Manage and showcase efforts with appropriate metrics
DIVERSIFICATION
Expand market offerings
Expand geographical reach Pursue full-service capabilities Create strategic OEM alignments Balance portfolio with
counter-cyclical businesses
MERGER AND ACQUISITION
Identify value-oriented innovations that contribute to airline customer’s cost focus
Focus on the supply chain & distri-bution channels for components & material
Leverage JVs and alliances
14 Airline Economics: MRO Guide 2011 www.airlineeconomics.co
MRO GUIDE
using so many systems. They are now adding 787s to their fleet with all the loadable software components and with all of the headaches that new genera-tion aircraft can have. The two airlines which merged, would need to merge the acquiring airline’s data into the other airline’s older systems or vice versa even before they can even think about an integrated approach for future cost sav-ings. In fact it is reasonable to assume that such a large airline would not be in a position to move forward with an integrated fleet management approach for at least a decade. That said, Luf-thansa too operates different systems and is actually running with SAP/ point solution, but it has everything under control and information flows between MRO shops freely. But this is a system that requires a huge amount of investment both in time and resources with many people staffing the same. Lufthansa is an example to American Airlines but if AA in the future wants to be able to manage its mixed fleet more efficiently, then it will have to invest very heavily in bespoke systems that can create an in-house crossover of data all running on one platform. This cost over the medium-to-long term will erase all gains made through reduced aircraft/ engine prices at point of sale.
Our heartfelt thanks goes to Team SAI for the provision of data and intel-ligence used within this feature and throughout this publication. delivered with the aircraft type, which
for mixed fleet airlines, however, loses all the benefits of having an integrated system. It would be much easier if the OEMs concentrated on building hi-tech aircraft and provided hi-tech structured information, and would not be engaged in entering the market of providing IT systems.”
The American Airlines order of September 2011, which consisted of huge numbers of Boeing 737 Max and Airbus A320neo aircraft, begs the ques-tions what the future will be like for the airline when it comes to maintaining and tracking the needs of these aircraft when comparable data between the two fleet types will not be easy to come by. If the two systems don’t look exactly the same, maintaining these fleets will be a challenge.
When Airline Economics looked into the fleet management systems of a large US airline, which subsequently merged, it became clear that there might be a need to become increasingly nervous about their future maintenance abilities. The US is one of the largest potential markets for fleet manage-ment systems but many still use Maxi Merlin’s outdated legacy systems. One side of the airline was using one legacy system and the other side was using a different system; the shop floor was using another system, and for compo-nent control they were using Oracle and so on. Just imagine the implications of At this point, the question needs to be
asked: What will happen to operators who are currently ordering mixed fleets of aircraft virtually free of charge on the back of signing aftermarket contracts? For now, it seems that unless there is a change of policy at the OEMs, the operator will not be able to compare aircraft data at all and will not have the in-house skills to deal with aftermarket problems in a cost effective manner. Thus the operators have in effect helped speed the process of the OEMs control-ling their fleets.
One business on the frontline with a headache on the subject of OEM incur-sion is Swiss Aviation Software. When asked about the effect on his business of OEM additional services, Ronald Schaeuffele, CEO of Swiss Aviation Software, which owns industry leading IT product AMOS, stated: “The OEMs produce aircraft and that is their core business. Apart from that, they provide additional services, such as systems for point solutions. The problem for us as a software vendor is that some of these solutions are open to connectivity while others are not. I have just come back from a customer that was asking me if Amos could connect to a particular sys-tem from Airbus, but Amos cannot and it is obvious that this is not an Amos-unique problem.
The Boeing toolbox is open to grab information from and can be linked with Amos to some extent. If you are a customer with the right market power, you can go to Boeing and ask for all the manuals out of the toolbox and load it into Amos. For smaller customers with mixed fleets the financial implications might be too tough to choose this way.” He adds: “When Airbus delivers a new aircraft, the documents delivered with the aircraft – including the component list of the aircraft – are completely dif-ferent from those Boeing delivers. The two manufacturers don’t seem to com-municate on this issue; they don’t seem to be preoccupied with the data format of information they provide. They pro-duce hi-tech aircraft and do not focus too much on data format standards. Sometimes they provide IT systems bundled with a new aircraft. Airlines with 787s on order, for example, might profit from an IT management system
Knowledge
KPMG is a leading provider of
cross-border advisory services
to the international aviation
finance and leasing sector.
www.kpmg.ie/aviation
© 2011 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
To find out more about how we can help you, please contact
Tom Woods on +353 1 410 2589 or [email protected]
16 Airline Economics: MRO Global 2011 www.airlineeconomics.co
DATA SYSTEMS
M
any airlines and main-tenance companies within the aviation sector know all too well from past mergers and acquisitions and/or internal revamps that data migration is a huge task and one that cannot be undertaken lightly. The task of data migration can be high in both cost and labour hours, and can provide mixed results in the first instance until staff train-ing and troubleshoottrain-ing processes start to take hold. One company that has been able to get around this is Swiss Aviation Soft-ware (Swiss-AS) which uses an innovative and advanced migration tool that eases the data transfer from the legacy systems to their system.Swiss-AS has gained substantial knowledge over a number of years in per-fecting the best possible data migration procedure and the firm uses that same knowledge to assist customers in mak-ing the right decisions when it comes to planning a data-transfer project. Many mainstream Enterprise Resource Plan-ning (ERP) system providers have not entered the aviation maintenance and engineering sector primarily because the system optimises all the processes in an engineering environment, which means it has to be highly bespoke due to the complex nature of the business. It is also not a high volume market, which is prob-ably why ERP system providers have not successfully expanded into it. This leaves the market open for targeted operators such as Swiss Aviation Software, Trax and Lufthansa Systems. Each of these companies has a reputation for products
that are based upon best practice built up over a number of years and with cli-ents on a case-by-case basis.
Swiss-AS chief executive Ronald Schäuffele says the business of providing data management products is one that goes well beyond the initial agreement, installation and training processes. “We are open for any additional fine tuning and reshaping of functionality and have a real relationship with our customers – it is not just a black box, it’s a community, we speak to each other,” he says.
“We optimise and adapt to new tech-nologies to help move the customer’s business forward. This often results in reducing manpower because we can prove that use of our system will be of benefit for new customers. They see the value that the integration of the systems brings, such as the ability to have infor-mation at your fingertips – for example when users see with one right click what logistics is doing and thereby prevent that something in the planning is going wrong. There are also minor functional-ities where customers can send messages within the company – much like an inte-grated email system – where you can look at one document to see all queries every-body has raised over a set period. It brings the departments closer to each other.”
The decision driver for system inte-gration for an airline, operator and/ or maintenance company is never the same. Some companies will concentrate on necessity while others will be look-ing to increase margins. When asked the question of how a system provider is able to measure the benefit to a customer
Amalgamating two or more data systems is a costly
and time consuming affair – even though a company
may save time and effort in the long run. So how have
Swiss Aviation Software got round this thorny problem?
Who combines
the data
?
www.airlineeconomics.co Airline Economics: MRO Global 201117
DATA SYSTEMS
18 Airline Economics: MRO Global 2011 www.airlineeconomics.co
DATA SYSTEMS
in time and money only, Schäuffele is unable to give an accurate response in terms of figures. “It is very difficult to quantify the benefit,” he says. “We have benchmarking figures from various business cases of customers who have been reviewing what they have achieved due to implementing a new system, but we are in such a dynamic environment that it is not always possible to compare what firms can save after two or three years with what they initially formulated in their business case. Because the envi-ronment will have changed so much over the years. But of course our customers are doing more business with less cost.”
Schäuffele added that it is very hard to quantify the benefits in a general way because a customer’s increase of efficiency heavily depends on the its productivity prior to the software implementation project. The final comment reflects the reality of the situation for maintenance and engineering firms – it is a matter of doing more business at less cost.
UNDER PRESSURE
The maintenance sector is under terri-ble pressure today to lower turnaround times, reduce costs and at the same time provide an enhanced level of all-round service to the customer. This against a backdrop of airlines parking aircraft again as passenger numbers fall and increased competition from Original Equipment Manufacturer (OEM) after-market services. OEM’s incursion in the aftermarket has been highly successful in the extreme with most agreements coming at the point of sale for an air-frame or engine.
For data management firms, OEM agreements are providing a headache because of the lack of data share that the OEMs will allow. Under a usual data management and integration agree-ment, customers are provided with a wide spectrum of generic interfaces which promote an easy integration of the system into the customers’ existing system environments. However, this is not always possible with some OEM aftermarket agreements.
When asked if the OEM incursion has had an effect on his business, Schäuffele said: “Yes, I have a headache. The OEMs produce aircraft and that is their core business. Apart from that, they provide
www.airlineeconomics.co Airline Economics: MRO Global 201119
additional services, such as systems for point solutions. The problem for us as a software vendor is that some of these solutions are open to connectivity while others are not. I have just come back from a customer that was asking me if Amos could connect to a particular system from Airbus, but Amos cannot and it is obvious that this is not an Amos-unique problem. The Boeing toolbox is open to grab infor-mation from and can be linked with Amos to some extent. If you are a customer with the right market power, you can go to Boeing and ask for all the manuals out of the toolbox and load it into Amos. For smaller customers with mixed fleets the financial implications might be too tough to choose this way.”
He adds: “When Airbus delivers a new aircraft, the documents delivered with the aircraft – including the component list of the aircraft – are completely dif-ferent from those Boeing delivers. The two manufacturers don’t seem to com-municate on this issue; they don’t seem to care about the data format of informa-tion they provide. They produce hi-tech aircraft and do not focus too much on data format standards. Sometimes they provide IT systems bundled with a new aircraft. Airlines with 787s on order, for example, might profit from an IT management system delivered with the aircraft type, which for mixed fleet air-lines, however, loses all the benefits of having an integrated system. It would be much easier if the OEMs concentrated on building hi-tech aircraft and pro-vided hi-tech structured information, and would not be engaged in entering the market of providing IT systems.”
The problem of OEM data share will be compounded where an airline orders a mixed fleet with aftermarket agreements attached; the competition between the Airbus Neo and the Boeing Max – for air-lines such as American Airair-lines that have ordered a large mix of Boeing and Airbus aircraft – may have trouble in five or six- years when they need to have comparable data between the two fleet types. “If the two systems to maintain these fleets don’t look exactly the same, it presents a prob-lem,” says Schäuffele.
Another factor suppressing the growth of the data management sector currently is the lack of cash at many airlines across the globe which prevents the implementation
of modern, cost-saving systems, which in turn affects the long-term bottom line. This factor is however a very serious mat-ter when one considers airline mergers and acquisitions and the lack of cash that carriers have to complete a merger.
CONFUSON IN THE RANKS
“The US is one of our biggest poten-tial markets but they still use outdated legacy systems,” says Schäuffele. “I was speaking to the technical staff from a big airline, where one side of the airline was using one legacy system and the other side was using a different solu-tion; the shop floors were using a third system, and for component control they were using an ERP system and so on. Just imagine the implications of using so many systems. Imagine they are now adding 787s to their fleet with all the loadable software components and with all of the headaches that a new generation aircraft will produce. This will be a real challenge for them. Let’s further develop this worst case scenario: The airline then
needs to merge with another airline with a similar scattered system landscape and the acquiring airline’s data needs to be transferred into the other airline’s older systems or vice versa. It is difficult to believe in an integrated approach in such an environment.”
In the past data management com-panies have concentrated on their own regional sphere of influence; Swiss-AS has had particular focus on Europe, while Trax concentrated on the Ameri-cas, with the two fiercely competing in the Middle East and the Asia Pacific regions. However, Swiss-AS is moving in on the American market in a big way. Airline
Economics asked Schäuffele what has
changed: “In the past, we mainly focused on Europe, some parts of Africa and the Middle East and previously we were not really prepared to go beyond in markets like Asia or Asia-Pacific or in the US. If you want to expand your business into the US, you need to have a separate legal entity over there and you need to have people working there that speak and think like they do.
“So we spread our wings to the US in September/October last year [2010] and have immediately generated a number of leads. We have signed a deal with South-ern Air and we hope to sign in a couple of weeks with a second one and a third is in the pipeline. We want to have this project finished in such a way that we can send a prospective customer to Southern Air to see what we have achieved there. We want to make sure that Southern Air is happy with the system and exploits the full potential of Amos and can therefore be used as a good reference site.”
Getting into the US market is no easy task however, which is why Swiss-AS has taken the decision to launch a joint ven-ture with Lufthansa Systems Americas. Swiss-AS is now represented in Miami, Florida, as a business unit within Luf-thansa Systems Americas.
Schäuffele says: “Swiss-AS found in Lufthansa Systems Americas the ideal partner for its strategic expansion plans to market Amos in the Americas. While being the market leader in Europe and having a substantial market share in other parts of the world, Swiss-AS now intends to intensify its presence in the US market. The potential of the US mar-ket is well-known to the MRO software industry. Many airlines in the US cur-rently use outdated MRO software and will sooner or later screen the market for best-of-breed, fully integrated MRO software solutions.
“Miami seems an excellent choice to Swiss-AS since the city is the link between South and North America and at the same time a gateway destina-tion to the rest of the world. Swiss-AS was looking for a partner and found in Lufthansa Systems Americas the ideal set-up for its strategic expansion plans. The American subsidiary of Lufthansa Systems has been based in the US for more than 15 years and has long-stand-ing relationships and experience with
DATA SYSTEMS
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20 Airline Economics: MRO Global 2011 www.airlineeconomics.co
DATA SYSTEMS
airlines in North and South America. Amos has been positioned within Luf-thansa Systems Americas as a business unit that will be fully dedicated to Amos-related activities. This approach enabled the US Amos team to start its business right away while profiting from the infrastructure, sales distribution chan-nels and good reputation of Lufthansa Systems Americas. Lufthansa Systems Americas has many years of experience in implementing software solutions in the aviation business. By co-operating with Swiss-AS, the aviation IT pro-vider complemented its portfolio for the American market. The Amos business unit will focus not only on sales but also on project management and consulting.”
THE BIG SQUEEZE
The business in the pipeline for Swiss-AS is impressive and is telling. In such uncer-tain times, airlines and MROs alike are desperate to reduce costs and gain what business is out there. “We have signed a considerable number of contracts this year,” says Schäuffele. “We went through a period where we were pushing ahead with 30 potential customers. Nine have signed so far, that is to say we are closing the deals now, which we have worked on for months, sometimes even years.”
But this is only one side of the coin, the other is the needs of customers to drill even more out of existing contracts with Swiss-AS. “At the same time we have large-scale developments in process. Times have changed and we always have to invest in keeping the system state-of-the-art. We continuously screen trends in the industry and add/enhance the functional scope. We are now optimising and reorganising the planning of main-tenance events in Amos. Over years we
have been adding functions to the main-tenance planning module, while adding complexity and diversity. Now we go one step back and consolidate the existing business functions prior to adding new ones. The same logic rules shall be applied to all functions of the maintenance plan-ning module,” says Schäuffele.
He adds: “Another big step forward will be the introduction of a rule engine in Amos, which is a graphical way to define complex behaviours of programmes in the system, such as the hierarchy of con-tractual terms in the program Contract Management. Thanks to this new feature, clients will be able to do visual program-ming in Amos via drag and drop. They will have a tool at hand that allows them to visualise contractual rules. Swiss-AS is in the process of introducing this rule engine in all areas where the system deals with very complex behaviours.”
IN THE PIPELINE
“We have a huge amount of develop-ment in the pipeline for pure MROs. One of these developments is devoted to the subject ‘material flow tracking’. Currently material is properly tracked when it is inside the customer’s store or installed/ removed from an aircraft. The move-ments between store and aircraft are not really monitored. In future you can define per part number tracking points, which indicate in the system where the part number is moving through your organi-sation. The client will have the possibility to define an unlimited number of flows per component that they want to control. We are developing this workflow together with our latest customer. You see, Swiss-AS is definitely pushing Amos into the MRO arena – being a high-yield market. Also for MROs have we introduced the possibility that third-party maintenance providers can work with mixed author-ity/certification set-ups while the system will always produce the right type of cer-tificate dependent on the ownership of the component/aircraft. This need arose because we have environments in our community where MRO providers work for different companies under different certification rules.
“Many more projects could be men-tioned here. I just want to refer to one other project in this context. Currently we have an approval rule system in place for
orders. In future, all Amos users can define at whatever place in the system which kind of approval workflow they want to imple-ment. Since approval workflows are so different between countries and cultures, we have agreed that the approval workflow system needs to be completely generic and that it must be adjustable to the customers’ needs. All of this will be released between now and the end of next year.”
UP FOR THE FIGHT
As companies such as Swiss-AS concen-trate more on pure MRO and compete more heavily against one another, they involve themselves more heavily in a market under great pressures. It would be folly for the aviation data manage-ment system providers such as Trax and Swiss-AS to devalue what is currently a highly investable arena that looks set for strong and rapid growth. Schäuffele sums up his thoughts in a manner that would impress any investor.
“We have grown over the past couple of years with a growth rate of 20–25%, but we do not want to become the biggest. Swiss-AS just wants to keep the optimum balance between acquiring new custom-ers vcustom-ersus maintaining what we have already achieved. At the same time, we are committed to continuously investing in the product in terms of technology and functionality. We think it can turn sour if we start selling more aggressively and sell at too high a premium. This is not good for the customers and it is also not good for the supplier. The only disadvantage is our connection to the Swiss franc. Our cost base is mainly in francs. Fortunately, most of our income is still in Swiss francs. Since the very beginning we were very cautious not to have the currency risk on our shoulders and customers were more than happy to have Swiss franc contracts because they expected this currency to be more stable with lower inflation rate risk. Many airlines were really pushing to sign franc contracts. Currently we have more than 100 customers and we still sign Swiss franc contracts. The ones we sign in US dollars at the moment don’t have a real big negative impact on us, as we try to have the cost basis of those contracts in US dollars. We would like to charge everyone in Swiss francs, but we had to recognise that some customers want to sign US dollar or euro contracts only.”
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www.airlineeconomics.co Airline Economics: MRO Global 201121
DATA SYSTEMS
For over 20 years Swiss Aviation Soft-ware (Swiss-AS) has been providing a range of bespoke management sup-port services to the aviation sector. In order to be able to give customers the most benefit from the implementa-tion of Amos, Swiss-AS offers a full package of services covering the whole range of services and thereby guaran-tee a successful and reliable product performance. Ranging from initial requirement studies to system instal-lation, from user training to consulting and continuous support. Amos Opera-tion Services (AOS), a service offered by Swiss-AS, covers a predefined set of tasks related to the administration of the application Amos and the underly-ing database.
Swiss-AS provides strong leader-ship throughout the project to ensure the implementation stays on time and on budget, while fulfilling the custom-ers’ expectations. Swiss-AS helps its customers to get the most out of their Amos investment by providing reliable consultancy services not only during the implementation project, but also for the complete life cycle of Amos, including management consulting, process analysis and system audits. This process includes a comprehen-sive support package through an Amos Online Support tool and Amos Online Documentation.
Over the past years, Swiss-AS has gained a high reputation around the world, which is the biggest difference from five or 10 years ago; there are fewer names left in the market today acting on a global level. Growth is being driven by reputation and word of mouth.
Combining 20 years of innova-tion and excellence in the area of IT/ MRO, Swiss-AS has become a fixture in the MRO software market and the i n d u s t r y - l e a d i n g maintenance man-agement system in Europe and beyond.
Since the late 1980s the
mainte-nance and engineering system Amos has been setting the standards in a highly specialised market segment and has attracted more than 100 cus-tomers from all over the world. Its solid customer base ranges from pure operators of all sizes, major low-cost, regional and flag carriers to large airline groups and MRO providers. Ryanair has been a customer since 1997/98. Lauda-air being one opera-tor of the Austrian Airlines group joined the AMOS community in 1994 while the entire Austrian Airlines group came on board in 2002.
Alitalia is a big customer, with 130 aircraft. Swiss is also becoming one of the biggest customers because it is migrating its data into Amos for its entire fleet. Amos lists GOL in Brazil, and AirAsia in Kuala Lumpur, and it has just signed with South African Airways. Swiss-AS helps customers to successfully manage the complex requirements of a modern aircraft fleet whether in the context of air-lines, MRO providers, pure operators or flight schools. In its fully integrated
software package Amos delivers all the required tools to meet the demanding requirements in the fields of mainte-nance, engineering and logistics.
Today, more than 100 customers in four continents run Amos applications – and as customers actively participate in the further development of soft-ware, the scope of functions in Amos is increased with every new customer. Needless to say, Amos completely ful-fils the airworthiness standards of EASA and FAA and is continuously updated accordingly.
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22 Airline Economics: MRO Global 2011 www.airlineeconomics.co
E
ngine original equipment manufacturers (OEMs) and maintenance repair and overhaul firms (MROs) are together responsible for the performance of an asset, which is a prerequisite to airline reliability, aircraft availability and fuel burn – the bulk of an airline’s cost base. It also represents the largest share of maintenance spend. It has often been said that the only real low-cost shop visit is the one you don’t have. But air-lines are getting smarter at stretching time on-wing by investing in a variety of tech-niques and activities to enhance enginelife. These include regular engine washes to ensure the working parts inside the engine are as clean and contamination-free as possible, as well as asking pilots not to use full throttle unless strictly necessary due to load, airfield altitude or atmo-spheric conditions. According to engine manufacturer CFM International (CFMI) all these techniques can increase time on-wing by 10% to 20%.
Growth rates in Asia (especially China and India) will be high over this decade. The active jet engine fleet in Asia-Pacific (including China and India) will grow from under 10,000 at the start of this
decade to some 16,000 in 2020 – that’s an additional 6,000 engines to support and maintain. This is said to be larger than the absolute engine fleet growth in North America and Europe combined during the same period. Engine MRO suppli-ers and othsuppli-ers in the related supply chain who have not already developed cor-porate, capacity, customer support and logistics strategies for the Asia region now risk losing out on global market share by some margin. Asia-Pacific accounts for almost 50% of the absolute growth in engine MRO spend and the region will be a larger engine MRO market than North
More MRO for
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MRO Global looks
into the maintenance
providers market and
outlines some of the
options available certain
engine types.
ENGINES
www.airlineeconomics.co Airline Economics: MRO Global 201123
availability from OEMs. So it is expected adoption of PMA will recover and increase, especially in the airframe components and interior parts of the aircraft.
ENGINE OEMS LEAD THE AFTERMARKET
In the mid-1990s, engine OEMs embarked on a strategy to capture the total maintenance value as part of their product lifecycle.The OEM approach was simple:
<hgmkhefZm^kbZeikb\^l%pab\aZk^Z significant portion of maintenance costs.
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Lik^Z]ma^bgo^lmf^gmbg^qhmb\mhhe-ing over a larger base.
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The effect on third-party/airline MROs:
<hfihg^gmZg]Zbk_kZf^H>FlaZo^ adopted similar models
<hfihg^gmZg]Zbk_kZf^H>FlaZo^ developed less maintenance-intensive equipment, which they control closely EZ[hnkZk[bmkZ`^Ziieb^lik^llnk^mh
third-party/airline MROs
The result:
If you aren’t an OEM MRO, you need a strategy to align yourself to deliver maximum value and stable costs to the customer over the long term.
On newer engine models, engine OEMs have a competitive advantage over other third-party suppliers. OEMs are able to sell long-term MRO support deals at the point of aircraft purchase and they control access to technical data, documentation and many parts. They can also be more flexible on material ikb\bg`pbmabgma^bkFKHhû^kl%lahne] they choose to do so. As evidence of the market strength of OEMs, one just has to observe the market penetration of ma^ Kheel&Khr\^ MhmZe<Zk^ hû^k hg bml MRO. Between 2007 and 2009 airlines
parked many old maintenance-intensive aircraft, such as the 737 Classic and MD aircraft, and reduced overall aircraft use to better match capacity with demand. In 2010 aircraft were moved back into service at pace, but now in the latter half of 2011 schedules are being cut once more and the general global market slowdown will once again see less aircraft in the air for the next six to 12 months. Red ink is again flowing across the balance sheets of airlines across the globe and so cost reductions are at the vanguard of thinking, and airlines have sought many ways to reduce their engine MRO spend. Examples include: a reduc-tion in work scope for shop visits; where possible, more repairs and less replace-ment of expensive parts; deferreplace-ment of the replacement of expensive life-limited parts and use of short-stub engines; greater leverage of spare or surplus engines in lieu of an overhaul; and, of course, seeking renegotiation of MRO contracts. All these changes in behaviour have meant engine overhaul suppliers, depending on their engine and customer portfolio, have seen revenues decline on average by 10–15%.
Ironically, the recession has seen the use of PMA parts decline by 17% since the 2007 peak. There are many reasons for mabl%bg\en]bg`3Zbkebg^nl^h_[nû^klmh\d rather than buying inventory; more repairs rather than replacement of parts; parking and cannibalisation of the mature aircraft fleets where PMA had a higher penetra-tion of material content; reduced airline resources available to the PMA approval process; and, last but not least, OEM defensive measures. This latter point can be illustrated by GE/CFMI’s agreements with potential adopters/users of PMA, the independent suppliers such as Aveos and ST Aerospace. This has successfully given GE/CFMI greater influence over the parts/ material supply chain. Despite this, PMA remains a strategic tool for airlines to use in the face of increasing prices or poor parts America and Europe by 2020. This is
driven not just by the fleet growth, but also by the age demographics of the fleet already in operation.
>g`bg^ \hlm i^k ahnk \hgmbgn^l mh climb with each passing year.
?e^^m kZmbhgZeblZmbhg !+))1Ç+)*)" helped to curtail average total spend per engine.
Ahp^o^k% mhmZe hi^kZmbg` \hlml Zk^ coming down when considering the improvement in fuel consumption on newer engine types.
The recent recession and global slowdown ]nkbg`+)**aZlZû^\m^]li^g]hg^g`bg^