European airline maintenance, repair and overhaul (MRO) providers may shift operations to the USA to evade the continuing fall in the US dollar. With the dollar down 28% over the past two years, MRO companies across Europe have been feeling the pressure.
If the dollar continues to fall, Lufthansa Technik (LHT) says it may start shifting some operations from Europe and Asia to the USA to take advantage of lower labour costs: "Our US operation [in Tulsa] includes landing gear and thrust reverser maintenance and support of business jet operations, and we would try to shift this work between our subsidiaries in Asia, Europe and the USA. Our US factory can accommodate this but we would need to hire more employees. If we think that this is a long-term trend, we would have to build more factories," it says.
MRO operators in Europe are partly hedged, as most of their suppliers sell in dollars and cheaper parts costs balance out lower revenues from dollar customers. But labour costs are still in euros, pushing up costs, says Airbus MRO specialist SR Technics: "As for every other company working outside the dollar region, the cost base of SR Tech- nics has increased." Some are taking precautions against this: SR Technics hedges up to 80% of its dollar exposure. LHT may follow suit: "We do not hedge on a large scale at the moment, but we will be using it in the future," it says.
MRO sales departments are not seeing European customers move to cheaper rivals in the USA. "The ferry flight cost is still quite high...and there is a lack of high-performance Airbus maintenance suppliers in the USA," says SR Technics vice-president of sales and marketing Tim Talaat.
ALEXANDER CAMPBELL / LONDON
Source: Flight International
