The maintenance, repair and overhaul (MRO) sector in the Gulf is undergoing a major sea change, which began earlier this year when Gulf Air broke away from its former overhaul arm Gulf Aircraft Maintenance (Gamco) and teamed up with Europe's SR Technics to create a new maintenance centre in Oman. Then earlier this month, SR Technics was bought by a UAE consortium that included Dubai Aerospace Enterprise (DAE) and the Abu Dhabi government's investment arm Mubadala Development - the latter creating a link to Gamco, which is wholly owned by the Abu Dhabi government.
While SR Technics is set to be the vehicle for DAE's MRO business, it is unclear how the ownership links to the region's longest-established player Gamco will be developed.
Gamco was originally established in the UAE as Gulf Air's MRO division in partnership with the local government, which had a 25% stake in the carrier. The split, announced last year, came as part of the decision by the Abu Dhabi government to withdraw from Gulf Air and throw all its weight behind its newly created national carrier Etihad Airways. Gulf Air - which was Gamco's biggest single customer - terminated its link and returned its 40% shareholding in parallel with the closure of its Abu Dhabi hub. Gulf Air signed a $750 million, five-year maintenance deal with SR Technics in March covering the airline's entire fleet and the establishment of a new $50 million maintenance facility in Muscat, in which Gulf Air will hold a 10% stake.
"All our heavy maintenance work going forward will be undertaken at SR Technics' facilities in either Dublin or Switzerland, and A checks will be carried out in Bahrain," says Gulf Air chief executive James Hogan. "The new facility in Oman will eventually have the capability to do all checks."
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Gamco has expanded its third party business following Gulf Air's departure |
Following the recent UAE take-over, SR Technics has emphasised "the determination of the involved parties to make the Oman heavy maintenance facility happen". It adds that it is "too early to give a concrete timetable about when it will begin operations", but that it is planned to have it established "as quickly as is practicable".
Although Gamco has been reducing its reliance on Gulf Air in recent years as it grew its "third party" work (the airline accounted for 68% of business six years ago dropping to around a third at the time of the split), the loss of the Gulf Air work is still likely to be felt in the short term, says Gamco's general manager Saif Al Mughairy: "Next year, revenue is likely to drop and profitability could fall primarily due to the Gulf Air transition."
Since the turn of the decade, Gamco's turnover has nearly tripled from $124 million in 2000 to $349 million in 2005, while employee numbers have grown from 1,000 to 2,200. During that same period, the business has been developed from one that barely broke even or made a loss, to one that has solid profitability. "We had a profit of $24 million last year - double that of 2004 - and $15 million for the first half of 2006," says Al Mughairy, who forecasts $30 million profit for the full year on sales of $290 million. He adds that Gamco's manhour costs are extremely competitive: "Only China is cheaper."
Replacing Gulf Air as the in-house customer is Etihad Airways - which, like Gamco, is 100% state-owned. Although Etihad's needs will make up around 14% of Gamco's business next year, it is unlikely to fill the void left by its predecessor as, unlike Gulf Air, it has a brand-new fleet, says Al Mughairy: "It will not generate much revenue for us for at least four years."
He adds that the Airbus A340 and Boeing 777 - which form the backbone of Etihad's fleet - will take up a lot of "footprint" when in Gamco's facilities undergoing light checks, "which will displace our capacity to accommodate high revenue, older aircraft".
Another issue will be the loss of a significant amount of engine overhaul work with the departure of Gulf Air. Gamco has full overhaul capability for the General Electric CF6-80C2 and the CFM International CFM56-5A (by year end) as well as smaller engines like the Pratt & Whitney Canada PT6A, while it can maintain the Rolls-Royce Trent 700 down to the module level.
"Our engine overhaul shop was created to support Gulf Air's CF6-powered 767 fleet, and the fleet generated a lot of engine overhaul work," says Al Mughairy.
Gamco senior sales executive Stan Pugh says that the whole of the company's original maintenance capabilities were "built on the back of the Gulf Air fleet", giving it full capability through to D check for the Airbus A320, A330 and A340, Boeing 767 and Lockheed TriStar. It also has this level of capability for the A300/A310 and 757.
"We can offer up to A check for the 747 and 777 and will complete our first 777 C check in 2008," says Pugh. "We will build our 777 capability through Etihad and then sell it to third parties," he adds.
"Our A380 hangar was completed two years ago, which can accommodate either one A380 or three smaller widebodies," says Pugh. With Etihad growing its A330/A340 and 777 fleet rapidly, Gamco's next expansion phase will be a four-bay 777 hangar (which can also be used to accommodate two A380s instead) due to open in 2008. It has also recently opened an advanced composites shop. Further down the road will be a new two-bay hangar situated in middle of Abu Dhabi airport when the new midfield terminal complex is completed in 2011.
The company is also looking to expand into new areas which could see it manufacturing a small business turboprop - the Farnborough Aircraft (FACL) F1 Kestrel. Gamco has signed a memorandum of understanding (MoU) with FACL to manufacture the Kestrel in Abu Dhabi. FACL is hopeful that Gamco will firm up its MoU by the end of the year and begin to produce further prototypes.
Although Gamco has had the MRO market in the region to itself until recently, it is not concerned about the threat of new players in the region: "The new entrants will stimulate the market, which is much bigger now in any case," says Al Mughairy.
Source: Flight International
