Maintenance, repair and overhaul (MRO) providers operating in the Asia-Pacific region must make use of lower labour costs and form local joint ventures and partnerships to ensure maximising the potential, a new study warns today.
Aerospace and defence research consultants Frost & Sullivan estimate the Asia-Pacific MRO market could be worth as much as $13 billion in 2011, but warn Western companies will fail to capture a large share of this unless they use loacl resources .
The market for MRO of commercial aircraft and engines in the Asia-Pacific region was worth around $8.7 billion last year but huge air traffic growth and in particular the rise of low fares carriers in the region will boost the market. Also, Asia-Pacific governments are "striving hard to liberalise this sector by introducing open skies policies and permitting domestic airlines to fly abroad," says Frost & Sullivan industry manager Subhranshu Sekhar Das.
But the shifting market dynamics pose challenges for original equipment manufacturers (OEMS) providing MRO services in the region, as legacy carriers need to cut costs wherever possible to compete with low cost rivals.
"Airline affiliates are being pressured to offer high-quality, cost-effective MRO services to attract foreign airlines by offering lower labour rates," Das says.
Following the "shift in the balance of power" caused by the emergence of budget airlines, OEMs must now face up to the need to provide round-the-clock services to meet the requirements of airlines, he adds. "OEMs need to form joint ventures and partnerships with local participants and properly utilise lower costs of labour as well as cater to different customer groups with higher value-added proposition."
MRO companies also have to contend with the need for significant capital investment with risk costs and extended return on investment.
But the volume of work available to MROs in the region looks set to continue growing at a "modest" rate of 7.2% as the forecast expansion of airlines’ passenger fleets and tripling of cargo traffic in the region is balanced by the possibility of additional terrorist attacks, the cost of increasingly complex air travel security measures and the impact of high oil prices.
HELEN MASSY-BERESFORD / LONDON
Source: Flight International
