The business of widebody airframe maintenance is fragmented, with the most active player - Air France Industries/KLM Engineering & Maintenance - holding just 6.7% of the market (by number of aircraft maintained), according to Flight's ACAS Database. Together, the top 10 providers account for 43.8% of market share.
AFI/KLM is one of three top 10 providers headquartered in Europe, the others being Lufthansa Technik and British Airways Engineering, though of course MRO is a global business - no major provider can be confined to a particular region. Still, it is striking that five of the top 10 spots (including second and third places) are taken by providers headquartered in Asia. The top 10 is completed by two US-based providers (in fifth and 10th).
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If the enormously popular 777 family is taken as a case study, AFI-KLM is found to extend its lead with a 13.9% share. Three Asia-headquartered providers complete the top four: SIA Engineering Company on 12.5%, Ameco Beijing on 10.2% and ST Aerospace on 6.4%. Yet the market is still a fragmented one, with only the top six holding more than 2% each and the top 10 as a whole accounting for less than 60%.
Airlines' tendency to outsource widebody maintenance continues to vary widely by region. In Europe the phenomenal success of the low-cost model, with its focus on core competences, is reflected, albeit indirectly, in the huge majority of aircraft that are maintained by third-party providers. Just 5.8% of 949 widebody aircraft are maintained in-house, suggesting that widebody operators have been forced to embrace low-cost principles to remain competitive.
MAINTENANCE REQUIREMENTS
The USA is not immune from this trend. Where once it was normal practice for major carriers to handle maintenance in-house, the post-9/11 recession drove the likes of United, Northwest and Delta to restructure their maintenance operations. The upshot is that today only about 20% of North America's widebody fleet is maintained in-house.
Similarly, maintenance of Africa's small fleet is largely outsourced, by an almost 75% majority, but in Asia the split is far more even. Outsourcing is only just winning the argument, with 51.9% of widebody jets covered by third-party agreements. Given that five Asia-headquartered MRO providers are in the top 10, it is no surprise that Asia's widebody fleet is larger than any other region's. It totals 1,285 aircraft, ahead of North America's 969 and Europe's 949.
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"There's a more limited rationale to outsourcing airframe heavy maintenance in Asia Pacific," says AeroStrategy consultant David Stewart. "In the US, they've got the bug: you've got a vibrant independent sector, the airlines don't think it's core business, and you can send work to Asia or Central America. In Asia Pacific, you've got low labour costs on your doorstep, and you've got national carriers that generate lots of man-hours."
However, in the Middle East and South America in-house maintenance continues to hold sway. Roughly 65% of the Middle East's 279 widebodies are maintained in-house, as are a similar proportion of South America's 98 widebodies. But ambitious players such as Abu Dhabi Aircraft Technologies (ADAT) and Brazilian maintenance company VEM are looking to change this picture in their respective markets. ADAT has invested $100 million in a three-bay A380 hangar, and intends to compete in the A350 XWB and 787 markets.
When it comes to outsourcing maintenance widebody operators have more options than their narrowbody counterparts, for the simple reason that widebodies can be shipped further for maintenance without the need for expensive, inefficient refuelling. In the recent past, rapidly escalating fuel prices have prevented operators from taking full advantage of these options, but the recent reversal of the trend may widen MRO providers' catchment areas.
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However, there are counteracting forces at work. Stewart observes that over the next decade the average man-hours per event will fall by 20%, and labour-rate differentials between the regions are also set to decrease. "It might be that the airframe heavy maintenance market will become more regional in nature, even for widebody aircraft," he suggests.
Further out, the maturation of 787 and A350 XWB aircraft will bring further declines in average man-hours per event. "The rationale for having the maintenance in-house for some of the airlines that operate these aircraft just disappears," says Stewart. "You just need a much larger base fleet to generate the necessary volume that would justify in-house capability."
For now, though, fragmentation will probably continue to characterise the widebody heavy maintenance market. "The real restructuring will come in the decade after next, when you've got these very non-man-hour-intensive airframes like the 787 and A350 XWB around," Stewart says. "People still like to build hangars... hangarmania is alive and well in some parts of the world."
MRO FOCUS
We chart key recent market developments as part of our regular series of maintenance special reports
- Engine maker CFM International is proceeding with plans to convert shareholder Snecma's engine maintenance, repair and overhaul (MRO) joint-venture with Air China into a CFM engine MRO joint venture. CFM International president and chief executive Eric Bachelet confirmed to Air Transport Intelligence at the Zhuhai Airshow that the engine maker is taking over Snecma's stake in the Chinese MRO.
- EADS Sogerma has agreed to sell its landing-gear maintenance division, EADS Revima, to a holding company co-owned by two individuals, one of whom is the division's head. Managing director Christian Grzanka and former Messier-Dowty and Aircelle chief Christian Knapp sealed the take-over deal on 28 October. The company is being renamed Revima. It specialises in landing-gear maintenance for widebody Airbus and Boeing types as well as the Airbus A320 family.
- German maintenance firm Lufthansa Technik has formally opened its new Bulgarian facility in Sofia, the country's capital. Lufthansa Technik Sofia, 80%-owned by the German company, will handle Airbus A320 and Boeing 737 base maintenance. The Sofia site will employ 350 personnel the first aircraft it services, with an IL2-check, will be a Lufthansa Airbus A321.
- EADS and the National Aviation Company of India, the parent of national carrier Air India, have signed an agreement leading to the establishment of an MRO centre at New Delhi. It is due to begin operations in early 2009 and will cater for all Airbus aircraft that will be operated by Indian airlines and other regional carriers. The companies say the centre will be able to maintain more than 100 aircraft by 2013. Boeing has also been in talks with NACIL about setting up an MRO centre in Nagpur.
- Selecting Asian and North American providers for Boeing's GoldCare maintenance programme for the 787 remains on the airframer's agenda, but the company is not disclosing any timelines due to delays in delivery of the twinjet. In July 2006 SR Technics was selected as Boeing's European maintenance provider for GoldCare. With respect to the Asian and North American selection process, a Boeing spokesman says: "We're working really hard on it."
- Gulf Air has signed a deal with the Bahrain Real Estate Company (Edamah) to build a new hangar at its Bahrain international airport base as it considers establishing a major maintenance facility for the region. Construction will begin next year. The facility, which is due to open in 2011, will be able to accommodate three widebody aircraft.
- German flag-carrier Lufthansa's maintenance division, Lufthansa Technik, has formally opened an operation in Switzerland to support Swiss International Air Lines aircraft and VIP-configured jets. Lufthansa Technik Switzerland at Basle will maintain Swiss's regional aircraft fleet as well as Airbus A320s and Boeing 737s with executive interiors.
- Iberia chairman and chief executive Fernando Conte sees the differing MRO strategies of his own airline and British Airways as a significant issue to be addressed if the carriers proceed with their proposed merger. The Spanish flag carrier has been steadily building its third-party maintenance activities over the years, while BA has been largely focusing on its own needs.
- FedEx has signed an agreement with maintenance software supplier Enigma in a two-part deal for the management of scheduled and unscheduled maintenance and OEM maintenance revisions. Engima is deploying its software platform from the Memphis headquarters of FedEx for more than 7,000 internal end-users and thousands of third-party maintenance specialists.
- Former ACE Holdings subsidiary ACTS has formally taken on a new name which became effective on 23 September. The MRO company's full legal name is now Aveos Fleet Performance Inc, and the move marks the final shift away from Air Canada owner ACE. In October 2007 ACE completed the sale of a 70% stake in ACTS to equity firms Sageview Capital and Kohlberg Kravis Roberts.
- India's first independent commercial MRO specialist, Air Works, has now received approval from India's regulator to launch operations. Air Works says in a statement that the Indian Directorate General of Civil Aviation has granted it approval to launch commercial MRO operations. The company has been operating for decades as a general aviation MRO firm but has just established a commercial MRO business in Hosur, near Bangalore.
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Source: Flight International
