The good, the bad and the ugly: the shape of things to ... - AviTrader

Cover Story - 2012: The MRO Outlook
everything. In this environment,
the ability to
be nimble and creative in
developing customer solutions
will go a long way
towards staying ahead of
the competition.
“Our industry has been
in rough waters for a
while,” says Thomas Ibsø,
group director, Sales and Marketing, of Danish
wheel and brake specialist TP Aerospace,
“and it is difficult to see the end of the storm
just yet. Airlines find themselves ever more
cash-strapped, MRO providers are expected
to provide wider and more complete support
packages for their customers - at lower prices
with no reduced expectations on TAT and reliability.”
Ibsø believes that reducing operational costs
will remain the focus for airlines in 2012,
which will increase demand for, in particular,
power-by-the-hour (PBH)
support programs, further
intensifying price competition
in the MRO sector.
“From our point of view,
as a wheel and brake
specialist, we foresee the
same trend, as wheels
and brakes are a high cost
chapter for all airlines.”
Thomas Ibsø
TP Aerospace
To maintain their competitive
edge, TPA will focus
on its Cycle-Flat-Rate
programs, which ensure
customers reliability, immediate
availability and
the ability to budget fixed operational costs
across whole platforms and fleets. “Through
flexibility, high service and immediate plugand-play
setups, we aim to distance ourselves
from larger and less flexible MRO nose-to-tail
providers. And in 2012, we will increase inventory.
Utilizing a buy-and-lease back option
our customers can reduce inventory and
administration, leading ultimately to reduced
overall costs.”
Werner Aero and Magellan Group are examples
of companies that have moved upstream
from their early days as parts suppliers to offer a
wider range of solutions that will provide ballast
in the stormy year ahead.
Mike Cazaz, CEO of New Jersey-based Werner
Aero, agreed that uncertainty is the new reality
in the industry. “We are all subjected to
fluctuations in both economy-related and geopolitical
events. At the same time, aircraft are
becoming more efficient everyday and hence
will require less maintenance going forward.
At Werner, we are looking for ways to reinvent
ourselves and our business, and 2012 will be
“Reducing operational
costs will remain the
focus for airlines in
2012, which will increase
demand for
PBH support programs,
further intensifying
price competition in
the MRO sector.”
Thomas Ibsø, TP Aerospace
the stepping stone for that. We are moving
more towards providing services and support,
using our current expertise, as opposed to selling
parts and engines.”
Rob Fessler, vice president Sales and Marketing
of the North Carolina-based Magellan Group,
meanwhile, says that his company is looking
ahead to 2012 to again increase its revenues
and expand its business toward newer technologies
to match customer demand. “The
aftermarket business model demands that we
constantly approach newer technologies and
make investments accordingly. The airlines
have always been cash-strapped. 2012 will be
no different. The industry has learned to incorporate
and consider credit analyses as a normal
and onerous feature of doing business.”
“Often, as aircraft reach a mid-life stage,
maintenance costs mount and are often difficult
to predict,” continues Fessler. “The aftermarket
helps to defray some of those costs
by offering quality airframe components and
engine parts to meet criti-
cal schedules at discounted
prices. We are meeting
this market by replenishing
our inventory with new
aircraft and engines.”
THE OUTLOOk FOR
ENGINE MRO
The high oil prices of the
past two years have completey
changed the face of
the aviation industry, with
two new fuel-efficient models,
the Airbus A320neo
and the Boeing 737 Max,
responsible for billions of dollars-worth of new
aircraft orders in the past year alone. The success
of the new planes rests securely on the fuel
savings provided by the engines that will power
them, Pratt & Whitney’s revolutionary PW1000
Number of aircraft
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Aircraft Retirements 2001-2011
10
(continued from p9) We have seen MRO
consolidation, streamlining
where possible, alliance and partnership
creation and in some cases, mergers.
The biggest MRO spend is in North America,
followed by Europe and although we
don’t expect this to change completely in
2012, the growth of Middle Eastern and
Asia Pacific entities should not be underestimated
as they are not suffering the same
economic turmoil as the two leading areas
of MRO spend.
Labour rates are most likely to dictate the
success of those growth region MROs in
continuing to attract business from Europe
and North America. Considering that in
some instances labour can make up around
80% of the overall cost of the check, and
that labour can vary from $35 per man hour
up to $100 per man hour, it is not surprising
that the cost of labour is a big factor when
choosing an MRO.
Rather than risk losing business, some of
the MRO alliances, partnerships and mergers
have been a case of Western MRO firms
buying into an increasingly eastern, more
competitively priced labour supply.
Although it has been talked about in terms
of reduced maintenance requirements for
the newer aircraft, and likely a reduction
again when NEOs and MAXs arrive in the
next few years alongside their associated NG
engines with longer on-wing times, there is
a need for MRO growth in some regions.
India and China seem comparatively fledgling
compared to their order book. It is not
unreasonable to imagine that some speculative
investors from the Far East, who
aren’t so affected by the not-so-global
downturn, might well investigate entering
the MRO market there.
There is probably a (continued overleaf)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
B737 B747 B757 B767 A300 A300-600 A310 A320 MD-80
AviTrader MRO - December 2011