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

Cover Story - 2012: The MRO Outlook
New MRO frontiers in 2012: The case for South America
A lot of ink has already been spilled over the emergence of east and
south-east Asia and the Middle East as the brilliant new frontier for the
global MRO industry.
But there’s a strong case to be made for South America. The region
has largely survived the global financial downturn unscathed, having
learned its lessons the hard way during its own financial meltdown in
TAP M&E Brazil’s 29m high Hangar 5 in Rio de Janeiro by night
2002-03. The continent’s GDP rose by an enviable 5.6% in 2010, and
notwithstanding the contagion spreading from Europe, it is still forecast
to grow by close to 4% both this year and in 2012. Low inflation,
wage increases and employment growth have lead to rapid growth in
air travel. Add to that the fact that the 2014 Fifa World Cup and the
2016 Olympic Games will both be held in Brazil, and the region is due
for a tourist explosion in the next few years.
The region’s aviation industry has grown apace. The merger of Chile’s
LAN and Brazilian carrier TAM, due for completion early in 2012, will
create LATAM,the world’s second-largest airline after Air China, with
a market value of $11.3bn. Another tie-up last month between regional
powerhouse Avianca-Taca and Chilean carrier Sky is expected
to presage further consolidation in the region, creating the economies
of scale that will allow South American airlines both within and to
expand beyond their borders.
With such growth in the airline sector, MRO growth is sure to follow.
The region already boasts one of the biggest MRO facilities in the
Americas in TAP Maintenance & Engineering, which owns the region’s
the further east you go. GAMECO’s Conrad
claims there is no issue with overcapacity in
Asia-Pacific and China, particularly in light
of the expected growth by airlines in these
regions. “We believe that at current growth
levels, it will be at least another three to five
years before capacity here starts to catch up
with growth.”
That said, he points to an increasingly crowded
MRO market in the region, especially in China,
with a number of new entrants, including
OEMs, international MROs, new joint-ventures
or partnerships and third-party component
repair houses, joining long-term established
MRO providers. “The bottom line”, he says,
Expenditure $bn
70.0
60.0
50.0
40.0
30.0
20.0
10.0
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largest hangar, the eight-bay Hangar 5 in Rio de Janeiro, as well as
comprehensive airframe and components facilities in the southern city
of Porto Alegre.
TAP M&E Brazil is the former MRO arm of the now-defunct Brazilian
flag carrier Varig, which went bankrupt in 2005. TAP Portugal
moved in and acquired Varig Engineering and Maintenance (VEM)
and since then has established a formidable
MRO network spanning Europe and South
America, and offering capacity and capability
unmatched in the region.
TAP M&E Brazil has triple certifications from
the FAA, EASA and the Brazilian authority,
the ANAC, for all Boeing, Airbus and Embraer
commercial aircraft except the Boeing
787 and the Airbus 380. It is a member of
the Airbus MRO network and an authorized
service centre for Embraer. Its Rio hangar has
four lines for widebody and four for narrowbody
aircraft, while its Porto Alegre (POA)
facility can accommodate one widebody and
five narrowbodies simultaneously. In addition
to airframe maintenance from A to D checks,
the two facilities between them offer aircraft
painting, engineering and planning support,
complete overhaul for landing gears, APUs, a range of PWC engines
and avionics and accessories maintenance for over 17,000 part
numbers.
But change is afoot for TAP M&E Brazil. Parent company TAP Portugal
is set to be privatized in mid-2012, with the parameters due to be
finalized as early as March. There are several possible suitors for the
Brazilian unit: IAG, the parent of recently merged British Airways and
Iberia, is believed to be keen to acquire TAP’s enviable network of 10
destinations and 74 weekly flights to Brazil, together with the top
airframe and component MRO in the region.
Another scenario could be the separation of TAP M&E Brazil from the
Lisbon maintenance unit. There are thought to be a number of interested
airline buyers in Latin America, ranging from LATAM to Brazil’s
second largest carrier Gol, which recently acquired smaller rival WebJet.
AviancaTaca is also understood to have expressed an interest.
Whichever way it goes, the buyer will benefit from taking Latin America’s
largest and most experienced MRO on board, while TAP M&E
would benefit from the influx of new business of an inhouse airline.
Projected MRO Spend per Region
2011 2012 2013 2014 2015 2016 2017 2018 2019
Africa Asia-Pacific Europe Middle East North America South America Source: IBA
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AviTrader MRO - December 2011