One big trend in recent aftermarket activity has been the increasing importance of OEM support, especially in engine work. For the biggest MRO deals, manufacturers often seem to compete mostly with shops that are part of a global airline, like Lufthansa or Air France.

But independent MROs are still significant players, especially in the airframe market, and even in the fiercely contested engine sector. The biggest independents still go head-to-head with their well-connected OEM and airline rivals, and even the smaller ones find a way to thrive in the niches that giant companies leave open.

While many OEMs want to own the airline customer and count on a steady aftermarket revenue stream, they are not always eager to perform the actual maintenance. If someone else can do it better, faster and cheaper, there is room for talented smaller companies to do well.

Many independents, both large and small, are betting there will be profitable room for them. They are investing in new capabilities, new products and platforms, and often in new geographical markets. That is true even in the toughest market—engines.

StandardAero obtains about half of its $1.6 billion annual revenue from the airline and fleet business that Senior Vice President Rob Cords runs. “We do engines,” Cords summarizes, and that includes powerplants from OEMs General Electric, CFM International, Pratt & Whitney Canada and Rolls-Royce, plus auxiliary power units made by Honeywell and Hamilton Sundstrand.

The MRO invests both to add capabilities and expand markets. “We made some investments in the last several years in P&W variants—PT6s and PW100s—and in the CFM56-7,” Cords explains. “Now we want to build out these businesses.”

So StandardAero is deepening capabilities in new-engine markets, bringing outsourced work inside so it can reduce turnaround times without buying rotables. And it is deploying field service representatives globally to complete on-wing repairs. The company also invests in making short turn times dependable in older markets. It is creating test cells for General Electric CF34s and CFM56-7s, each capable of testing the other engine to give customers reassuring redundancy.

The company will probably invest between $20-50 million over the next couple of years, contingent upon on whether it finds attractive acquisitions for component repairs.

Engines on new aircraft are “a little out of our range at this point,” Cords says. StandardAero waits until engines need a significant volume of maintenance at full overhaul centers, not just warranty repairs. “We can't invest five years ahead of the maintenance curve.”

Relationships with OEMs vary. StandardAero sometimes competes with OEMs, sometimes OEMs own the customer but offload work to StandardAero, and sometimes an OEM teams with the MRO in selling long-term support. “The customer wants the OEM offer but also wants to work with us,” Cords explains.

Operators often come to independents like StandardAero to modify maintenance programs. “We do LLPs or parts replacement differently. We are creative,” Cords says. That and turn times that can be 30% faster than rivals' keep StandardAero busy and investing.

Smaller engine MROs also see opportunities. Jet Aviation Specialists (JAS) grew to 75 employees in 25 years, repairing components such as combustors, cases, rings and honeycombs on CF6s, CFM56-3s, -5s and -7s, and PW4000s. JAS just invested $4 million in offices, facilities and equipment. President Diego Beltran aims for a 20% average annual growth rate.

Beltran sees room for expansion because JAS serves a niche, not competing with engine OEMs but supplying them on beneficial terms.

JAS budgets 10% of revenue for investments needed for technology changes. “Once you may have used a plating process; now you use HVOF [high-velocity oxygen fuel] or another process,” Beltran notes. “You must make sure you have equipment to support newer engines.”

Sixty percent of investment typically goes to equipment and machinery, 30% to tooling and 10% to upgrading facility layouts. Requirements must be planned at least a year ahead to be available when needed.

JAS recently brought honeycomb repair work in-house that used to be outsourced. Beltran also is interested in adding GE90 capability, if he can find a way to work with the manufacturer. “OEMs tie up new engines for 10 years, so they need to mature a bit before we start to see them. But there may be an opportunity with the GE90.”

JAS grows because “we deliver what we promise,” Beltran emphasizes. “Meeting customer expectations is not enough. We need to anticipate and surpass expectations.” He says even powerful engine OEMs often receive poor service from suppliers.

Beltran expects JAS may acquire other businesses in two or three years.

Another independent engine service provider, Prime Turbines, part of Killick Aerospace Group, also is looking for new businesses that complement its current PT6 maintenance activities.

Capital is no constraint. The hurdle in acquiring companies is finding the right opportunities. Prime Turbine looks for ongoing MRO businesses it believes it can grow. The MRO will probably add another corporate-aircraft engine type to its capabilities in 2014, says John Waldrop, vice president of sales.

“We would like to grow 10 percent per year, but that is tough,” he says. “People say flat is the new up, but if we see a good opportunity we will take it.”

Turbine Controls generates $30 million a year working on engine accessories, rotating components, gearboxes and cases, says sales executive Andrew Walmsley. At the start of 2013, it purchased World Aircraft Accessories' assets that enable repair of pneumatics, hydraulics and electro-mechanical components, its first nonengine capabilities.

Turbine's five-year plan is to continue growing, expand its Connecticut facilities, identify products and processes it can pursue, and consider different aircraft. The company aims for a 5% annual growth rate. “You can try to grow your slice of the pie or look for more pies,” Walmsley explains. “We look for more pies.”

Privately held Turbine funds growth internally, and Walmsley says obtaining capital is not a challenge, so long as there is a history of return on investment.

Recognizing that OEMs now control the engine aftermarket, Turbine seeks to partner with them. Walmsley notes, “if you are adversarial, you will have a problem in the medium to long term because the independent engine market is shrinking.”

Turbine's selling point is that it is an ACE Gold supplier of Pratt & Whitney and brings that quality to all of its customers. The company completes repairs quickly, rather than stocking expensive rotables, to make timely deliveries.

In addition to adding nonengine capabilities, Turbine has hired sales directors for the Pacific and military markets and will add one in Europe next. Walmsley expects to boost sales in all three markets. “There are always opportunities.”

Sometimes MROs are constrained by general business problems. “I hoped we would be growing more, but we are holding our own in our little niche,” says Pat Halpin, co-owner of Turbine Weld, which overhauls PT6, JT15D and PW100 hot-section components.

Halpin is ambivalent about growth. “We do not want to cross that 50-employee barrier in the health law [the Patient Protection and Affordable Care Act that affects businesses with more than 50 full-time employees]. We don't know how much it will cost. Blue Cross and Blue Shield do not know.”

Halpin has 44 employees. He has a good health plan, but does not know what will happen to it or costs in 2014. He wants to ascertain that before making commitments to expand, which could come in the second quarter of 2014.

Component shops must increasingly pay attention to OEM plans. Bernie Rookey is president of Texas Pneumatics and Turbine Fuel Systems, which have a total of 75 employees. His constantly adds specific repair capabilities at a rate of 20-30 per month. “You cannot sit still,” Rookey emphasizes.

Most additions are in product lines his companies already handle, but Rookey sometimes looks at new parts or aircraft types. He is now getting more involved with regional jets and is considering the rotary-wing market, which he believes is underserved.

Investment in new capabilities is funded out of cash flow as Rookey is “bank-averse.” He is not interested in acquisitions, even small ones, because he believes they require too much management effort.

Rookey is still trying to figure out what his companies “want to be when we grow up.” He would like 10-15% annual growth, but has struggled since the 2008 crash. “We are probably close to that [growth rate] this year but not for the last three or four years.”

Rookey might consider selling his two companies at some point. “I don't want to do this forever,” he says. “I'd like to just ride my motorbike someday.” Meanwhile, he adds capabilities based on equipment requirements and expected revenue streams. The big hurdle is not money, but time. “We do not have the people to do all we want to do.”

Texas Pneumatics already has capabilities for the Airbus A380 and is looking at the A320neo and Boeing 737 MAX. “We want to do new aircraft, but they are in warranty for three to five years and at best, it is eight years before they generate significant business,” Rookey explains. Boeing 777s and 737NGs are his biggest models for MRO business.

Test equipment for new models is expensive, but Rookey's shops work mostly on pneumatic and fuel components that use mechanical tests. A few fuel parts require electronic testing. “If you go to the OEM, you pay $2 million,” Rookey observes. “But there are ways to get equipment that generates test signals at much lower cost. You have to be innovative. Test equipment is not a barrier.”

That is certainly what AAR has found. The 30-year-old company began expanding rapidly after its acquisition of United Airlines' overhaul facilities in Indianapolis seven years ago, notes Jack Arehart, co-chief commercial officer. “That was a giant step in maintenance services, and since then, we have expanded our footprint,” he says. The ambitious independent did 5 million man-hours of airframe maintenance alone in fiscal 2013 with an average of 55 aircraft in its hangars, not including its newest facility in Lake Charles, La.

And airframes are just a part of AAR's spreading footprint. “We think aircraft maintenance is an excellent window for seeing the other needs of customers,” Arehart explains. Through that window, the company has perceived needs for engineering services, landing-gear overhaul, surplus parts, component repair and repair management, cost-per-hour (CPH) programs and other ancillary services.

Indeed, airframes constitute only one-third of AAR's commercial business, which provides 40-60% of company revenue, the rest being from government and defense. “We like being hedged in those two sectors,” Arehart says.

Despite steady expansion, AAR does not have fixed rules on how much it will invest each year, making each decision on a stand-alone basis. “When is the right time to move into a new technology or new aircraft like the 787, versus the entry costs?” Arehart asks. “When there is a sufficient number of that model in the regions we serve that need their first heavy checks or have components out of warranty.” In other words, AAR will launch new capabilities when its metrics of scale, need and entry costs are met.

Repair management and CPH support are now a third of AAR's commercial business, supported by another important capability—teardowns to supply its CPH contracts or sell into parts markets.

What AAR does not do is compete with OEMs on engine overhauls, but it does commit to supplying engine parts for five years at predictable prices. So AAR buys 50-75 engines a year to tear down for parts. And the company collaborates with many OEMs, distributing their products, managing warranty or other repairs, and generally helping OEMs meet their own commitments.

So far, it's all working well. AAR continues to expand airframe maintenance, seeking to bring widebody work back to the U.S., adding a new line to its Duluth, Minn., narrowbody hangar along with landing-gear capabilities.

Smaller companies also see opportunities in airframe work. Empire Aerospace conducts heavy checks and modifications for Empire Airlines and customers such as Horizon Air and FedEx. President Tim Komberec sees his niche in turboprops: ATRs, Bombardier Q400s, Saabs and Embraer Brasilias. “There are a limited number of turboprops in North America, but also a limited number of shops working on them,” Komberec notes.

Now, Empire is considering beginning to work on regional jets. Komberec sees a lot of aftermarket movement, especially for smaller RJs. “There are lots of CRJ200s grounded, and there is an opportunity for storage, teardowns, mods and returns to service.” Empire could start working on Bombardier CRJs at its four-bay hangar. If business goes well and it adds Embraer ERJ work, it could expand.

Komberec will go for it when he sees “the business is there and the economy is not going into the toilet.” He hopes to decide by the end of 2014. “Capital is not a problem. We can get capital if we need it because we have been very cautious.”

Commercial Aircraft Interiors (CAI) has been handling aircraft interior repairs, refurbishments and modifications since 2003, mostly on Boeing models but now also on Airbuses. With 62 employees, CAI wants to increase work on Bombardier and Embraer RJs, says Marketing Vice President Brian McKiernan.

In February 2013, CAI opened four new buildings—for repairs, machining and storage—close to Seattle. “We have been growing and plan to grow steadily,” McKiernan says. “We are getting more into long-term programs rather than one-off deals.”

In late 2013, CAI opened a new line for black and clear anodizing, work previously done outside. It has also brought composite work inside and is moving into cargo conversions. “The growth is internal; we are not looking to acquire or be acquired,” McKiernan says. If CAI lacks a needed capability, it looks for an ally that has it. “Five years from now, we plan to be larger, not for the sake of bigness, but to handle the kind of business we are looking for that comes in.” CAI would like to pursue more seating work to support Airbus widebodies and RJs.