SINGAPORE—The business landscape in Asia for MRO firms is changing dramatically, with the developments largely driven by the region's burgeoning low-cost carriers.

AirAsia has said publicly that, under its new collaboration agreement with national carrier Malaysia Airlines (MAS), it aims to use MAS Engineering & Maintenance (E&M) as a MRO provider. Malaysia's prime minister, Najib Abdul Razak, also said in his speech on Dec. 6 at the LIMA Airshow that he wants to see Malaysia get a larger share of the region's MRO work. One way to achieve that is to convince AirAsia, the world's largest operator of Airbus A320s, to give work to Malaysian MRO firms rather than outsourcing this work overseas. He was referring to the fact that AirAsia over the years has sent A320s to Singapore Technologies Aerospace (ST Aero) and Airbus A330s to Lufthansa Technik Philippines.

MAS E&M presently does no heavy maintenance airframe work for AirAsia. But in early December, the then head of MAS E&M, Roslan Ismail, told Aviation Week that his firm was working to win over AirAsia. But he added no contracts have been signed yet because MAS group's collaboration agreement with AirAsia still has to be approved by anti-trust regulators. Another issue the two parties have to contend with is that AirAsia already may be locked into long-term contracts with other MROs.

Since then Roslan has left MAS, as part of a wider management shake-out that also saw two other top MAS group executives exit at the end of last year. Industry executives say AirAsia group CEO Tony Fernandes is the one driving many of the MAS group changes. The collaboration agreement, for example, was borne out of last year's share swap deal in which Fernandes and his business partner, Kamarudin Meranun, received about a 20% equity in MAS in return for giving shares in AirAsia to MAS's largest shareholder, the Malaysian government's investment arm Khazanah.

While AirAsia and MAS are yet to collaborate on airframe maintenance, AirAsia does send its CFM engines to GE Engine Services Malaysia, a firm in which MAS is an equity holder.

Indonesian low-cost carrier Lion Air, meanwhile, has been sending its CFM engines to ST Aero and Garuda Indonesia's GMF AeroAsia.

GMF recently signed a memorandum of understanding with CFM International that will eventually see GMF maintaining CFM56-7 engines in Indonesia in collaboration with the engine-maker. The Indonesian MRO firm's president director, Richard Budihadianto, has been trying for years to win all of Lion's CFM56 engine work. But Rusdi Kirana, Lion's president director, says he is only willing to give GMF some of his engines.

Lion also uses GMF for airframe heavy maintenance but plans to bring this work in-house once its new heavy maintenance base on the Indonesian island of Batam is completed. “The Batam authority has been quite helpful,” says Rusdi, when asked why he chose that location. He says the facility will be ready for airframe heavy maintenance checks by the third quarter. Industry executives say another reason Lion chose Batam is because the island is next to Singapore, so Rusdi is hoping the close proximity will help it to win third-party MRO work.

The other low-cost airline having an impact on Asia's MRO industry is Nok Air. The Thai low-cost carrier recently appointed Lufthansa Technik as the heavy maintenance provider for its entire fleet of ATR 72s and Boeing 737-800s. Thai Airways International owns 49% of Nok and the carrier's heavy maintenance work had largely been going to Thai's maintenance arm, but Nok is managed independently. Nok CEO Patee Sarasin has been pushing for Lufthansa Technik to establish a maintenance base in Thailand so the work can be done locally, but it is unclear if the German firm has complied with this request. Patee was unable to comment on this aspect and Lufthansa Technik declined to comment.

This means the Germans may send the Nok aircraft to Lufthansa Technik Philippines, which has largely focused on Airbus aircraft. It would need to establish the capability to do heavy checks on ATRs and 737-800s, but may be willing to comply as its biggest client, Philippine Airlines (PAL), has been scaling back the work it provides. PAL was locked into a long-term contract in which it gave all its heavy maintenance work to Lufthansa Technik, a deal that has since lapsed. LHT Philippines is a joint-venture between Lufthansa Technik and Macro Asia, a Filipino firm owned by Lucio Tan, who also owns PAL.

The fact that the long-term maintenance contract with Lufthansa Technik has lapsed explains why PAL was able to appoint Taiwan's Evergreen Aviation Technologies (EGAT) last year to do heavy checks on some 747-400s, work that previously was done by Lufthansa's joint venture Ameco Beijing. PAL also recently signed a contract with SR Technics for repair cycle management covering the airline's entire fleet of narrowbody and widebody aircraft, as well as engine maintenance for the airline's Airbus 340-300s.