As Middle East airlines grow their fleets and expand their markets, three dynamics are becoming apparent. One is that many carriers want aftermarket services in the region—having suppliers service them from North America or Europe sometimes is no longer acceptable. The other two are guarding against overcapacity and solving the shortage of MRO personnel in the region.
Abdullah Osman, Emirates vice president for engineering materials management, emphasized this point during Aviation Week's MRO Middle East Conference here last week when he asked why more manufacturers are not providing maintenance support in the region.
Besides developing the support and infrastructure in the region, locating aftermarket providers in the Middle East and North Africa should decrease the expenses of shipping MRO work outside the region, as well as costs associated with logistics and longer asset downtime (AW&ST Jan. 21, p. 40).
The Middle East air transport market may be among the fastest-growing in the world, but whether that translates into an equally speedy development of the region's MRO business remains to be seen. Because the average fleet age will decline over the next 10 years, demand for MRO might only kick in with a “time lag,” Yen-Pu Paul Chen, Aviation Week's director of forecasts and analytics, told delegates at the conference.
According to Chen's 10-year market forecast, the average age of Middle East-based aircraft will decline to 9.4 years from 10.8 years now. The current figure already compares favorably to the world average (11.1 years) and that advantage is set to widen even further. Almost half of the current fleet is less than seven years old—meaning the aircraft have not yet undergone heavy checks.
Still, the MRO market in the Middle East is growing faster than in most other regions.
David Stewart, head of aviation and aerospace at ICF SH&E, predicts the Middle East MRO market will increase by 8.5% annually in the next few years. But he cautions that a large part of it may be locked in with big airlines such as Emirates, which do most work in-house. The share of freely available business may therefore be smaller than anticipated.
Because of its size, Emirates has methodically brought more maintenance work in-house, which has infused the airline's engineering organization with high technology and substantially lowered MRO costs, Osman says. Emirates occupies eight hangars in Dubai. The carrier is weighing establishment of its own pneumatics and hydraulics MRO, says Osman.
While the advantage of locating MRO services closer to home is evident, many MRO providers and even OEMs have expressed caution about adding capacity in the Middle East, which is the second dynamic now appearing. “The challenge is not to create overcapacity,” and then discover in a couple of years that new facilities cannot be filled, says Zaid Al Hazmi, general manager for six-month-oldMiddle East, which has a 175,000-sq.-meter (1.9 million-sq.-ft.) workshop and a parts storage facility of the same size in Dubai. “We must be very careful that we build the right capabilities, and they must be competitively priced and a value for the airlines,” he says.
This logic is probably why, the Engine Alliance and Abu Dhabi Aircraft Technologies (ADAT) have delayed building their $150 million engine overhaul and test cell facility for the and GP7200 models, which they announced in late 2010 and planned to open early this year. The demand for overhauling those engines simply has not developed yet.
Evidence that the adage “build it and they will come” is untrue can be seen in nearby Turkey, where Turkish Technic, MNG Technic Aircraft Maintenance and myTechnic all have built big hangars. While the Turkish airline market is growing at a healthy rate, five-year-old myTechnic's hangars are only still 50% full, says CEO Yavuz Cizmeci.
In November 2010, two years after it opened, myTechnic established a partnership with the HNA Group of China and Hong Kong-based Bravia Capital Partners and sold a majority stake of its business to the two entities. “There will be more and more MRO mergers, as well as more outsourcing,” Cizmeci says.
Even ADAT restructured and modestly “right-sized” its business last year, implementing many process improvements to gain further efficiencies and establish a sustainable future. Its vision is based on long-term strategic positioning, which is part of the reason it likes to partner with OEMs. Frederic Dupont, senior vice president of sales for the Mubadala Aerospace MRO Network, to which ADAT belongs, says partnerships with OEMs make good sense, “especially because OEMs are playing a bigger part in the aftermarket with new platforms.”
While there is not one right way to grow capabilities without creating overcapacity in the region, there is consensus on one sore point: the acute shortage of local maintenance and engineering personnel. The numbers of licensed maintenance engineers and approved maintenance organizations in the region are increasing slightly, but Persian Gulf countries do not develop enough local talent to propel the growth.
“Our biggest challenge is finding the right people. Poaching is a big problem,” says Adil Al-Sheibani, senior manager of development engineering for Oman Air, which will be adding new-800s, and -300s in the next few years.
The supply-and-demand problem is exacerbated by the dearth of internships that provide recent graduates with practical experience, says Oussama Jadayel, director of the Balamand Institute of Aeronautics (BIA), part of the University of Balamand in Lebanon. He believes academia needs to better partner with the regional industry, as is done in the West.
Because most MROs in the region require at least five years of experience and are often “critical of recent graduates' experience,” Jadayel says poaching talent from other companies is common and “everyone is fishing from the same pool.”
Seven carriers in the Arab Air Carriers Organization (AACO)—Air Algerie, EgyptAir, Emirates, Kuwait Airways, Middle East Airlines,and Saudi Arabian Airlines—signed a memorandum of understanding in November to cooperate in four areas to save costs and gain efficiencies. Those areas are: maintenance training, vendor audits, line maintenance and the joint purchase of consumable parts. A governing board for these initiatives will hold its first meeting next month in Cairo. AACO expects the collaboration to save the participating airlines about $150 million in the next four years, says Rashad Karaky, manager of economics and technology for the AACO.