Third-party revenue at - Group’s Engineering & Maintenance (AFI KLM E&M) unit is on the rise as the entity adjusts its focus to more profitable work and trims costs through streamlined operations.
Revenues from outside the group are up 19.6% to €621 million ($824 million) for the first half of 2013, including a 20.4% increase in the second quarter, group executives explained during of the company’s first half earnings call.
AFI KLM E&M’s total first half 2013 revenue was €1.6 billion, putting its third-party work at 38.1% of sales.
Part of the third-party growth has been increased success in both engine and components work. These areas are AFI KLM E&M’s “most profitable,” and will be prioritized accordingly, the company says.
The group also will look to shed some “unprofitable” heavy maintenance work, “where Europe is no longer competitive in terms of labor costs.” The company, however, did not specify what work may be dropped.
The shift comes as the group moves to integrate its two engineering units. Earlier this month, the group tapped Air France Industries (AFI) President Franck Terner to head all AFI KLM E&M strategic activity, which for the first time will be guided from the group level.
Day-to-day operation of AFI and KLM E&M will continue to fall to each airline’s vice president of maintenance, which market the combined services under the AFI KLM E&M umbrella brand.
The group also is moving forward with a new aerostructures shop at Paris Charles de Gaulle Airport. The 65,000-sq. ft. facility, scheduled to open in mid-2015, will incorporate AFI KLM E&M work currently performed at Paris Le Bourget Airport, streamlining its Paris-area operations. The new shop will have more composites capabilities, reflecting the increasing shift in aircraft manufacturer design trends away from metal airframes.
The group says it is planning similar enhancements to its aerostructures shop at Amsterdam Airport Schiphol.
AFI KLM E&M’s work on both group aircraft and third-party fleets represents about 5% of the group’s total revenue. AFI KLM is about 18 months into Transform 2015, a three-year effort to trim costs and revamp its business lines.