Aftermarket Makes Subtle Changes To Portfolio Management

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Subtle changes are occurring in how companies manage their business portfolios. Examples come from a leasing company, an OEM and aftermarket providers. While they are different, the common denominator is cash management and adjusting to today’s needs as the market recovers.

For lessor Engine Lease Finance, asset management practices have had to change to work with airlines’ cash conservation needs. For ease of returns, it has allowed airlines to match engine conditions with the return of multiple leased aircraft, Tom Barrett, ELF president and CEO, said at Aviation Week’s Aero-Engines Americas. It has also assisted airlines with “shop-visit avoidance through flexible terms on multiple leased engines and buying out their unserviceable stock” through its INAV parts joint-venture company, he says. Another demand-driven need is offering shorter-term engine leases to match airlines’ requests and including “enhanced access to multiple spares” during the recovery to cover airlines’ planned shop-visit programs, he says.

In addition to changing leasing term needs, Engine Lease Finance is “accepting much weaker credit profiles” than it did before the COVID-19 pandemic, Barrett adds.

OEMs are actively monitoring their supply chain to ensure that as they ramp up, their suppliers are ready, too.

Pratt & Whitney is working with suppliers “to make sure that they’re investing, and placing those for critical parts and raw material requirements, as well. We’re starting to ramp back up . . . so we have to stay very close and make sure that our suppliers are taking the right actions now to be part of that ramp,” says Maya Raichelson, the OEM’s vice president for product delivery center operations.

As Pratt & Whitney pursues its internal Industry 4.0 journey—connecting its machines and facilities to gain efficiencies through digitalization as well as looking at things such as model-based design—it is also working with its supply base “to bring their digital and modernization strategies forward,” says Raichelson.

While a lot of consolidation was predicted last year, so far that has not played out, and the market has proven more resilient than expected.

However, in the last month more partnerships have emerged as aftermarket companies seek to grow their footprint, capabilities and/or customer base.

For instance, Lufthansa Technik Middle East will help Joramco, the Jordanian MRO owned by Dubai Aerospace Enterprise, expand its in-house nacelle capability. Lufthansa Technik Middle East will be Joramco’s preferred nacelle MRO provider and will relocate some of its stock to Joramco’s facilities for consignment and repair.

At the same time, Joramco and VD Gulf in the United Arab Emirates signed an agreement to explore ways to cooperate. Jeff Wilkinson, Joramco’s CEO, told Aviation Week the MROs have complimentary capabilities and different customer bases, so their businesses don’t compete.

Fraser Currie, Joramco’s chief commercial officer, predicts independent MROs will form more partnerships or alliances. “If you can bring two [MROs] together but maintain corporate governance of known competitive activity, airlines will start to look to come to a group—whether a formal joint venture or an alliance,” he said.

Lee Ann Shay

As executive editor of MRO and business aviation, Lee Ann Shay directs Aviation Week's coverage of maintenance, repair and overhaul (MRO), including Inside MRO, and business aviation, including BCA.