Pandemic Expected to Boost MRO Outsourcing in Asia-Pacific

Carriers under financial pressure are looking for more ways to reduce fixed costs.

The COVID-19 pandemic is likely to accelerate the trend in the Asia-Pacific airline industry of maintenance outsourcing, according to some senior airline executives.

While the pandemic highlighted both advantages and disadvantages of outsourcing maintenance, carriers will be increasingly likely to choose this option, a panel of airline engineering heads said during Aviation Week’s MRO Asia-Pacific event.

One of the obvious reasons is that carriers under financial pressure are looking for more ways to reduce fixed costs, said Surinder Kumar Bansal, VP of engineering for AirAsia India.

Many Asia-Pacific airlines have downsized due to COVID-19, noted Anh Nguyen, technical director for Vietravel Airlines. After the pandemic, it will be harder to achieve the economies of scale required to retain certain MRO tasks in-house, he said.

An audience poll conducted during this panel session aligned with the views of the panelists. About 76% of respondents indicated the pandemic will make outsourcing more attractive to airlines, while 15% said it will slow the outsourcing trend and 9% said it will have little effect.

The panelists also said the COVID-19 crisis also emphasized certain aspects of in-house maintenance that were an advantage, however.

Airlines without in-house MRO capabilities faced challenges while cross-border travel was severely restricted because they could not fly aircraft to some of their regular MRO providers, Bansal said. This meant aircraft could potentially be “stuck at an airport with no MRO activity,” forcing carriers to find ways to work around the problem.

“During normal operations, outsourcing maintenance is a big help” in containing cost and optimizing efficiency by sending work to specialized providers, Bansal said. But during the pandemic there were advantages “both ways.”

Airlines with huge maintenance organizations of their own did face a problem when operations were halted, said Romulo Raras, head of engineering for Philippine Airlines. However, outsourcing presented other challenges. Certain types of agreements meant airlines continued paying MRO providers even if aircraft were parked and not earning revenue, Raras said. Airlines have needed to arrange deals to try to reduce the cost of outsourced maintenance. It is important for MRO providers to be “creative” in such discussions, Raras added.

The issue of minimum flying hour guarantees has become “a really hot topic” between airlines and MRO companies, particularly as contracts are being renegotiated, said Bansal. The parties need to address “how to minimize the impact to the airline and how to also [protect] the interests of the service providers.”

Nguyen said one of the things airlines learned during the pandemic was that MRO contracts with minimum requirements do not work for carriers when operations are halted. Some MRO 

Adrian Schofield

Adrian is a senior air transport editor for Aviation Week, based in New Zealand. He covers commercial aviation in the Asia-Pacific region.