Robust travel demand has spiked MRO demand for narrowbodies and widebodies—including the A380 and A340. James Pozzi and Lee Ann Shay discuss the big news and nuances they observed at MRO Middle East in Dubai on March 2-3.

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Lee Ann Shay:

Welcome to this MRO Podcast. I'm Lee Ann Shay, Aviation Week's executive editor of MRO and business aviation, and I'm here in Dubai with my colleague James Pozzi, who is the MRO editor for EMEA. James, thank you for joining me.

James Pozzi:

Hi, Lee Ann.

Lee Ann Shay:

We just wrapped up MRO Middle East. It was a bustling show, packed, lots of business happening, lots of conversations, very engaging. As evidence, at 4:00 today, when the chime went off and said that this show is going to end, people continued to linger, even though they said, "It's time to go. Go to the exit." People continued to stay. What is your impression?

James Pozzi:

Well, certainly the optimism is back. I mean, the numbers today. I mean, a lot of people did remark on how kind of good the turnout was, and how busy it still was on the second day. Of course as you mentioned, at the end of the show, the floor was still packed, pretty much. I think the optimism is definitely there still for this region. Passenger numbers are up. MRO activity has increased over the last year, certainly, but certainly a lot of the kind of airframe check work is kind of up as well, over that time.

I think this region, before COVID, for a long time was characterized by its ambition. There's certainly no shortage of that, and that's still very much there, but there's certainly a few issues and challenges for the region to get to grip with, and I'm sure we'll be coming onto those a bit later on in this podcast. But yeah, I think buoyant mood at the moment. Still a few things to consider, as I mentioned with the challenges. Things are certainly looking a lot better than they were this time maybe 12, 18 months ago, two years ago certainly, so good news in that sense.

Lee Ann Shay:

In several conversations, frankly, almost in every conversation I have about MRO, people mention the workforce shortage and a lack of parts, especially for certain engine types, APUs, etcetera. And several people did say that, especially on the APU side, it seemed that there was a lot of work in progress, because the travel demand has come back very fast. Airlines want to get their aircraft engines, APUs into the shop, but isn't MRO capacity, and then the part shortage is real. It's affecting turnaround times in a big way.

James Pozzi:

Yeah, the supply chain is very disruptive here. I mean, it's a global problem, and this region is not immune from that. I mean, long turnaround times are still very common, especially on certain programs, engine programs, definitely. The Middle East is really feeling the impact of that, and I'd say that's one of the main hurdles it needs to overcome long term, like with the rest of the world, in order to truly, I guess grow and move forward as an industry.

Lee Ann Shay:

You know, and the term "one-stop shop" is not new. It's not a new concept, but as evidence, Etihad Airways Engineering, yesterday I guess it was, made several announcements, and one of them is Collins Aerospace is moving its nacelle MRO from the free zone here in Dubai to Abu Dhabi. It's going to be co-located at Etihad Airways Engineering. I asked Collins, "Why the move?" And right now, they're kind of in a single shop, isolated, whereas if they move it down to Etihad, a long-time customer, you have aircraft, you have engineering support, aircraft coming in and out. It just makes a whole lot of sense logistically, you know? And so I think that's just one example of some of the further kind of bundled capability that you see continuing, in this region especially.

James Pozzi:

I spoke to a couple yesterday in Europe who were really looking at this region potentially, to set up partnerships and to work with existing companies here, as you said to sort of bundle those capabilities and get them in the same location, or at least the same region, and have that one-stop shop. That also helps, I guess, overcome certain capability shortfalls, which as I mentioned before, this region still has an issue with, the lack of capability. For me, it was always in parts. That was easily identifiable, the lack of kind of parts repairs offerings here, but no, apparently it's across the board. Someone told me yesterday, in airframe maintenance, and of course engine MRO, so I guess I see that as filling that gap, and certainly companies outside of the region are looking at this region still, for those partnerships, joint ventures or whatever else they will do to have that one-stop shop offering.

Lee Ann Shay:

I kind of went down a rabbit hole, but there was a lot of nacelle news.

James Pozzi:

Yeah.

Lee Ann Shay:

You know, the last couple of days.

James Pozzi:

Yeah, very nacelle heavy.

Lee Ann Shay:

Which was interesting, you know? But Spirit AeroSystems continued to seek global partners around the world to bring its services a little bit closer to region, closer to customers, and Spirit AeroSystems signed an agreement to make Joramco, in Jordan, an authorized repair center, and Joramco is another one who has extensive partnerships and is increasing its capabilities.

James Pozzi:

Yeah. I would say outside of UAE, Jordan, possibly also Israel as well, are two countries that have these kind of growing and developing MRO regions, and they've got some very established companies now, with multi-capability offerings too, so it's no surprise we've kind of seen more of that. Also interestingly, a few people have noted the intentions of Saudi Arabia. Of course, Saudi Arabia Engineering Industries are affiliated with the Saudi Airlines, who of course have their own ambitious sort of fleet plans. Saudi Arabia are certainly kind of opening up to the West more, in terms of as a tourism location, a holiday destination, for example, even buying into Western sports teams as we've seen in my native England with Newcastle United.

So it's no surprise that this extends to things like MRO. That was noted by several people at the show, that Saudi Arabia could really grow in the next few years, and really go on, I guess an offensive in terms of acquiring capabilities and growing in that country domestically, and opening up to sort of more third-party. So we'll watch and see how that develops over time too. But for now, certainly, I'd say Jordan has some very interesting things going on there, but the main driver at the moment is certainly still coming through the UAE and the locations of Dubai and Abu Dhabi.

Lee Ann Shay:

I'm glad you brought up Saudi Arabia. It's definitely something to watch. It's growing. Jordan is growing, Abu Dhabi. And you know, here in Dubai, there's DXB, but also Dubai South. Every year when we come here, Dubai South continues to grow, expand capabilities. Now the business jet operations have pretty much moved to Dubai South. They have more logistics, and more MRO, so that's definitely expanding in many ways as well.

James Pozzi:

Yeah, and you visited there this week, didn't you?

Lee Ann Shay:

I did, and one of the companies I visited was Lufthansa Technik Middle East. They do flight controls, flaps, slats, radomes, nacelle--going back to nacelles. One interesting thing, this region used to be very dominated by widebodies. Clearly narrowbodies flies here too, but during the pandemic, when there wasn't international travel, the widebody market really tanked. And now, that's picked up. It's robust. Emirates has that big cabin retrofit program that's going to be going on. They're spending a lot of money.

James Pozzi:

Running into the many millions. It's a massive undertaking on the widebodies. And certainly one of those widebodies in that, is the Airbus A380, which has come up in several conversations the last couple of days. That program looked dead in the water, certainly into the first few months of COVID, when airlines announced retirements, etcetera, but it’s go new life in it now. And of course, some of the Middle Eastern carriers here in UAE, and also in Qatar, fly A380s, so there's this strange goings on with certain aircraft types. A340s as well. Programs you thought that were kind of easing off or coming to an end, they've got new life breathed into them now, so it's a very, very interesting. Certainly not a market we could have predicted two or three years ago, and it's taken some very strange turns, but it's very exciting to watch.

Lee Ann Shay:

That is true. We kind of wrote off the A340, a four-engine aircraft. We didn't think they were coming back, and now they are.

James Pozzi:

Yeah.

Lee Ann Shay:

And you know, kind of going back to where we started, the part shortage. For especially some of the tier two and three vendors, who really thought the A380 was done, they moved on, and picked up some different platforms, and again, now that's kind of hurting some of these widebodies that have rapidly come back in the region. And even Emirates. They traditionally do most of a lot of their work in-house, but because of this steep ramp-up, they've even had to outsource some of their 777 airframe maintenance.

James Pozzi:

Yeah, to a couple of providers, yeah.

Lee Ann Shay:

Yep. So there's a really interesting dynamic going on with the widebodies--especially, I think, here.

James Pozzi:

Absolutely. It's worth noting, actually, we were talking about doing things in house. Insourcing seems to be a thing here at the moment, with the airlines, particularly smaller ones, maybe without the resources of like an Emirates, or an Etihad or whatever else. I had a couple people yesterday on panels who talked about insourcing certain services, really to offset turnaround times in the supply chain. They thought maybe doing it in-house could help achieve that. And having that kind of in their own shops, and having that capability there, Texel Air and Bahrain, they've been doing some interesting stuff insourcing. And even a low-cost carrier, Jazeera Airways in Kuwait, they've looked to insource stuff recently. And that seems to be a trend at the moment with airlines, certainly on the medium to smaller scales. They're all doing it, so it'll be very interesting long term, to see if that continues and that keeps going on, but all signs so far, from what people say, associated with those airlines, is that it will. They see more insourcing on the horizon, so that will be very interesting to watch.

Lee Ann Shay:

I heard that from a lot of different vendors too, just as a way to try to mitigate some of the problems, predict things…

James Pozzi:

Yeah, absolutely. I think because of the supply chain issues, there's no real confidence that it will be over quickly. We ran a poll actually, yesterday, during one of the panels, and the large consensus was that it could be long-term permanent changes, so the supply chain kind of dynamic and how it works is now completely permanently shifted, and it's not going to kind of go back to how it was before, maybe before COVID or in the run-up to it certainly. I think the more optimistic people think maybe the medium term, which will be a period of two to three years it might be disrupted, but you'd be hard pressed to find anyone who thinks it'll be over, I guess by this year, although there is some hope it might normalize a little bit globally, and obviously that will play a role in the Middle East too.

Lee Ann Shay:

I agree with you. You know, most people predicted supply chain problems, this year they're going to continue, but I think it's important to point out too, that it's very different between airframe, engines, and components, but there's a really big difference between the new platforms and the mature ones too.

James Pozzi:

Absolutely.

Lee Ann Shay:

So it will be interesting to watch.

James Pozzi:

Yeah.

Lee Ann Shay:

Well, James, thank you so much for joining me, and thank you for being here at MRO Middle East. It's been a fantastic event.

James Pozzi:

Yeah, fantastic week, and great to see familiar faces, and meet new ones too, and certainly a lot for us to ponder in the future, about this region, but it will be very interesting.

Lee Ann Shay:

That's all the time we've got for today. Don't miss the next episode by subscribing to us in the podcast app of your choice. And one last request, if you're listening to the MRO Podcast in Apple Podcasts and want to support us, please leave us a star rating or write a review. Thanks so much and bye for now.