Podcast: Regionalization Of The Engine Market In Asia-Pacific

AeroEngines Asia-Pacific just wrapped up in Hong Kong. Speaking from the event, Aviation Week editors Lee Ann Shay and James Pozzi and analyze what’s trending in the region with special guest Lars Moeslein from HAECO.

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Lee Ann Shay: Welcome to the MRO podcast. We're recording this in Hong Kong as we wrap up AeroEngines Asia-Pacific. We saw an increase of 25% attendance here year over year, which is an indicator of the importance of this topic. I'm Lee Ann Shay, executive editor for MRO and Business Aviation for Aviation Week. Joining me to discuss this is colleague James Pozzi, our MRO editor for the EMEA region, and special guest Lars Moeslein, who is HAECO’s senior vice president, group commercial for Asia-Pacific. Lars, welcome to your first MRO podcast.

Lars Moeslein: Yes, thank you very much for having me.

Lee Ann Shay: So to kick it off, what were the hot topics discussed here with your customers and/or potential customers? And what's unique about this region?

Lars Moeslein: Yeah, I think very, very often, supply chain comes up. Lease engine availability comes up and shop TAT. So they are the big headaches we still see in this region. There's a shortage of these engines on the widebody and narrowbody markets. We see longer turnaround times than expected. That stresses the airlines, their flight plans, their operations. So this, in total, is still a big headache we see in APAC.

Lee Ann Shay: James, what are a few things that stand out to you?

James Pozzi: Definitely turnaround times, as mentioned. I think that was explicitly cited as the top risk to the engine supply chain in Asia-Pacific during one of the sessions this week. Airlines and MROs are demanding predictable TAT as much as short TAT as well, ideally. Solutions to this were interesting—the geographical proximity and regionalization of repair and parts capability being close to the operator was seen as a major lever to improving this. Other things that came up that were interesting, of course, right now with the events in the Middle East, there was some reference to geopolitical and macroeconomic risks. The conflicts and tensions there, of course, include the Middle East but also other things like the U.S. and China trade battle tariffs. They were applied just under a year ago and were also cited as potentially a long-term disruption. Disruption to logistics, for example, adds a bit of uncertainty to raw materials and parts flows. That was a scenario that was raised as well. There was also a lot of interesting discussion about new-generation engines. We've seen a larger influx of those coming into the region, as we have everywhere else, both in the narrowbody and widebody markets. This is obviously a big widebody region. Rolls-Royce and GE engines are pretty spread in the fleet. A lot of talk as well about ramp-ups with capacity in order to meet the demand there. As we heard, there is not a demand problem at all in this region, but there are a lot of other challenges. Engine scarcity, for example, was cited as quite a big one at the moment.

Lee Ann Shay: I totally agree. Regionalization came up a lot, as did the ramp-up. But one thing that also arose was component repair—that there just needs to be more engine component repair in the region. Lars, what do you think?

Lars Moeslein: Yeah, I think so. If you look into the newer engine types, it's a very restricted environment for the independent mode. We have OEM repairs only in most cases, and that restricts the opportunities we have to shorten the turnaround time, to offer our customers an alternative, to develop these doctor repairs, to use PMAs, for example, to shorten turnaround times. So it's definitely a topic that needs to be addressed and explored more. It keeps away our engineering power as an MRO a little bit, and it restricts the market and causes delays at the end. Component repairs are important to have, but I wish there would be more openness for alternative repairs. We, as an engineering capability, can actually develop and offer our customers a second solution to the purely OEM solution.

Lee Ann Shay: And kind of related to that, but not entirely, planning. It seems like there's a lot of really good, sophisticated planning going on. Your colleague Gray Zhang, who leads HR for HAECO, spoke today and mentioned how HAECO is incorporating a more holistic planning approach, both with workforce and some of these capability developments and expansions.

Lars Moeslein: Look, it’s almost like service design for our customers. The word quite often used is a kind of nose-to-tail solution we can offer. The engine overhaul is one part of that. Having a capability for base maintenance, for line maintenance, combining these services, coming up with an engine wash solution, an engine removal or engine transport solution can offer a lot of benefits to our customers rather than just looking at the pure engine overhaul. I think Gray gave a good overview of services we created and are offering from a global engine service perspective—to do module changes, to do on-site, on-wing services, to actually avoid bringing the engine into the shop, avoid sending the engine around the world, wasting money but also a lot of time. We're reducing that shop load by doing as much as we can on-site with our global engine services. This is something developed in HAECO. As you said, from HAECO, we're thinking always—we listen, we understand, and then we lead. We create our solutions by listening to the customer, coming up with a solution, challenging that solution, and integrating that into our service portfolio. Always, of course, with safety first, but with a reduction of pain to our customers.

Lee Ann Shay: Well, it sounds like there is improvement, though, in the region. Turnaround times in some cases are improving. Retention has been improving. So it's not all doom and gloom. James, Lars, any thoughts?

Lars Moeslein: Yeah, I think maybe at the moment we get a little bit lower turnaround times because the supply chain may improve. But as we see, that can change within a week. Tensions come up again. So rather than completely relying on that supply chain, it's better—you mentioned Gray mentioned it—to have the right workforce, have the right planning tools to adapt to changes. We constantly see changes, but also having alternatives to react to those changes, which may be an on-site module change rather than sending the engine into the shop. I think it's not as easy to say, "Oh, everything eases now; we go back to normal. Let's do it like we did it the last 10 years." I think there's more thought to be put into actually coming up with a long-term solution.

Lee Ann Shay: Absolutely. Well, change, I think, is one word that's not going to go away for the Indian market.

James Pozzi: Yes. And it ties in nicely, actually, Lee Ann. Speaking of change, one of the dynamics I found interesting was the dynamics around new-generation engines and the more mature variants. Of course, as we know, there's a lot of life in some of these programs. CFM56, for example, has a couple of decades in it, depending on who you speak to. There is a gradual shift in the portfolio mix, but not a hard switch. The next-gen work is increasing. One of the speakers yesterday from KLM said roughly by a few percentage points per year, while legacy work tapers more slowly. It's a controlled ramp-up. The reason cited for this was it avoids overexposing the shop to unpredictable next-gen durability issues that we know all about, but also preserves the legacy capability. They can serve the airline customers that still rely heavily on older fleets. We also heard about how they're balancing that capacity, and it seems a few shops are focusing on separate lines, capabilities, and even workforce strategies. SR Technics, of course, a Swiss company, but they have a presence worldwide. David from them, who is based in Asia, mentioned they've set up separate facilities and lines for the GTF and next-gen engines versus the CFM56 and legacy engines. The Leap as well, of course, they're doing the 1A. He also mentioned the technicians and the workforce. He said younger technicians are being trained directly on the next-gen technology, while the more experienced staff remain focused on the mature engines. That helps with the cross-training process. The benefit of this is it avoids diluting expertise and allows each line to optimize for its specific technology and processes. Very interesting how they're going about that as well. Just another thing worth citing: module swaps and partial work scopes to relieve full shop pressure. Rolls-Royce had some interesting things to say about that, but also MROs expanding their module shop models for engines like the Trent 1000, where they're performing targeted module work instead of full visits when possible. Very interesting. It seems that might be a long-term thing rather than a short-term method of alleviating supply chain constraints. We'll keep an eye on that as well.

Lee Ann Shay: Lars, are you getting a lot of requests for module swaps?

Lars Moeslein: Um, look, it depends on the engine type. So GE90, maybe not the classic module swap engine type. We're not that deep into the narrow-bodies, but I know that module swaps, especially for the legacy types, are quite popular. These engines are at the end of their life, so you're trying to get as much green life out of them. It makes sense to do a smart work scope to change the modules to maximize the life. But also, we have to consider two markets. It's an owned market with owned assets, and then there's a lessor market with these assets. Therefore, it really depends on the build-up goal and on the contract signed with the lessor if the modular swap is possible or not. With owned engines, it's really easy. There are really good tools out there where you can calculate your end-of-life scenarios, where you can change the engines, change the modules, and fly them out. Let's say it this way: I think for the newer models, like the Leaps and GTFs, it might be something for the future. I wouldn't say it's that big at the moment.

Lee Ann Shay: Sounds good. Well, gentlemen, thank you so much for your insights. I really appreciate it. And that is a wrap for this podcast. Don't miss the next episode by subscribing to the podcast wherever you listen to them. And one last request: please consider leaving us a star rating or writing a review. Thank you so much, and signing off from Hong Kong.