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APRIL 2021

Special Reports: Aircraft Leasing

MTU rides wave of Asia-Pacific recovery

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by ASSOCIATE EDITOR AND CHIEF CORRESPONDENT, TOM BALLANTYNE  

April 1st 2021

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In retrospect, some might suggest the decision by German-based MRO, MTU Maintenance, to open an office in the aviation leasing hub of Singapore in September 2019 was poorly timed. Read More » Not so, said Luc Morvan, chief representative for MTU Maintenance Lease Services in the island nation.

“In our portfolio of services some of them definitely saw a decline in demand,” Morvan told Orient Aviation. “It is definitely valid for the engine leasing side where fleets are being grounded. That is what we have seen. At the same time, there has been increased demand for technical services and troubleshooting on engines,” he said.

“Actually, I would say we have been extremely busy since 2019. The only factor that changed was the nature of the services we were providing. Of course, proximity to the customer is always critical when it comes to giving them the best support.”

Being close to customers in the Asia-Pacific airline market, particularly the aviation leasing sector, was one of the major reasons MTU opened its Singapore office. It also has an engine shop in Zhuhai, southern China and a technical services facility in Perth, Australia.

“We have three different kinds of customers,” explained Morvan. “We have our traditional MRO customers sending us engines for repair. We need to support them when the engine is in repair with lease support. Also, we have the non-MRO customers. We are doing a lot of work at airlines who are not necessarily customers on the maintenance side. And then we have the lessors.

“With each of these customer categories you have a completely different challenge. There is still strong demand. When I say strong demand, it is a little bit in brackets, but every time we see a strong market we are still seeing requirements and we are still seeing support being required. For us in the Asia-Pacific, I would say it is in places like Vietnam, India, China and Australia.

“We also are seeing stronger need from the lessor side. Not necessarily for engine leasing services, but for one of the other two services we provide within the engine leasing division - asset management and technical services. There is definitely stronger demand for engine experts to determine the engine types still with the lessors.”

Pandemic or not, MTU has been expanding. Last year, MTU Maintenance Zhuhai, a joint venture between MTU Aero Engines and China Southern Airlines that provides comprehensive services for CFM56, LEAP and V2500 engines, completed an expansion that is increasing its existing capacity by 50%, to 450 shop visits per year. Teams started moving into the company’s facilities in December with the initial goal of ramping up to full capacity as market demand increases post COVID-19.

In November, plans were unveiled for a second Zhuhai facility in neighboring Jinwan. It will have an initial annual capacity of 250 shop visits and is scheduled for opening in 2024.

Morvan said: “We have a timeframe in mind [for the recovery]. We believe it should be back for us probably on the MRO side in the middle to the end of next year and probably ahead of the airline recovery. MRO recovery will lead airline recovery because grounded aircraft must have their engines checked or repaired before re-entry to service.

“In the next two or three years, there will be heavy financial pressure. The only certainty we have is there is uncertainty. Everything we are doing now is based on that. You need creativity. You need flexibility. That’s a little bit the trademark of MTU not only on the MRO side but on the leasing and trading sides and technical services.”

Overall, MTU is navigating the coronavirus crisis well. The company recorded an 18% reduction in incoming engines in 2020, which was above market expectations of -45% in shop visits for the global aftermarket in commercial engines. It attributes the results to its broad engine portfolio of 30 engine types. They include the newly added LEAP engines and popular narrow-body propulsion units from the CFM56, PW1100G-JM and V2500 engine families. They are forecast to be the fastest to recover.

Last month, MTU Aero Engines chief program officer, Michael Schreyogg, said the company had recent campaign wins of US$5.5 billion, the second highest result in MTU Maintenance history.

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