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AUGUST 2021

Special Report: MRO Asia-Pacific update

Asia-Pacific remains “richest” future airline MRO market

Asia-Pacific aircraft MRO companies rapidly adjusted their business models as COVID-19 hit the industry hard. When a recovery commences the sector will have undergone significant change, leading MROs told associate editor and chief correspondent, Tom Ballantyne.

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August 1st 2021

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In September last year, as the COVID-19 pandemic persisted, Boeing’s Global Services modification team commenced an assignment they had never undertaken: supporting the complete nose to tail interior and connectivity modification of a big passenger jet in an entirely virtual setting while keeping the work on schedule. Read More » The aircraft was an All Nippon Airways (ANA) B777 parked in China at HAECO Xiamen, the U.S. planemaker’s MRO partner.

Facing daily COVID-19 related challenges, including fast changing local conditions, lockdowns and the virtual work environment, to meet customer commitments Boeing created a global support team on-line, bringing together design and liaison talent in Long Beach, California and Puget Sound, Washington, as well as Boeing engineering experts in Moscow and Kiev to ensure the necessary round-the-clock support needed to deliver the Japanese carrier’s specifications.

Working closely with ANA and HAECO, using video, detailed photographs and 3-D drawing markups to troubleshoot issues and keep the complex modification on schedule through constant communication, they were able to support their commitment to a 24-hour turnaround cycle on issues that returned the aircraft to service on time.

Boeing Commercial Services Programs vice president, Mike Doellefeld, told Orient Aviation earlier this month: “For example, we utilized technology during the pandemic to change the way we do a modification. We have gone to a full nose-to-tail modification using technology without necessarily having to be first-hand on the product, doing a certification lock. That’s an example of exercising the portfolio with traditional communication supplemented by increased photos, videos, real-time cross share, virtual walks and measures by analytics. Then we take all that to draw conclusions that will conform to the regulations and ultimately end up with a product we have as much confidence in as a non-pandemic environment.”

The Boeing case study is only one example of the changes the entire aviation MRO ecosystem has undergone during the pandemic. While digitisation and advances in IT systems were well underway pre-pandemic, MRO providers are agreed the COVID-19 crisis has accelerated the process. Limitations on travel, created by border restrictions and quarantine measures, have forced business on line and encouraged them to innovate. And despite the downturn, most sector participants have not held back on investment and research and have pushed ahead with expansion plans.

“We see the Asian market as growing significantly and we want to be part of it,” MTU Maintenance Zhuhai president and CEO, Jaap Beijer, said of the joint venture between MTU Aero Engines and China Southern Airlines. “For sure we have expansion plans and I am very happy both shareholders in Zhuhai have decided to go on with expansion plans,” he said.

“We have announced we will have a second plant coming in soon. We will still build the second plant because we think the growth will come back. There will be a kick back in later years. We have to be prepared for that.” The second facility, with an initial annual capacity of 250 shop visits, is expected to enter operations in 2024. “We also invested in new engine types - (CFM) Leap 1A and Leap 1B. Already we are working on that. It is there we see the next three, four, five years growth. That is why we decided to invest now and hopefully have good flexibility in the next two or three years for customers when businesses are picking up again.”

Beijer said a major digitisation program has been launched at the Zhuhai joint venture and at other facilities. “This is a chance to get it done. All these things are now moving forward. The same applies to automation of deliveries and logistics. The same will apply to scoping in data, analysing it and bringing it on a platform to show to the customer,” he said.

“We do a lot there. We have a process where they can tell us online their problems and we can quickly support the customers there. There is a big program coming to Zhuhai to automate and it is speeding up.”

Boeing also is committed to expansion. One example, Doellefeld said, is the opening of two lines for passenger to freighter conversions of B737s and B767s in response to a strong air cargo market. The services arm of the OEM also is investing in sub sectors of airline MRO.

Pratt & Whitney vice president aftermarket operations Asia-Pacific, Tim Cormier, said the engine maker is developing technologies for its MRO shops in the region. “We are introducing advances in automation and non-destructive testing (NDT). Embracing digital transformation moves industry leaders like Pratt & Whitney (P&W) further into the future, where the customer experience can be integrated with our products in flight and not only our own operations. It also assimilates [us] with a comprehensive supply chain at the back end.”

Companies such as P&W, MTU, Boeing, Airbus and others also are training their workforce to rapidly incorporate augmented reality in aircraft MRO checks.

With thousands of aircraft parked and travel restricted, communication channels emerged as one of the key survival mechanisms for the MRO business, Airbus head of scheduled maintenance services, Claire Kauffman, told Orient Aviation.

The new digital communication systems were basically in place, but maybe not embraced as much by people. “During the pandemic, it actually became one of the key tools to continue running our business as efficiently as possible. We realised they were actually very efficient. We could work remotely and we could work using these digital tools,” she said.

“Yes, definitely it was a real-life example that it was working. We will continue having the benefits of those capabilities even if I have to admit my team already is very keen to go back and visit customers physically. I don’t think this is the end of business travel.”

Like other MROs battling the pandemic, Airbus has been conducting frequent webinars with customers across the globe, answering questions about aircraft parking, storage and return to service among other MRO issues. Kauffmann said that while protocols are contained in official manuals many aircraft were parked away from their home bases. Some carriers are accustomed to storing aircraft, but others were not and they needed to be assisted with the process.

MTU’s Beijer agreed the business will be forever changed. “The trust about doing things on line will increase. So, customers won’t have to come here every time to do an audit for the authorities,” he said.

“The FAA (U.S.Federal Aviation Administration) cannot come here now [during the pandemic]) so they do it online. All these factors will change our business and they will change the trust in data. It will be different in the future.”

P&W’s Cormier said the impact of digital transformation on advanced manufacturing technology is even more dramatic with robotics, automated testing, augmented reality, additive manufacturing, business intelligence and data insights. “It is part of a framework for connecting the various flows of data and will provide an all-inclusive view across the life cycle of a product from design and development and service and support. It is influencing all operations. Such an end-to-end digital infrastructure connects the stakeholders throughout the life cycle using data and models, driving dramatic improvements in productivity, quality and customer satisfaction,” he said.

Magellan Aviation Group senior sales and marketing director, Mohammad Ali Dawood, said the pandemic will bring about change in other areas of the industry. Its aircraft parts and engine leasing business, which has bases in Singapore, North Carolina, Florida and Ireland, has found that as passenger demand has declined during the pandemic airlines and lessors have consolidated their fleets and retired some mature aircraft sooner than expected.

“As a result of these early retirements, we anticipate an increased volume of aircraft and engines to begin being parted out to the point where we see a flood of USM (Used Serviceable Materials) materials entering the marketplace in coming months and years. We expect the USM market will be even more competitive,” he said.

“At the same time, older aircraft platforms converting to freighters have been a bright spot in our industry. With demand for conversions increasing these conversions will see a substantial increase in MRO work as well.”

Boeing’s Doellefeld believes MRO tools will change. “We are moving more and more towards technology or virtual reality. We are looking at measuring airplanes with more technology. Scanning is another technique. We can do a quick survey, infra-red systems and i-bars on parts or inventory components rather than physical inspections,” he said.

“Going beyond the MRO is how we train mechanics servicing the airplanes. We have been shifting to virtual sessions and competency-based training for the certification and accreditation of pilots and technicians. They all have a network or a relationship to the maintenance, repair and overhaul sections of our business.”

As the pandemic worsened, there was something else MROs have had to worry about. Their customers were losing billions of dollars and needed to radically cut costs. MROs approached by Orient Aviation would not detail how they approached this subject as financial arrangements with their customers are commercial and in confidence. They did, however, make it clear everything possible was being done to assist financially hard-pressed airlines.

“We keep in close contact with all our customers. When you are running a business it’s the full spectrum of the value stream which includes the commercials and the financials. That’s a conversation we will keep between ourselves and our customers, but we have had proper conversations to address their needs and have done everything possible in the spirit of help and forward looking involvement,” Doellefeld said.

MTU’s Beijer underscored the importance of talking to customers. “We tried to limit their financial burden. I think this is the biggest topic. How did we do it? We try to help the customer in need. The most important factor is flexible work scoping. So reducing the cost as much as possible but making sure they still have engines to fly. Try to limit not only our own costs, but the cost to the customer to help them in these difficult times,” he said.

Cormier said P&W understood airlines need to manage cash flow. “I can’t go into specifics, due to commercial confidentiality, but we are staying close to our customers during these difficult times and helping airlines when we can. We recognize that when people encounter difficulties, it is how you respond that will determine the nature of the relationship in future,” he said.

For some MROs, while the pandemic brought new pressures to their businesses, the direct impact on their operations was short-lived. Engine shops like MTU Zhuhai and P&W saw some recovery come quite quickly because most of their MRO work was on engines powering narrow-body fleets. In MTU’s case its Shanghai lines work on engines for B737 and A320 types while for P&W in the Asia-Pacific it primarily overhauls the V2500 and GTF, the engine types on several A320ceo and neo, Embraer E2 and Airbus A220. These airplanes fly short-haul and domestic services which began returning to service well before wide-bodies.

One undisputed belief is held by all the MROs Orient Aviation interviewed: that the Asia-Pacific, the growth engine of aviation before the pandemic outbreak, will resume that position when recovery comes. “We view the market as strong,” Doellefeld said.

“We know the Asia-Pacific will be one of the richest parts of our world for growth in the next 20 years. Our expansion plans are not disrupted by COVID-19 in staying focused on that.

“We see continued growth in the region for additional capacity and we see our aircraft in that area. We know our airline market will recover with time so we will stay focused on the initiatives and the needs and growth of technology and services. It is exactly what we are doing and that’s inclusive of MRO capacity and capability in the Asia-Pacific.”

Magellan’s Ali Dawood said the current outlook for recovery in the Asia-Pacific is much longer than anticipated, possibly starting in the last quarter of this year and extending through the first and second quarters of 2022. “This timeline is due to an unfortunate combination of reasons; vaccinations rates continue to be very low, while international travel restrictions remain largely in place,” he said.

“It will be difficult to estimate and the timeline could change as Asia-Pacific countries struggle to deal with the virus situation. Although China’s domestic market has surpassed 2019 levels, it does not benefit others in the region as China does not expect to open its borders in any significant way before the February 2022 Winter Olympics.

“For the rest of Asia, we can expect countries like India, Indonesia, Vietnam, Japan and Thailand to bounce back quicker than others once herd immunity is established due to their vast domestic market presence. However, as borders continue to be closed and governments continue to impose more lockdown measures, we do not see a fast recovery on the horizon.”

MRO compound growth forecast at 3% a year to 2031
The International Air Transport Association (IATA) has calculated the global aviation industry lost more than US$118 billion in 2020 with dozens of airlines either seeking bankruptcy protection or ceasing flying as a result of the pandemic. During the crisis, cash preservation and cost control remained a priority for airlines, which also resulted in bad news for aerospace manufacturers and MRO providers.
The COVID-19 crisis is estimated to have lowered spending on commercial MRO by about $40 billion in 2020, according to analysis conducted by U.S. consultancy Oliver Wyman, published in its Global Fleet and MRO Market Forecast 2021-2031. It estimated spending on commercial MRO in 2021 will reach $68 billion and that demand is unlikely to return to pre-pandemic levels until year-end 2022.
Despite lower predicted MRO industry expansion, compound annual growth of the sector from 2019 to 2031 is expected to be at least 3% per year.

 

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