Home' Asian Aviation : AAV April 2019 Contents AsianAviation | April 2019 19
MRO SOUTHEAST ASIA
IN ADDITION TO PREDICTED CONSOLIDATION in the MRO
space, participants at the conference discussed a multitude of
concerns and challenges such as how to make MRO “as sexy” as
being a pilot, regulations (or too many regulations as the case may
be) and the pull of Asia for MRO providers.
Adam Cowburn, managing director at Alton Aviation Consultan-
cy, kicked off the event by saying the aviation industry is enjoying
profitable times, but added that low-cost carriers (LCCs) are
squeezing legacy airlines. The industry is generating returns above
the cost of capital and fuel is relatively stable in terms of cost, but
said as long as the US dollar remains strong, costs overall will
continue to be high.
“ The airline industry is experiencing
its longest cycle of profitability in a
generation with an estimated profit of
US$33 billion,” Cowburn said. What’s
helping this momentum is “continued
strong growth in air traffic demand
and the global economic recovery as
well as airline consolidation in mature
markets that is driving capacity and
Cowburn said one of the challeng-
es facing the industry overall is the
issue of higher interest rates, which
he posited could be the “new fuel
cost” affecting the sector. He said
higher rates are a negative for OEMs
because of the effects on financing
costs for airplane buyers so it makes
it more difficult to sell planes while for
MROs higher rates are a positive because it means used aircraft
stay in service longer so MRO volumes increase. For airlines,
higher rates are “neutral”, Cowburn said, because they will likely
retain more used aircraft while aircraft overall cost more to own
and lease, which in turn affects capacity. Lessors also got a neutral
rating when it comes to higher interest rates because while the
cost of financing increases and the value of new aircraft slightly
falls, the value of used aircraft also rises.
MRO providers in Asia look set to be profitable for years to come,
Cowburn said, simply by the fact that there’s a 4,000-plane backlog
of work to be done for all types, far more than any other region. This
“continues to drive investor interest, joint ventures, M&A activity in
MRO providers and the OEM supply chain”, he added.
Overall, “today ’s commercial air transport MRO market demand is
about US$73 billion,” Cowburn said, “which we expect to see growing
to at least US$108 billion by 2029, which is an annualised growth
rate of about 3.9 percent.”
The consolidation the industry has seen so far will continue, Cow-
burn said. With Airbus acquiring Satair, Stelia and partnering with
Bombardier, Boeing acquiring Aviall and partnering with Embraer,
Safran’s acquisition of Zodiac and Snecma and United Technologies’
buying Rockwell Collins and Arnic, more will follow.
Cowburn said today was “the golden age of aircraft cabin interiors”
as evidenced by Rockwell’s acquisition of B/E Aerospace that will
integrate seats, IFE and IoT capabili-
ties and Safran’s Zodiac deal that will
improve, or should improve, Zodiac’s
into MRO game
AirAsia officials attending the MRO
conference in Kuala Lumpur said in
several panel sessions that the air-
line, in addition to its “digital” moves,
is considering jumping into the MRO
game to handle its plans for future
fleet growth. AirAsia’s head of group
aircraft engineering, Nantha Kumar,
said the airline currently uses MRO
stalwarts like Sepang Aircraft Engi-
neering (SAE) for the airline’s heavy
maintenance needs and said the air-
line would continue to use third-party providers, but added that
the carrier ’s growth plans may mean it needs to “in-source” some
of its MRO work.
Airline officials declined to specify when they would make a de-
cision, but said on the sidelines of the meeting that they hoped to
make a decision within two to three years. The scope of the work
could include airframe work, C-checks, wheels and brakes and
composite repair, but not engine work or components, Kumar said.
AirAsia officials have previously said they would be interested in
opening a facility in Thailand where Airbus is expanding its own
facilities but said any new MRO base for the airline could be in
Malaysia where AirAsia is based.
The maintenance, repair and overhaul (MRO) industry will continue to see more
consolidation and joint ventures in the years to come as OEMs commit to vertical integration.
Editor Matt Driskill was in Kuala Lumpur for the Aviation Week MRO conference.
▲ Panel members at the MRO conference in
Kuala Lumpur discussing trends in the industry.
Links Archive AAV March 2019 AAV May 2019 Navigation Previous Page Next Page