Air Transport

TAP Portugal plans to turn former Varig maintenance division VEM into a key Latin American Airbus maintenance provider and is in negotiations with General Electric to re-open its old engine shop.

VEM has capability on all Boeing types, which generate 90% of its revenues. The other 10% stems from regional aircraft work. VEM used to be certificated for the Airbus A300, although this has lapsed.

TAP board member for maintenance and engineering Jorge Sobral says: "In South America there is not much MRO competition. There is no serious competitor on the Airbus line. We want [VEM] to get there first. Usually whoever comes first wins."

He says Latin America is Airbus's and Boeing's second-strongest growth market after the Asia-Pacific region, but several firms offer Boeing maintenance. VEM is aiming to secure A300 and A310 certification by June and A320 accreditation by the year-end.

Sobral says VEM also plans to offer hour-based maintenance packages. "We are trying to introduce that concept there and, if it is successful, our margins will go up. It is a different approach," it says.

VEM sold its Rio de Janeiro-based engine shop business to GE, but Sobral says that - as GE has since relocated the business - VEM might re-enter the market.

"We are in the process of seeing whether it is possible to make the engine shop viable again," he says. "We are thinking of moving the [Pratt & Whitney JT8D] engine shop from Lisbon. The engine type is not popular here, but in South America there are lots flying."

This would free space at Lisbon for TAP Maintenance & Engineering to begin work on a variant of the Rolls-Royce RB211. Last year the Lisbon shop was at maximum capacity, overhauling 123 engines.

TAP has injected €24 million ($32.5 million) into VEM, which is expected to break even by 2008.