ANALYSIS: Barfield sale reflects Sabena Technics' strategy shift

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The low profitability of its ‘power-by-the-hour’ (PBH) component maintenance business has prompted Sabena Technics to sell its US subsidiary Barfield, and thus abandon the burgeoning Latin American MRO market.

Last month, the French MRO provider revealed it was selling the Miami-based component repair specialist to Air France Industries KLM Engineering & Maintenance. The transaction is to be complete by mid-year.

Barfield supports avionics and other components at three US locations, with around 230 employees. It has also operated a repair shop for Airbus A320 and A330 rotables in Avianca’s hangar in Bogota since January 2013. The Colombian site was established after the airline inked a 10-year flight hour-based A320 avionics maintenance contract in late 2010.

This was supposed to pave Sabena Technics’ way into Latin America’s growing MRO market, where comprehensive, flight hour-based support contracts are much more popular than on the northern continent. In the USA, airlines tend to repair components through traditional time- and material-based contracts, due to the diverse and competitive market of individual specialist repair shops. The carriers are also typically large enough to maintain their own inventories, without a need to pool equipment with other operators.

However, Barfield was unable to win enough additional PBH business to make the model profitable, particularly in regard to building up a wide-ranging component pool. “We don’t have the right size to be able to able to compete with the other competitors in the market,” says chief operating officer Jean-Luc Fournel. “To continue expanding in that market, you need to invest a lot of money in the spares. So we decided not to continue investing in an activity where the return on investment is too low for us, and to concentrate our investment on other activities in the group."

The company's main competitors in Latin America’s component maintenance market were AFI KLM E&M, Lufthansa Technik and UK spare part specialist AJ Walter Aviation.

In Europe, Sabena Technics sold its Brussels-based PBH maintenance business – comprising inventory and contracts with 13 clients – to AAR. The US-based MRO provider has thus established a new facility in the Belgian capital to continue the existing custom.

For Air France-KLM, the Barfield acquisition will roughly double its business in the Americas. While its existing Miami-based subsidiary Aero Maintenance Group turns over around $80 million a year, Barfield generates around $75 million in revenues, says Franck Terner, president of the airline group’s MRO division.

The businesses will complement each other well, he says, because there are “very few” capability overlaps. The combined operation should also generate savings through “good synergies”, as both firms share the same suppliers, he adds.

No decision appears to have been made over whether the two brands will be kept in the long term. For the time being, the Barfield name will be retained as it is a “good, well-known” brand, says Terner.

A year ago, Barfield’s chief executive, Frederic Denise, told Flightglobal that the Bogota shop was set to grow quickly – with potentially 15 employees by the end of 2014 – while the MRO group also planned to establish a “presence” in Brazil by 2015. However, Terner is more coy about facility investments in Latin America. There are no plans to set up a site in Brazil in the short term, he says, and any new facilities in the region would likely be established with an airline partner.

Meanwhile, Sabena Technics has virtually left the aftermarket in North and South America. The MRO provider still offers its airframe maintenance capacity to airlines in the region, but Barfield's Fournel concedes there is little prospect of winning extensive contracts aside from ad-hoc repairs and individual checks, due to western Europe’s high labour costs.

Components will continue to be repaired at the existing shops in Brussels, Bordeaux and Dinard, but this will be on a time and material basis for airlines and other MRO providers.

In the future, Sabena Technics wants to focus on three key areas: airframe maintenance and VIP completions, military aircraft MRO and comprehensive support – including flight hour-based component service contracts – for ATR turboprops. The group has invested in spares for the latter's latest -600 series, says Fournel, because “on that specific market we have the right size”.

The main business growth in that area is to come from operators in Europe, Africa and Asia. To that end, Sabena Technics is opening a spare parts distribution centre at Singapore in May, where it has thus far only had a sales and customer support office.