ANALYSIS: EFW seeks more MRO to balance freighter conversions

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After enduring hard times in the air cargo sector, EFW sees its future in airframe MRO, despite a high-cost location in Dresden

While Airbus launched the long-awaited A330 passenger-to-freighter (P2F) conversion programme this year, EADS's modification centre - Elbe Flugzeugwerke (EFW) - in Dresden wants to build up its maintenance, repair and overhaul (MRO) activities to become less dependent on the cyclic air cargo industry.

The historic Saxon city has a long aerospace tradition, as in 1958 it was the birthplace of Germany's first passenger jetliner - the four-engined, ill-fated Baade 152.

In recent years, however, the company has had a rough ride. After the air freight sector collapsed in 2008, EFW had to cut working hours and lend staff to other EADS facilities for the following two years as its A300/A310 conversion line dried up because of declining cargo volumes and reluctance by carriers to invest in more aircraft.

Revenue nearly halved from €198 million ($244 million at current rates) in 2008 to €109 million in 2010. The situation started to improve later that year and recovered to €157 million in 2011, but EFW president and chief executive Andreas Sperl says the company was only able to survive the "relatively difficult" period "reasonably well" with no cuts to its permanent workforce, because it conducted third-party MRO work and benefited from increases in its second business area - the production of composite interior panels for Airbus. The latter activities are growing about 10% year on year, in line with the airframer's increasing production output. EFW staff now work across three shifts and there are plans to employ additional staff.

Thanks to a P2F conversion contract with Deutsche Post DHL for 18 A300-600s, EFW is now working at full capacity again with about 1,200 permanent employees. Eight A300-600s have been completed, with the remainder due to continue until "far into 2013", says Sperl. However, follow-up work has yet to be secured, although the modification specialist is holding talks with potential clients. Ultimately, Sperl expects the A300/A310 conversion line to wind down by 2015 given the age and available feedstock for the two models.

SINGAPORE LINK

The A330P2F is scheduled to be certificated in 2016 and EADS signed a co-operation agreement for the new conversion programme with ST Aerospace in February, giving the Singapore-based MRO provider a 35% stake in EFW.

ST Aerospace will be responsible for the engineering to modify both A330-200 and -300 aircraft, while EFW will later take over 70% of the production in Dresden. The remainder will be converted at ST Aerospace's base in Singapore.

Engineering for the A300/A310 P2F programme had also taken place outside of Airbus long before EFW took over the production line from the airframer's Hamburg plant in 1996. The partnership with ST Aerospace was necessary because of the A330's higher complexity versus its older sibling, which will consequently lead to more design effort, says Sperl.

The required engineering resources are unavailable in Dresden or at Airbus because of the airframer's own new aircraft programmes. ST Aerospace has no P2F experience with Airbus aircraft, but converted numerous Boeing and McDonnell Douglas types.

EFW wants to build a hangar for up to three A330s in Dresden, although it is not yet clear zwhether the full size will be realised all at once or in stages. More space will be needed when the P2F programme ramps up in 2016-2017, says Sperl, because the modification house wants to use its existing facilities for more third-party MRO business, leaving more spare capacity for ad hoc work.

In the past, EFW mostly conducted maintenance in combination with freighter conversions, but now it wants to establish another foothold as a third-party provider for airframe repairs and modifications.

This is an additional objective for the partnership with ST Aerospace. Sperl wants to train more staff for MRO work and transfer know-how from Singapore to Dresden. However, management control for EFW's maintenance business will remain in Dresden.

He does not rule out that the MRO work could be offered in combination with ST Aerospace's component and CFM International CFM56 engine support capabilities as part of future full-service contracts, although nothing is planned to that effect yet.

ST Aerospace expects its current focus on airframe support to shift to modifications and conversions because of the reduced need for regular structural maintenance on new-generation aircraft.

Sperl concedes that competition in the labour-intensive and notoriously low-margin airframe MRO business will be stiff, given EFW's high-cost location. However, he adds that the company gained great encouragement when it offered its capabilities to third-party customers, some of which was carried out in co-operation with Lufthansa Technik.

Sperl says: "Our advantages are a high degree of flexibility, reliability in keeping redelivery terms, and relatively high [turnaround] speed. So we think we can compensate certain disadvantages on the salary side with flexibility and efficiency."