ANALYSIS: The Middle East faces MRO challenge

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Huge aircraft orders placed by Gulf carriers at the Dubai air show in November 2013 have raised questions as to how the region's future fleet can be maintained.

Most airlines in the Middle East and North Africa conduct airframe checks through in-house technical departments. But despite a number of MRO facility construction projects, it is not clear whether that capacity and the technical capabilities will be sufficient to support the future fleet. Much may depend on the extent to which the newly ordered aircraft will be used for fleet growth or replacement of existing aircraft.

For example, Emirates plans to operate aircraft for about 12 years before they are replaced with new fleet entries. That age marks a typical point in an aircraft’s life cycle where maintenance is becoming more intensive and potential findings are less predictable, both of which lead to higher costs and longer downtimes.

However, that fleet-renewal model is in reality not working quite as planned, because there is insufficient demand for mature aircraft from potential buyers, particularly for widebodies. For example, Emirates has a number of Airbus A330s, A340s and Boeing 777s which are up to 18 years old.

Today’s secondary market is not liquid enough to take over such aircraft in significant numbers, says Rob Morris, a consultant with Flightglobal advisory service Ascend. Selling mature aircraft for passenger-to-freighter conversions has been a central part of the secondary market in the past. But the number of P2F conversions has collapsed with the declines and volatility in the air cargo segment.

Leased aircraft may be easily returned to their owners at the end of their operational term. But if the equipment is owned by the airlines, the phase-out will be more tricky. Aircraft may thus stay longer in operation and require maintenance capacity which is also needed for younger fleet entrants. Given the low demand for mature widebodies, airlines need to have a holistic asset management strategy that includes the retirement of their aircraft, says Morris.

The 20 largest airlines in the Middle East and North Africa operate around three-quarters of the region’s approximately 1,600-strong commercial passenger fleet, while the remaining 60-odd carriers have comparatively small fleets with up to about 20 aircraft. Nearly 40% of the total fleet is operated by the four largest carriers – Emirates, Turkish Airlines, Saudi Arabian Airlines and Qatar Airways.

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Emirates and Turkish are by far the largest carriers with 196 and 191 aircraft respectively, Flightglobal’s Ascend Online database showed in December, although the Turkish figure excludes the airline’s wholly owned low-cost subsidiary Anadolu Jet and SunExpress, its charter venture with Lufthansa. Etihad is trailing behind with a 78-strong fleet that is a third smaller than its next-largest rival, Qatar Airways. However, the Abu Dhabi carrier is growing fast with up to 290 aircraft on order and is building up its global influence through shareholdings in a number of international airlines.

Three-quarters of the 20 largest operators conduct airframe maintenance either in-house or through closely associated MRO providers, such as AnadoluJet using its parent’s MRO organisation, Turkish Technic. Also, Etihad does not have its own technical operations, but the state carrier supports its fleet through Abu Dhabi Aircraft Technologies, the MRO subsidiary of the emirate’s investment fund Mubadala.

The three largest carriers – Emirates, Turkish and Saudia – have their own large technical operations. Emirates is building four additional hangars for its MRO facility at Dubai International Airport, which thus far comprises seven A380-sized maintenance bays and a separate paint hangar. However, plans for further expansion have already been discussed.

While the Gulf carrier is purely focused on its own fleet, Turkish aims to generate half of its MRO business from third-party customers. In particular, the new Habom maintenance complex at Istanbul’s Sabiha Gokcen airport has been built to support external clients, such as Pegasus Airlines, which has hired one bay inside the new narrowbody hangar.

Saudia Aerospace Engineering Industries (SAEI) supports Saudia’s fleet, although widebody heavy checks have been contracted to Evergreen Aviation Technologies in Taiwan. Qatar Airways has thus far outsourced its maintenance, but the airline has built a massive MRO complex at Qatar’s future Hamad International Airport, which is to be used for light and heavy checks.

Despite the hangar-building boom, Lufthansa Technik chief executive August Wilhelm Henningsen expects that there will not be enough base maintenance capacity for the region’s rapidly growing fleet, even among the three main Gulf carriers. The German MRO provider would thus be interested in establishing a facility in the region with a local airline, he told Flightglobal at the Dubai air show.

More than half of the passenger fleet in the Middle East and North Africa are 737s and A320s.

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In the widebody arena, the 777 is by far the most popular model with 238 in-service aircraft – or nearly 15% of the region’s fleet. Emirates is the long-haul twinjet’s largest operator with 121 units averaging 5.7 years in age. Another 61 firm and 20 optional 777-300ERs are due for delivery to Emirates until 2021, which will thereafter be followed by 150 firm orders for the successor 777X generation.

Saudia and Qatar are the next biggest 777 operators. Two thirds of Saudia’s 34 GE90-powered 777s are 12 to 16 years old, but the carrier has rejuvenated the fleet with 11 777-300ERs since 2011 and has firm orders for another nine. Qatar’s 32 777s, meanwhile, have an average age of just under three years, with the oldest aircraft being six years old. The Doha-based carrier has orders for up to 18 additional 777s and signed a tentative deal for 50 777-9Xs at the Dubai air show.

The A330 is the next most popular widebody with 158 units. Its largest operators are Qatar with 29 aircraft (average age circa eight years), and Etihad with a 25-strong fleet averaging at 5.5 years. Emirates has 22 A330 that are 10 to 15 years old. Apart from two planned deliveries to Etihad in 2014, the three Gulf carriers have no firm orders for the A330 as their focus has shifted to the 787, 777 and A350. Together, the three airlines have orders for up to 805 aircraft of those widebody families.

Turkish is still growing its 20-strong A330 fleet. While the existing aircraft are about 4.5 years old on average, the carrier has 18 additional A330s on order. In total, operators such as Gulf Air, Oman Air and Afriqiyah Airways have firm orders for 40 A330s.

The A380 plays a particular role in the region’s MRO landscape. While Emirates – which has the world’s largest fleet with 42 aircraft – has ordered a further 98 superjumbos, Etihad and Qatar are much more cautious about the type with only 10 firm orders each.