ANALYSIS: Turkish seeks MRO future beyond home turf

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Turkish Airlines is expanding its maintenance footprint as the flag carrier’s technical arm struggles to support the rapidly growing fleet while also building up its third-party aftermarket standing.

In 2013 the airline group acquired MRO provider MNG Technic, based at Istanbul’s Ataturk airport, after the carrier’s own facilities at the capital’s main hub became too small. Turkish Technic had been operating out of two hangars at the airport on the city’s European side. One of them was built in the 1970s, while the other became available in 1999. The hangars have a combined capacity for five wide- and seven narrowbody aircraft.

The two facilities – each of which includes a range of backshops – had been adequate when Turkish operated around 70 aircraft a decade ago. However, the airline’s fleet size has since tripled and, in 2006, Turkish Technic was reorganised as a wholly owned standalone MRO provider, which should generate half of its business from third-party customers.

Only around a quarter of revenue comes from external clients today, as the parent airline's fleet growth has been “beyond our expectations”, says Turkish Technic general director Ismail Demir. In 2012, the MRO specialist generated a turnover of just over $800 million, with an operational profit of nearly $31 million. However, revenues are targeted to nearly double to $1.5 billion by 2017, says Demir.

At Sabiha Gokcen International airport on Istanbul’s Asian side, the group has been building a massive greenfield MRO complex named Habom, together with international partners. However, the completion of the initial narrowbody hangar – a separate widebody facility is still being built – was delayed. The facility, set to accommodate up to 11 single-aisle aircraft, was due to open in 2013, but the MRO provider was still in the approval process in December. This delay was a factor in the acquisition of MNG Technic.

Ataturk airport is set to close after operations move to Istanbul’s planned new main hub northeast of the city – the first construction phase of which is scheduled for 2017. Turkish took over MNG Technic on the assumption that Ataturk airport will be closed circa 2022, says Demir. The MRO provider thus does not want to make significant investments in its existing hangars. Rather, it is focusing on the Habom site and the new airport.

Meanwhile, MNG Group – which includes construction companies and a cargo airline – was looking to sell its maintenance facility. The 25,000m² (269,000ft²) hangar – which has a staff of around 1,000 – was opened in 2011. However, with Ataturk airport due to close within a decade, “you need quick return and a full hangar in winter and summer” to amortise the investment, says Ahmet Karaman, the new managing director of the facility under Turkish’s ownership. “That’s not possible just with third-party customers,” he says.

After the acquisition, the former MNG hangar was merged with the new MRO operation at Sabiha Gokcen airport, and renamed Turkish Habom. That unit was formally set up as a sister company of Turkish Technic to concentrate on airframe maintenance and third-party MRO, while the latter is to focus on component repairs and more lucrative, engineering-based work, says Demir. “Our labour rates are lower than most of Europe. However, we cannot bet [on that] because there are other… countries, for example, Egypt or countries in the Middle East and far east, which have lower labour costs than ours,” he says.

“We are now going in a direction to lower our labour costs with the MNG move… and having MNG and Habom under a different roof,” says Demir. He adds that man-hour rates alone are rarely the only criteria in MRO contracts, as airlines are generally willing to pay a premium to ensure certain quality standards and turnaround times. “So we put price and quality together, and in these terms we will be very good,” he says.

MNG started converting Airbus A300-600 passenger aircraft into freighters (P2F conversions) after the maintenance specialist took over the supplemental type certificate from B/E Aerospace subsidiary Flight Structures in 2011. Turkish wants to continue that activity to maintain the necessary skills, although it is not clear what types could be converted once the A300 modifications have petered out, given the twinjet’s dwindling fleet.

“We have in the past seriously studied the conversion business for A320s and A330s,” says Demir, but he adds that “Airbus was not willing to co-operate with us by sharing [engineering] data”. Turkish Technic would have to reverse-engineer an STC which, he admits, would be a long project without much promise for return, given the slump in the air freight market. Weak demand for air cargo has led to a sharp decline in P2F conversions since 2008.

However, Demir says that the plans are not completely off the table. Turkish operates extensive A320 and A330 fleets. “According to our studies, that [P2F] market could be viable after 2017... By that time, we can still think about that,” he says.

Engine and component repairs as well as strategic partnerships with MRO providers, manufacturers and other specialists are to drive future business growth. Turkish Technic opened a joint venture engine overhaul shop for CFM International CFM56 and International Aero Engines V2500 powerplants with Pratt & Whitney at Sabiha Gokcen in 2010. With Goodrich, the MRO provider set up a repair facility for nacelles, thrust reversers and related components a few miles from the Habom site. However, Demir says that the latter operation will likely be relocated into the maintenance complex, which also includes other component facilities wholly owned by Turkish Habom. A repair shop for wheels and brakes and another for hydraulics have thus far become operational.

Major equipment such as auxiliary power units and landing gear are repaired in “pretty close” partnership with the manufacturers, says Demir. This is also increasingly the case for avionics and other electronic components, where MRO providers depend on access to the manufacturer’s engineering data and test equipment. However, Turkish Technic is still advancing its own know-how and procedures, such as non-destructive testing techniques for composite structures, to maintain a strong position versus the manufacturers, says Demir.

A dedicated research and development department was established in November 2012, to concentrate on projects such as engine washing and maintenance-data collection. But the engineering capabilities were also employed to set up its own manufacturing base for aircraft equipment, particularly for cabin interior installations, as a follow-up to classic wrench-turning airframe maintenance.

Together with Turkish Aerospace Industries, the MRO provider established a cabin interior systems joint venture in 2010. Now part of the Habom complex, this business has developed galleys to be retrofitted to Turkish Airlines’ Boeing 737-800s from 2014, and is currently undergoing supplier approval by the US airframer to become future line-fit equipment. A similar retrofit project is under way for the airline’s A330 fleet.

Turkish Seat Industries is a comparable joint venture with Izmit-based car-seat manufacturer Assan Hanil. The partnership has developed an economy-class seat to be installed on Turkish 737s, 777s and A320s, says Demir. The seat is going through the final certification stages and will initially be employed to replace seats made by Koito Industries, which are installed on around 15 aircraft in Turkish’s fleet, he says.

Koito’s equipment has been subject to airworthiness directives after it emerged in 2010 that the Japanese manufacturer falsified safety-test results on around 150,000 seats, which were installed across some 1,000 aircraft in the world fleet.

The first shipset of Turkish’s own seats are to be delivered for the retrofit programme in 2014, but the carrier also wants to line-fit new 737s with the equipment from next year. While economy-class seats will be the first stage, designs for future business-class accommodation are already in the drawer, says Demir.

“What we want to establish for the seats is a full-service centre. Complete shipsets will be taken out of [the] aircraft, completely renovated and put back on the aircraft with all spares and part support available nearby the seat company,” he adds. Unsurprisingly, that venture is also to become part of the Habom complex in future.