Middle East boosts its MRO footprint

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As with the aviation sector in general, the centre of gravity in maintenance, repair and overhaul is slowly shifting east. With a local widebody and narrowbody fleet set to double this decade and the funds, political will and skills base to develop a modern infrastructure, the Middle East and North Africa - along with Asia - is set to secure an ever-bigger slice of the global MRO pie.

The region's MRO providers - most of them with a heritage as the in-house operation of a state-owned airline - believe they are ideally placed not just to exploit this growing domestic fleet but also to take advantage of their location just a few hours flying time from much of Europe, the Indian subcontinent and the CIS to secure further-flung custom, based on a winning combination of lower labour costs, rapid turnarounds and skilled staff (expatriate and home-grown).

 

©Gulf Air
SIAEC maintains Gulf Air aircraft in Bahrain. From 2012 a new company Gulf Technics will pursue third-party work

The extent of some of these ambitions will be seen as key players gather at the second MRO Middle East - which kicks off at Dubai airport on 28 February - and will feature not just the region's emerging maintenance powerhouses, but Western suppliers keen to tap opportunities in a still immature and fast-growing sector.

Bahrain is the latest Middle Eastern state to put down a marker in the third-party MRO marketplace. The kingdom's airline Gulf Air has wrestled with its MRO options since Bahrain's split with former fellow-owners, Abu Dhabi, Oman and Qatar. In the glory days of Gulf Air, maintenance was the job of Gulf Aircraft Maintenance (Gamco) in Abu Dhabi. However, shortly after the launch of Etihad as the new Abu Dhabi-based United Arab Emirates national airline, Gamco was renamed Abu Dhabi Aircraft Technologies and Gulf Air withdrew its business.

After a dalliance with SR Technics - now majority owned by Abu Dhabi's investment company Mubadala - Bahrain has turned eastwards and teamed with Singapore's SIA Engineering (SIAEC). The Singapore company has been handling the maintenance of Gulf Air's 34 aircraft at Bahrain International airport from a temporary hangar since 2009. However, a new agreement between SIAEC and Bahrain's Mumtalakat holding company signed at January's Bahrain air show will see a new business being set up called Gulf Technics, which together with SIAEC will establish a new facility in 2012 to handle Gulf Air and third-party work.

BAHRAIN BID

The move is part of a wider strategy by Bahrain to regain some of its status as the regional centre of aviation following the emergence of Abu Dhabi, Dubai and Qatar as major hubs for international traffic in the past decade. Mumtalakat chief executive Talal Al-Zain says the new MRO operation will add "another crucial component to the services on offer and will be vital in helping to attract new airlines to use Bahrain International airport".

Bahrain's move could increase the pressure on the region's two main third-party MRO providers - ADAT and Jordan Aircraft Maintenance (Joramco). Once the maintenance arm of Royal Jordanian, Joramco has in the decade since its split from its former parent (which retains a 20% share) built a third-party business that now represents 75% of its revenues.

Specialising in Airbus and Embraer E-Jets - the main fleet of Royal Jordanian - the private company has been successful in securing contracts from airlines based in a radius of 5-6h flying time. A strategy of adding capabilities such as composite repairs and investing in technologies has helped the business triple turnover since 2005, and taken it on the way to being a "world-class company", chief executive Bashir Abdel Hadi told Flight International on a visit to Joramco's Amman facility late last year (Flight International, 10-16 November 2009).

DEEP POCKETS

The international ambitions and deep pockets of ADAT's parent Mubadala have transformed the former Gamco. Aside from a shiny new brand image, the company has been investing in its site next to Abu Dhabi's international airport. An Airbus A380 hangar is due to open October in plenty of time for the arrival of Etihad's first superjumbos two years later - these will not be due for their first C check until 2014. Mubadala also signed at last year's Paris air show an agreement with General Electric that will see ADAT becoming a specialist centre for the GEnx and the GE90.

With Etihad still a fairly small airline in global terms with a young fleet whose aircraft have only recently begun to roll in for heavy maintenance in significant numbers, ADAT is very much focused on the third-party market.

Mubadala's aerospace vision, of course, does not stop at the borders of the UAE. As well as its controlling share of SR Technics, the business also has a stake in Italian aircraft builder Piaggio. At the Singapore air show in early February, executive director Homaid Al Shemmari said Mubadala was looking to acquire a third MRO company by early 2011 in North America or Asia by early next year. The move would give it a global MRO footprint alongside its European and Middle Eastern coverage with SR Technics and ADAT.

Mubadala's possible move into the North American market follows that of its counterpart in its neighbouring emirate, Dubai Aerospace Enterprise, which owns one of the region's largest independent players, Standard Aero (as well as a minority stake in SR Technics). Standard Aero appears to remain a solid investment for the investment house, which has struggled to establish some of its other planned ventures in aviation education and airport development.

New airport developments in Dubai and Abu Dhabi could provide opportunities for MRO operations in the coming years. The new seven-runway Al Maktoum airport being built in the desert near Dubai's main industrial area in Jebel Ali will be part of a massive commercial complex called Dubai World Central, which will include MRO facilities.

Several companies - including Livewel of India and ExecuJet (see business aviation box) - have previously committed to building hangars at the 6.7km2 (2.59 miles2) Aviation City part of the development, although Dubai's financial crisis has slowed the project and few details have emerged on progress.

In the region's biggest MRO facility, at Dubai International airport, Emirates has begun to offer third-party work. The 55Ha (136 acres) engineering centre opened in 2006, with each of its seven hangars able to handle an A380. It has around 30 third-party customers, but the main focus is the Emirates fleet of 137 aircraft.

The region's other big airline, Qatar Airways, has its line maintenance facility in Doha where it carries out light inspections including A, B and some C checks. Its heavy maintenance is put out to tender, with the vendor choice varying with aircraft type and work required.

Typical providers include ADAT, Lufthansa Technik and SR Technics. However, Qatar Airways may be able to bring all maintenance in-house when it relocates to the new Doha International airport in 2012.

COMPONENT SUPPORT

As well as fully fledged MRO facilities, a number of companies are also making the most of opportunities in component support as airlines with a view to the balance sheet look to divest inventory and avoid the hassle of having to provide in-house spares support. At the Singapore air show, Mubadala unveiled a venture called Sanad ("support" in Arabic) to buy airlines' components stock and maintain it on a contract basis through ADAT and SR Technics. Mubadala has already clinched a contract with Air Berlin for its inventory of 10 spare engines and says it hopes to conclude deals with four or five more airlines this year.

It is a market AJ Walter - which is exhibiting at MRO Middle East and setting up a sales office in Dubai - is also extremely interested in, says the UK company's Andrew Braley. AJ Walter specialises in providing long-term component support for Airbus and Boeing fleets for 700 airlines and maintenance houses around the world. Currently most of the region's airlines have support deals directly with the original equipment manufacturers and are storing their own parts, says Braley.

"They are cash rich and are using the old model of carrying big inventories. However, some of the newer, smaller airlines are looking at different models. No-one is going to launch a new airline and have $10-20 million of inventory just sitting there," he says. Even the larger, established airlines are looking again at their support strategy, he maintains. "These airlines can't continue with the old ways and are beginning to look at selling off some of their inventories."

Goodrich was one of the first OEMs to establish a dedicated support and overhaul centre in the Middle East, opening its 10,000m2 (107,600ft2) campus at Dubai's Jebel Ali free trade zone in 2008 in a bid to "grow our activity by being closer to the customer", says Joel Haldemann, vice-president of MRO operations for Europe, Middle East and Africa. The centre, which has 70 staff, handles nacelles, evacuation systems, icing systems and cargo equipment on Airbus and Boeing types.

Last August it added electronic engine controls for the Rolls-Royce Trent 500, 700 and 800. Later in the year, it signed a letter of intent with Emirates to become exclusive provider of evacuation system MRO services for the airline's on-order fleet of 58 A380s.

"We are very confident that we can grow in 2010, mainly due to the size of the airlines here, but also with new operators too," says Haldemann, who adds that Middle Eastern airlines tend to prefer "working closely with the OEM".

Rockwell Collins has also made a move into the Middle East, signing in early February a memorandum of agreement with Saudi Arabian company Advanced Electronics (AEC). Under the deal, AEC will become an authorised repair centre for Rockwell Collins in the Middle East and the two firms will collaborate on designing, manufacturing and marketing avionics, electronics and communications products, largely for the defence market.

It is one of several joint ventures in the region, primarily for current and future military procurement contracts, but with possible spin-off benefits for the civil sector.

 

©Egyptair
With airlines increasingly willing to fly further to seek out value, the region's MRO providers are confident of finding more work from outside the Middle East and North Africa, where they are already benefiting from a growing fleet