Miami-headquartered component repair specialist Aero Maintenance Group (AMG) is seeking approval from Brazil's Agência Nacional de Aviação Civil (ANAC) to expand its largely US-based business in Latin America.

But the wholly owned Air France Industries KLM Engineering & Maintenance subsidiary says that the northern and southern continents remain two separate markets where airlines pursue distinctly different MRO strategies.

Carriers in Latin America tend to pool their components and sign by-the-hour agreements with maintenance companies, which provide comprehensive support for a range of part numbers over a set time period, says Christian Tallec, AMG's chief executive. US airlines, however, still prefer more conventional time-and-material deals, where the operator contracts a repair shop to fix equipment on an individual basis.

This is partly due to the large size and homogenous fleets of US carriers - which does not require them to pool inventory with their competitors - but also the USA's traditionally diverse component MRO sector with a wide range of small, independent repair shops.

Latin America, on the other hand, has only limited local component repair capacity.

But Tallec says that the different airline purchasing strategies lead to different repair methodologies at maintenance providers. The US approach is mainly cost-driven - airlines contract a number of repair shops which in turn compete for the lowest price to mend the equipment.

The flight hour-based service model rewards the MRO providers for improving reliability - their profits grow with increasing on-wing time of the components. But this approach requires significant economies of scale to create an equipment pool and offer a comprehensive range of service.

The challenge for the maintenance companies is to set themselves up to operate economically in both arenas. AMG generates around a quarter of its revenue in Latin America - Tallec declined to provide a specific value - while the majority of its custom remains in the USA.

AMG says on its website that it aims to reach revenues worth $100 million.

AFI KLM E&M has gradually acquired AMG since 2004 to gain a foothold North America's huge MRO market. But the takeover has in return given the US component repair specialist access to an equipment pool and the Franco-Dutch parent group's existing relationships with Latin American carriers, says Tallec.

He does not expect the business split between the two continents to change dramatically in the near future. While the southern region enjoys burgeoning growth, this should just lead to incremental increases in AMG's custom as the "giant" US market remains the company's stronghold, he says.

AMG has no concrete plans to establish a repair shop in Latin America. But Tallec does not rule out setting up with an avionics testing facility in partnership with an airline.

AFI has installed such avionics testing equipment at TAM's base in São Paulo.

Source: Air Transport Intelligence news