In the maintenance industry, the big are getting bigger

Graham Warwick/WASHINGTON DC

North America's maintenance, repair and overhaul (MRO) industry enters the new millennium in a healthy condition, having changed shape substantially in the closing years of the 20th century. In South America, recovering economies and increasing liberalisation of the air transport market should boost the region's MRO providers.

North American MRO companies, led by Aviation Sales and BFGoodrich Aerospace (BFG), experienced growth in 1999. Long-time market leader BFG reported strong growth at its Everett, Washington-based Maintenance, Repair and Overhaul division - which handled a record 478 aircraft, 11% up on 1998. Aviation Sales, meanwhile, grew to match BFG in size, largely as a result of an aggressive acquisition strategy that has built its TIMCO subsidiary into a major multi-site MRO operation.

Consolidation has been the defining characteristic of the North American maintenance industry over recent years. Parts redistributor Aviation Sales has led the charge, building itself into a major MRO competitor through a series of acquisitions: AeroCorp and TIMCO in 1998 and, last year, the airframe and engine maintenance operations of US cargo carrier Kitty Hawk. The enlarged TIMCO has sites at Greensboro and Winston-Salem, North Carolina; Lake City, Florida; Macon, Georgia; and Oscoda, Michigan.

Aviation Sales' strategy has been to integrate MRO operations with its parts distribution, flight control repair, component overhaul and interior refurbishment businesses to reduce maintenance downtime for customers by speeding the flow of repair work. The company calls this integrated service TIM-TAM, for Total Inventory Management and Total Aircraft Maintenance. TIMCO director of marketing Lou Churchville describes it as a "closed circuit, which expedites the movement of overhauled parts."

BFG appears to have been taking note, because it has just integrated its Airframe Services and Component Services operations into a single Aviation Services division, based in Everett. John Martin, president of the new division, says the move will enable BFG to "respond to the total requirements of our customers" - a clear indication that airlines now want more than just maintenance.

Such moves are likely to increase the competitive pressure on the rest of the North American MRO industry, which has seen substantial changes in recent years. New names have entered the field while others have changed hands. One of the new names is Aviation Management Services (AMS), which last year acquired the Dimension Aviation maintenance and modification centres at Phoenix Sky Harbor and Goodyear airports from Sabreliner. Formerly SabreTech, and renamed in the aftermath of the ValuJet DC-9 crash, Dimension had suffered the loss of a Boeing contract to convert McDonnell Douglas DC-10s to freighters. Included in the deal was a dormant Orlando, Florida, facility, which AMS hopes to reopen this year.

Familiar names

Other, more familiar, names have also seen changes. Italy's Alenia ended its foray into the US MRO market in 1998 when it sold San Antonio, Texas-based Dee Howard to its management, backed by an investment firm, which has embarked on an expansion programme. In contrast, Singapore Technologies Aerospace decided to increase its stake in the USMRO market by acquiring Dallas, Texas-based Dalfort Aviation in 1997.

Late last year Precision Standard, better known as the parent company of MRO provider Pemco World Air Services, was acquired by an investment team. Although Pemco says it had a good year in 1999, the company's fortunes had been affected by a US Federal Aviation Administration airworthiness directive (AD) which severely limits the loads that can be carried by Pemco-converted Boeing 727 freighters. Now Pemco is expanding, and says "things look encouraging for this year".

Industry changes have not been restricted to the USA. In Canada, following its 1998 acquisition of Edmonton, Alberta-based MRO provider CAE Aviation, Spar Aerospace embarked on a programme of divestitures which has left the company focused around its Aviation Services business. Although largely involved in the maintenance and modification of military aircraft, Spar is moving into the commercial aircraft MRO market and has plans to expand through further acquisitions.

Fuelling Spar's ambitions is the emergence of low-cost carriers seeking maintenance services that are independent of major carriers Air Canada and Canadian Airlines International (soon to become one). The growth of Calgary, Alberta-based WestJet has boosted the commercial maintenance business of both Spar and Conair, the Abbotsford, British Columbia-based firefighting specialist. The company's maintenance division, Conair Aerospace, now performs work for a number of Boeing 737 operators, including WestJet.

Boeing presence

Boeing, which has long had a thriving freighter conversion business, stepped up its presence in the aftermarket last year by forming Boeing Airplane Services, a new business dedicated to post-delivery modification of its commercial aircraft. The unit has formed a global network of modification and engineering facilities to provide retrofit packages for Boeing aircraft, including avionics upgrades, passenger-to-freighter conversions, interior reconfigurations and performance improvements.

The network includes BFGoodrich, as well as Boeing partners ST Mobile Aero-space and SAirGroup maintenance arm SR Technics, which is to establish a US maintenance and modification centre at a former Boeing plant in Palmdale, California. SR Technics America will begin operations in 2002, initially focusing on DC-10 to MD-10 conversions under an agreement with Boeing to install upgraded cockpits in 57 aircraft, but plans eventually to offer a wide range of MRO services for Airbus, Boeing and McDonnell Douglas Aircraft.

Freighter conversions continue to fuel industry growth, with Boeing Airplane Services forecasting that 1,500 aircraft will be modified over the next 20 years. The manufacturer plans to be more involved than before in the market, having watched what has happened to the 727.

Boeing's Wichita, Kansas, modification centre, which previously specialised in 747 passenger-to-freighter conversions, is also modifying DC-10s and MD-11s. Boeing Airplane Services, meanwhile, has launched a 757 freighter conversion programme with a deal to acquire, modify and support 44 aircraft to be leased to package carrier DHL Worldwide Express. The first aircraft is to be delivered next year.

ST Mobile Aerospace will be a "preferred supplier" for the 757 freighter conversion, with Boeing Wichita and other modification centres likely to handle any overspill. Boeing also plans to launch a 767 passenger-to-freighter conversion programme, for which it sees a 200-aircraft market, similar to that forecast for the 757.

Aviation Sales' TIMCO subsidiary and Seattle-based Flight Structures has already developed a 767 freighter conversion for package carrier Airborne Express. The company is converting an initial batch of 12 aircraft and is hopeful of follow-on orders.

TIMCO has also teamed with Hamilton Aviation to provide "AD-free" freighter conversions of the 727. The modification has been developed by Hamilton and Wagner Aeronautical, which formed Air Mod One to develop a finite element model of the loads in the 727 fuselage. This has been used to validate the freighter conversion, which includes a cargo door, strengthened floor and 9g barrier.

TIMCO's Churchville says test flying has been completed, and supplemental type certification of the 727 freighter conversion is expected within a few weeks. The first aircraft is due to enter service by the end of March, and Hamilton/TIMCO has orders for over 30 conversions, he says.

Churchville expects the conversion of passenger 727s and the rework of previously converted aircraft to provide substantial work for TIMCO. The modification restores the full load capability of the 727 freighter, he says. Pemco signed an agreement with Wagner to rework AD-affected aircraft, but the status of the deal is not clear.

Boeing's are not the only aircraft in line for cargo conversions. TIMCO is converting a number of Airbus A300s to freighters, while Lockheed Martin Aircraft &Logistics Centers has launched an L-1011 TriStar conversion programme with an order from UK-based Intercapital Aviation for 13 freighters. The aircraft will be acquired from Delta Air Lines and converted by Lockheed Martin's Greenville, South Carolina, modification centre.

While cargo carriers and major airlines continue to be the main customers for North America's MRO providers, the growing regional and corporate aviation sectors are emerging as important markets. Booming sales of business and regional jets are prompting companies to expand their aircraft completion and maintenance capabilities. The result could be another reshaping of the industry.

Source: Flight International