It is no secret by now that the aviation market in mainland China is set to boom, with domestic passenger traffic poised to soar at about 7.9% a year on average, according to a recent Boeing forecast.
The airframer expects the country to require 4,330 new commercial aircraft over the next 20 years. With China's aircraft fleet set to grow, maintenance, repair and overhaul firms are hoping to capitalise on the fresh business opportunities offered by the new jets.
© Ameco Beijing
Ameco Beijing opened its 747 hangar, which can be used for heavy maintenance and painting, in 2009
Among those seeking to expand its customer base is Ameco Beijing, which has already established itself as a key MRO player since it was set up in 1989. Based at Beijing Capital International airport, the company is a 60-40 joint venture between flag carrier Air China and Germany's Lufthansa. Among its facilities are four hangars that can handle 15 widebodies and 11 narrowbodies at the same time.
Late in 2009 it opened its latest 270 million yuan ($40.8 million) Boeing 747 hangar, which can be used for heavy maintenance and painting. The MRO firm's three other hangars include a 10,000m2 (107,500ft2) painting hangar for aircraft up to the size of a 747, a 53,800m2 four-bay maintenance hangar and another hangar that can take the Airbus A380 and several other aircraft simultaneously.
Armed with these facilities and capabilities, Ameco Beijing hopes to increase its revenues as it serves a growing fleet in China. "The growth of the MRO business will be at about 8% a year in China for the next 10 years, which is twice that in other parts of the world," says Ameco Beijing's chief executive and general manager Andreas Meisel.
Revenues at the MRO firm grew 6% in 2009 compared with 2008, and Meisel expects a similar trend in the years ahead. "We want to outpace the market. The market is growing and we want to grow with it, but we will also try to be better than it," he says.
Ameco Beijing now serves more than 80 domestic and international customers, with Air China as its biggest customer. The Star Alliance carrier accounts for about 60% of its revenues, says Meisel. Other domestic airlines and international carriers make up the remaining 40%.
With Air China contributing the majority share of Ameco Beijing's revenues, it is no surprise that the firm's growth strategy is closely linked to the carrier's fleet.
Late in 2009 Ameco Beijing signed an agreement with Lufthansa Technik Shenzhen to develop Pratt & Whitney PW4000 fan thrust reverser capabilities. Under the agreement, Ameco Beijing will repair and overhaul Air China and Air China Cargo's PW4000 fan thrust reversers on 747s and 767s in its facilities. Previously they were sent overseas. Lufthansa Technik Shenzhen will provide material and technical support for Ameco Beijing's PW4000 capabilities.
Looking ahead, the MRO firm hopes to add more capabilities in the overhaul of aircraft components. "We have good capabilities now, but we are thinking of doing more," says Meisel.
This will help Ameco Beijing to win more business from Air China and help reduce the amount of outsourcing work performed by the airline. "We plan to work with Lufthansa Technik to get more work from Air China and other domestic airlines as well," says Meisel.
While Meisel says that Ameco Beijing has traditionally done more work on Boeing aircraft, it now hopes to boost its experience with Airbus airliners, with Air China set to add more jets from the European airframer to its fleet.
© Ameco Beijing
Beijing works on PW4000s and RB211s
Among Air China's 260-strong fleet, Ameco Beijing is supporting 110 jets in the country's capital. Most are Boeing aircraft, but the airline is set to acquire more Airbuses. It has 62 Airbus aircraft on order, as listed by Flightglobal's ACAS database. Two-thirds of these are A320-family narrowbodies.
"Traditionally, we are more of a Boeing facility. But with Air China getting more Airbus aircraft, we want to close this gap in the next three to four years with support from Lufthansa Technik," says Meisel. This includes offering more line maintenance work for Airbus aircraft, he adds.
As well as developing PW4000 capabilities, the MRO firm has added other skills, such as additional modifications for 767s. It has completed its first 767 winglet modification programme for Germany's Condor Airlines and is the only MRO provider in China to offer the capability. Under the deal, it added winglets to nine 767s operated by Condor and re-delivered the ninth aircraft to the airline in October. The winglets will help reduce fuel consumption by an average of 4-6%.
Ameco Beijing also added A380 capabilities to its portfolio in 2009, starting with line maintenance work on Lufthansa's third A380, which it flies between Frankfurt and Beijing. The MRO firm's A380 hangar is able to accommodate six widebodies and four narrowbodies at the same time, including the superjumbo.
While Air China is Ameco Beijing's top customer, Meisel says the MRO firm is also working to woo more international carriers to take up its services. United Airlines is its biggest non-Chinese airline customer, with Ameco Beijing performing maintenance work on the Star Alliance airline's 747s and 777s.
Other international customers of Ameco Beijing include Aeroflot, Air India, Austrian Airlines, Jet Airways, Lufthansa and Transaero.
Winning more business from airlines outside China is important to Ameco Beijing, says Meisel, as the bigger Chinese airlines other than Air China have their own maintenance facilities. China Eastern Airlines, for example, has an MRO joint venture with ST Aerospace, Shanghai Technologies Aerospace, based at Shanghai's Pudong and Hongqiao airports.
The parent company of the other major carrier in China, China Southern Airlines, has a 50% stake in MTU Maintenance Zhuhai, a MRO joint venture with Germany's MTU Aero Engines. "In general, the bigger airlines are linked to their own facilities so it would be a challenge to get them to be our customers," says Meisel.
But there are exceptions. For example, Ameco Beijing performs work on China Southern's Rolls-Royce RB211 engines as MTU Maintenance Zhuhai does not have that capability.
Ameco Beijing also services the aircraft of smaller Chinese carriers such as Shanghai-based Great Wall Airlines. "If you want to prosper as an MRO provider in China, you have to look at international customers. It's a challenge and it impacts your strategy," says Meisel.
Besides facing the challenge of gaining new business in a market with MRO providers linked to major Chinese carriers, Meisel believes that competition from firms elsewhere in Asia will also be a force to be reckoned with.
"The competition is within Asia. We are not competing against companies in the USA and Europe, but rather with those in Hong Kong and Singapore. They have good labour costs and we would have to fight against that," says Meisel.
Costs of labour are going up in China, he adds, acknowledging that this is inevitable in the world's fastest-growing economy. "It's a matter of fact in a fast-developing country," says Meisel. Ameco Beijing, however, will seek to make up for this in other ways. "We will have to compensate with better efficiency. Two to three years ago, we began looking at processes to make them leaner and faster," he adds.
This process will continue as Ameco Beijing seeks to remain competitive in the fast growing aviation market in China.
"It's going to be a long journey. Improving our efficiency is not just a one-time programme," says Meisel.