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ANALYSIS: Etihad's MRO unit grows third-party business

While Etihad Airways is enduring a period of retrenchment after years of rapid expansion, the Middle Eastern carrier’s technical arm is still on an upward growth curve.

The unit has increased its third-party maintenance business and is considering options to expand capacity, potentially beyond the company’s Abu Dhabi base.

Etihad Airways Engineering chief executive Abdul Khaliq Saeed tells FlightGlobal that the MRO division had a “financially very successful” operation in 2018, in which financial targets were exceeded with a “very good margin”.

He acknowledges that “a few” aircraft left Etihad’s operation – new ones were delivered too – as the carrier trimmed capacity through fleet and network adjustments.

Also the demise of Air Berlin in 2017, in which Etihad held a 29% stake, had an effect on the MRO division, as the defunct German carrier previously sent aircraft to Abu Dhabi for maintenance.

However, Alitalia, another of Etihad's ill-fated investments, continues to send aircraft to the engineering arm, despite the Gulf carrier having ended its interest.

Saeed says that the contract with Alitalia is independent from its parent’s previous involvement with the Italian carrier.

But overall, he says, Etihad’s restructuring programme had “no negative impact” on the maintenance division. The proportion of third-party activity grew to more than 70% in 2018 – from around 60% during the previous year – while the MRO complex at Abu Dhabi airport was fully occupied with around 300 aircraft visits.

In 2018, Etihad Airways Engineering won business from 15 new customers, including Iberia.

The Spanish carrier was one of several clients for ad hoc checks on individual aircraft, although Saeed says that talks are ongoing with Iberia to arrange more regular shop visits.

Norwegian became a customer too, requiring multiple aircraft checks.

“We are focused on increasing our third-party [business],” Saeed says.

The growth on non-Etihad work was a result of efficiency improvements to reduce turnaround time – creating additional MRO capacity – and efforts to increase quality.

Saeed says these initiatives prompted previous customers, which had taken their business elsewhere, to return to the MRO provider.

He forecasts that Etihad Airways Engineering will again operate at full capacity in 2019, but admits he is "looking at increasing capacity” for the future.

Expansion could be achieved through further efficiency savings or co-operation with external partners.

The company is in the process of developing an expansion strategy and is in talks with potential partners in Latin America, Saeed says, while declining to provide further detail.

Etihad Airways Engineering is a member of Airbus’s MRO Alliance, which has generated additional business for the maintenance provider.

Before the MRO Alliance was unveiled in 2017, Etihad Airways Engineering completed wing structure and door modifications for A380 operators on the airframer's behalf.

In Saeed's view, the alliance’s largest benefit is to gain access to Airbus’s technical knowledge and its engineering support, which he describes as “very positive” for the MRO provider and its ability to reduce turnaround time.

While Airbus has said that co-operation with MRO Alliance members will be much closer than under the manufacturer’s previous aftermarket partnerships, Saeed asserts that the set-up does not prevent it collaborating with other airframers as well.

“We are working with all the manufacturers… There is nothing that stops us from working with Boeing,” he says.

Cabin maintenance and upgrades are key activities for Etihad Airways Engineering for which, Saeed notes, the company’s European Aviation Safety Agency Part 21 design and manufacturing organisation approvals are especially relevant.

Airbus, too, sees a substantial market for cabin upgrades and has established a dedicated division for such modifications on in-service aircraft.

Saeed says that talks with Airbus are under way to direct cabin projects to the MRO provider’s facility later this year.

Separately, Etihad Airways Engineering is preparing its first C-check on an A350, for a third-party customer, scheduled to begin in March.

While Etihad and Emirates are fierce rivals, in recent times there have been hints that the two could look to work more closely together. Saeed indicates that the two carriers are evaluating options of how they could co-operate in engineering and other fields.

Noting that the partnership studies were initiated by the two airlines’ owners, he says that “the plan is of course for engineering that we should talk to each other… look at synergies and help each other”.

Saeed describes the relationship between Emirates and Etihad as “very good” and foresees “many different areas” for potential co-operation.

But he says that no decision has been taken about any potential collaboration in maintenance.

Etihad Airways Engineering additionally plans to grow its component repair activity, in partnership with OEMs. In 2018, it disclosed a 15-year aftermarket agreement with Moog.

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