Home / Shipping / Aviation/ Airbus, Boeing maintenance push forces incumbents to rethink strategies

Airbus, Boeing maintenance push forces incumbents to rethink strategies

Comments / {{hitsCtrl.values.hits}} Views / Monday, 12 February 2018 00:00

Singapore (Reuters): A push by Airbus SE and Boeing Co to capture more of the $ 77 billion global commercial aircraft maintenance, repair and overhaul (MRO) market is leading incumbents to seek partnerships and explore new business lines to stay competitive.

Airframe and engine manufacturers are stepping up sales of packages that supply customers with maintenance, engineering and parts. That poses a direct challenge to independent MRO companies like US-based AAR Corp, Singapore’s ST Aerospace and SIA Engineering Company Ltd. and Germany’s Lufthansa Technik.

Billions of dollars worth of business is at stake. Consulting firm Oliver Wynam estimates that MRO spending will rise to $ 114.7 billion a year over the next decade as the global jet fleet grows.

Boeing, which earned about half of its $ 14.6 billion in services revenue in 2017 from commercial jets and the remainder from defence, is aiming to more than triple that number in as little as five years. It signed nearly $ 1 billion worth of services contracts during the Singapore Airshow this week.

Airbus reported an 18% jump in commercial services revenue to about $ 3 billion in 2016, with the 2017 numbers yet to be released, said Laurent Martinez, head of Services by Airbus.

He said that as Airbus grows its services business, less-efficient independent MRO companies might find themselves left in the cold.

“That is the nature of competition,” he said, citing contract victories like a deal covering the Hong Kong Airlines A350 fleet announced during the airshow. “There was strong competition, and we led the pack and were selected.”

Joint Ventures 

As competition heats up, MRO companies such as Singapore Technologies Engineering Ltd’s ST Aerospace division and Singapore Airlines Ltd offshoot SIA Engineering have formed joint ventures with airframe and engine manufacturers, including Boeing and Rolls-Royce.

The partnerships potentially increase their access to business, but the gains are not certain.

“An airline could be a Rolls-Royce customer ... and our joint venture will have to compete for the work from Rolls-Royce, even though Rolls-Royce is a shareholder,” SIA Engineering CEO Png Kim Chiang said.

But the partnerships between manufacturers and MRO companies demonstrate there may still be room for independent businesses that have already established strong local footprints. And some airlines prefer working with an MRO provider that can service mixed fleets of Airbus and Boeing jets. “I think there is space for everybody to play if - and I’ll give you a caveat - an MRO continues to differentiate through efficiency,” Boeing Global Services CEO Stan Deal said. “Those MROs that do, I think there will be plenty of space for them. Those MROs who ... become complacent, I think you will see those MROs tend to falter.”

New business lines

Indonesian MRO Garuda Maintenance Facility AeroAsia is promoting “reasonable prices” as a key selling point as competition grows, said its director of base operations, Rahmat Hanafi.

In higher-cost Singapore, which controls 10% of the world’s MRO market despite having a far smaller percentage of the global jet fleet, the MRO companies are looking to diversify into new business lines.

SIA Engineering is servicing Embraer SA regional jets and is looking to add Bombardier Inc. It is also seeking new airline partners for joint ventures similar to its arrangement with Cebu Pacific in the Philippines, Png said.

ST Aerospace is stepping up passenger-to-freighter conversions and has launched seat-manufacturing and aircraft leasing businesses. It has five aircraft in the leasing business but wants to expand to 50 within three years, said ST Aerospace President Lim Serh Gee.

ST Aerospace says focusing on mid-life aircraft whose leases have ended, rather than working on new aircraft, offers an opportunity to expand.

The idea, the company said, is to reconfigure the cabin in its shop with seats it has manufactured, sign a maintenance contract with the airline and later potentially handle the plane’s “end of life” with a passenger-to-freighter conversion or scrapping it for parts.

“It is the whole value chain I’m trying to capture,” Lim said.

Share This Article


1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.


Today's Columnists

The no-confidence motion against Ranil will create further chaos

Friday, 23 March 2018

The Mahinda Rajapaksa-backed Joint Opposition yesterday submitted a no-confidence motion against Prime Minister Ranil Wickremesinghe

Making green cars greener: $15 b opportunity not to be missed

Friday, 23 March 2018

Fortunately for me,W.A. Wijewardena wrote an article on Dhammika Perera’s presentation at the Colombo School of Business and Management

Women’s bodies, masculinities and economic insecurities

Thursday, 22 March 2018

Cat’s Eye was deeply saddened to witness another wave of anti-Muslim violence, yet again, under a Government which promised to protect them from such violence. It was reported that the first round of violence in Ampara was sparked by a claim that

Strong brands can sustain shocks!

Thursday, 22 March 2018

The recent media highlighted the impact of communal violence on the tourism industry. The press conference earlier this week threw out a number as high as 10% whilst the actual cancellation was around 500 room nights around the Kandy vicinity was rep

Columnists More