Aircraft maintenance on upswing

Dubai For the first time since 2003, the aircraft maintenance, repair and overhaul (MRO) market declined from $45.1 billion in 2008 to $42 billion, this year due to the global downturn. However, it is expected to start looking up next year, a top industry official told Gulf News.

"The market has shown some decline this year due to the financial situation. However, we see some positive signs in market recovery," August Wilhelm Henningsen, chairman of Lufthansa Technik, told Gulf News in an exclusive interview at the Dubai Air Show 2009, which concluded yesterday.

The number of parked aircraft climbed noticeably, exceeding 10 per cent of the worldwide fleet of 20,000 planes, recently. Each aircraft has to undergo heavy maintenance checks once in four-six years depending on the aircraft utilisation.

A report issued by Global Industry Analysts predicts the worldwide MRO market will reach $55.2 billion by 2015 with engine overhauls expected to expand most rapidly in the Asia-Pacific region.

However, the Middle East MRO market remains buoyant due to aggressive expansion.

In an exclusive interview, Henningsen elaborated on the direction the market is taking. Excerpts:

Gulf News: You are aggressively looking at the Middle East market. How is the outlook for MROs in the region?

August Wilhelm Henningsen: The outlook is very good, very positive. The Middle Eastern carriers have massive aircraft order backlog. They are growing in a big way. The region's air traffic has been is one of the highest in the world.

Going forward, the airline fleet will require heavy maintenance as they grow old. Therefore, there will be a need for more MRO facilities and that's why we are aggressively looking at the region for more opportunities.

The outlook for the MRO business in the Middle East, or for any other regions for that matter, is linked to the economic growth of the region.

The outlook for the aircraft fleet growth is very positive, about 4 per cent globally, whereas in the Middle East it is expected to grow at 5 to 6 per cent.

How big is your business in the region?

The Middle East is the second biggest market for us after Europe, our home base. Out of the 2,000 aircraft under our management, 10 per cent, or 200, belong to the Middle East.

We have strong relationship with all the major carriers, such as Emirates, Etihad, Qatar Airways, Saudi Arabian Airlines, Oman Air and others. And the market is growing and we want to serve this market as much as possible.

There is a definite need for more MRO facilities in the Middle East, no doubt about that, and we want to remain at the forefront of this.

If that's the case, then why haven't you invested in the region so far?

There have been plans to open the investment in the region, but with the right partnership. We want to invest with the right partners and in the right project that is viable and profitable for the stakeholders.

We are talking to a number of airline partners in the region to develop MRO facilities and capabilities. Most airlines here have pretty good line maintenance capabilities. The larger airlines have their own MRO capabilities. Where there's a lack in capabilities - we come in.

However, we are continuously looking at opportunities.

Our MoU with Oman Air is one such move towards that direction.

Could you please elaborate on the latest deal with Oman Air? How much are you investing in the new hanger?

We have just signed an MoU with Oman Air on a possible joint venture to develop a maintenance hanger in Muscat. Following the MoU, both parties will engage in detailed discussions on the project, the joint venture and the business plan for it. We have not finalised anything, especially the ownership stake composition in the joint venture and the investment requirements.

What are the new business opportunities that you see going forward. These days, people are looking for mobile and Internet connectivity on board. What are you doing to facilitate that?

This is one of the core areas of developments that we have identified. We have finalised a deal with Panasonic to deliver the onboard mobile and Internet capabilities that will add passenger convenience. The project is in the testing phase and upon it's success, we hope to retrofit first the major long-haul fleet of Lufthansa, hopefully by next year. This would be an important milestone.

However, we also see strong business opportunities in the private jet and VIP businesses.

Could you kindly elaborate this? How important and relevant this to the Middle East?

Worldwide business and VIP jet market is growing at a very high pace, with the exception of the last one year.

The Middle East has one of the highest high-networth individuals and the VIP fleet here is growing. We have some very good customers here. We have very strong capabilities in design, development and re-development of VIP interiors to suit all types of tastes.

growth

lufthansa technik

Lufthansa Technik, one of the world's largest MRO service providers, is aggressively looking at the growing Middle East market. The company, which is part of the Deutsche Lufthansa group, last year generated 5.5 billion euros in revenue, commanding a 12 per cent market share globally.

It conducts 1,700 aircraft inspections per day and has 32 subsidiaries. It services 1,200 airctaft engines per year. Its order book has stabilised at 2.8 billion euros in 2008 and 2009.

Last year, it invested 124 million euros in global expansion. It added a new state-of-the-art engine overhaul facility in Hamburg that will serve a growing market.

The company, which employs 26,000 people having 670 customers and 2,000 aircraft under contract, on Monday made announced a MoU with Oman Air to develop an aircraft hanger.

— S.R