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Special report - Overhauling Maintenance, Repair and Overhaul& (MRO)

MRO - special report

Maintenance, Repair and Overhaul (MRO) is a critical component in airline operations.

But the sector is due a revamp of its own

Every penny counts in the current economic environment, putting Maintenance, Repair and Overhaul (MRO)—which usually represents some 12-15% of operating costs—under the magnifying glass. While safety and quality is never compromised, the $45 billion sector is examining different structures in an effort to generate greater operational efficiency.

Although most airlines do their own line maintenance, 60% of the world’s carriers outsource heavy work to lower costs. “Huge investments in infrastructure, facilities or parts require significant funding and often a single airline can’t realize this alone,” says Juergen Haacker, Chief Operating Officer at Abu Dhabi Aircraft Technologies.

“These trends provide a reasonable business perspective to MRO providers,” he adds. “But they also increase the responsibility of an MRO provider to better understand the operational environment of its customers, including all legal requirements. It must also recommend how to optimize the entire operational system, including the repair and overhaul processes.”

The remainder of airlines prefer to keep MRO in-house. Yet even this involves internal agreements to adhere to and, according to Guenther Matschnigg, IATA Senior Vice President of Safety, Operations and Infrastructure, there is also additional pressure to find business from third parties in order to spread costs and generate revenue.

“This is especially true for smaller carriers doing their own MRO,” he says. “The need to get third-party contracts is growing all the time. It is estimated that about 30-50% of MRO work is third party. So while some airlines are getting out of MRO, others believe they can find economies of scale by bulking up the amount of work they do.”

IATA is smoothing progress wherever possible, trying to ensure MRO companies and airlines cooperate while maintaining operational excellence. The IATA Engineering and Maintenance Group has established guidelines on engineering best practice and the standardization of technology, for example. In particular, its Information Exchange enables members to quickly and confidentially exchange information on any matter with technical implications.
The big breakthrough, though, would be an audit scheme for MRO, along the lines of IATA’s Operational Safety Audit and Safety Audit for Ground Operations. Many countries require audits that cost airlines millions of dollars every year.

“MRO companies are audited all the time,” says Matschnigg. “Anecdotal evidence from some of the major players suggests that there can be as much as one audit every week. We have to stop this audit frenzy—it wastes money and valuable resources.”
However, the MRO sector is awash with regulators and regulations, so satisfying all requirements will be a tall order. “But imagine what it would be like if a major MRO company only got audited once,” points out Matschnigg. “The cost savings would be enormous.”

Jacques Gentil, Executive Vice President of Technical Services at Air Mauritius, would welcome such initiative. “If an IOSA-compliant airline has already audited the MRO, it would make sense for airlines using the same facilities to accept the audit,” he says. “It saves time and money. However, there is also a need to get the different authorities to agree between them to get the full benefit.”

Audit regulations aside, there are other legal issues. In the US, proposals exist to extend the the Federal Aviation Administration’s remit at foreign repair stations. The more severe version could contravene existing local laws and potentially cause problems both for US airlines and the overseas MRO facilities that undertake work on their behalf.

There are plenty of other areas ripe for improvement, too. Perhaps most important, given public concerns, is environmental mitigation. Notwithstanding the work MRO companies do to ensure aircraft produce less emissions, companies can actually improve their own performance.

Chemical waste products from engine washes are a case in point. IATA has formed working groups to look at best practice and a means of disseminating this information to the industry. Then there is training. New techniques and standards could greatly enhance MRO performance. There are no current recruitment problems, although shortages are expected as the industry returns to growth.
Another area undergoing significant improvement is parts supply. The main manufacturers have established sizeable warehouses at strategic global locations, which help cut costs and ensure speedy delivery. Airlines are also looking at joint purchasing to find economies of scale. As prices are escalating, carriers will become even more vigorous in this pursuit. Freight forwarder cooperation would also be appreciated, as every efficiency in the distribution network needs to be exploited.

However, Matschnigg warns that the search for more cost-effective sources for parts can never fall back on those that are uncertified. “There cannot be any compromise on this,” he insists.

Steve Chadwick, General Manager of Engineering Technical at Cathay Pacific Airways, agrees cost management will always be a key deliverable of an airline engineering department. “This must be achieved, while at the same time ensuring high-quality operational delivery,” he says. “The trick is to leverage process improvement and new technology that delivers business benefits to all. It is surprising how much opportunity exists when both parties are incentivised to work together on delivering productivity.”

New proposals from some US politicians could place even more of a burden on a Maintenance, Repair and Overhaul (MRO) sector already swamped in a swathe of legislation.

Currently, the Federal Aviation Administration (FAA) must check MRO facilities that service US aircraft once a year. However, there is a vocal lobby calling for more frequent checks—although how this will be achieved given FAA staffing levels is unclear. Some are even asking for drug checks on foreign workers, which would be a clear violation of local law in many countries.

There are two proposals in Congress—one in the House and one in the Senate. The House version is stricter and IATA has objected vociferously. The Senate version is the more sensible approach as it would defer to international agreements and sovereign law. The industry is also supporting an FAA in-house committee, which has called for risk-based inspections.

At the moment, the future is uncertain and no real progress is expected until 2010. However, both airlines and MRO facilities remain committed to the paramount importance of safety, and available evidence does not support the draconian House view.

IATA Director General and CEO Giovanni Bisignani has called the proposals “protectionist” and believes they show a lack of understanding of aviation and the global economy. “They are symptoms of lost leadership,” he says. “It is time to look ahead and build a stronger global industry for all players.”

Other articles from MRO special report:

MRO gets strategic
In November 2009, the Maintenance, Repair and Overhaul (MRO) sector became the latest addition to IATA’s Strategic Partnerships program.
The move invites MRO companies and maintenance software providers to actively engage with IATA airline engineers in work groups and task forces concerned with identifying operational cost drivers and aircraft recovery processes.
Common MRO and airline issues will be discussed, including aircraft performance, health monitoring, fuel efficiency improvement, maintenance program optimization, and preventing future engineer shortages.
The MRO community will also be able to provide valuable insight on IATA’s environmental and cost reduction initiatives, a unique opportunity to influence the voice of global aviation.
For more information on the Strategic Partnerships program, email



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