MRO: A Quick Fix?
Brian Dunn says airlines and MROs must work together if they are to deal with the complexities of the modern airline industry
Like the airline industry they serve, maintenance, repair and overhaul companies (MROs) must confront a changing environment. New aircraft, higher utilization rates and the need to keep costs to a minimum are a few of the factors keeping them on their toes.
As if that’s not enough, engine original equipment manufacturers (OEMs) have been muscling in on the action, leveraging their economies of scale to lock in long-term total care deals. At the same time, the likes of Boeing and Airbus are creating their own MRO networks, licensing authorized service centers. It is forcing large, third-party airline MROs and independents to
offer a value-added service despite the pressures.
Greater efficiency, consolidation, and improving customization will not be easy for MRO companies to achieve, however— especially while ensuring cost and safety levels are maintained.
Dealing with the new realities could well change the MRO landscape of the future.
MTU Aero Engines is under no illusions about the challenges ahead. It has had to implement new processes to cope with what it describes as an accelerated transition period, as new engines replace older models far sooner than was previously the case. “The engines of recently delivered models will be in their honeymoon period—with no heavy work required—for the next five to seven years, and new engine models now represent 46% of the active commercial jet engine fleet versus 33% pre-crisis,” explains MTU spokesperson Odilio Mühling.
“As a result, about three years of growth in engine MRO, or approximately 15-17% of the total engine MRO volume, have been lost. This trend will continue if both fuel prices and aircraft OEMs production rates remain high.”
Essentially, there is less work to be had. This has had an impact on turnover and margins, and has led to short to medium-term market overcapacity for more common engine types, such as the CFM56. This is good news for airlines but it is forcing MROs to adopt new strategies, with long-term consequences. For example, MTU’s ‘MRO InTakt’ program at its Berlin plant has reduced turn times by more than 40%, which has allowed it to double the number of engines overhauled per month.
It also offers more on-wing repairs, such as boro-blending, where damaged blades can be repaired via boroscope holes to avoid disassembly. But the flipside of this is a larger inventory to minimize aircraft downtime. Mühling says this allows the company to maintain essential flexibility and quick response times.
Naturally, it also adds to cost. MTU is trying to counter the inventory build-up through new sourcing strategies within its MRO network, a strategy common to others in the trade. “We work hard to avoid adding to our materials inventory unnecessarily,” says Leonard Kazmerski, Vice-President, Marketing and Business Development for TIMCO. “The goal is to make sure that only the parts needed are stocked, and that delivery is as close to the demand as possible without introducing unwanted risk to the visit schedule.
“We have been looking at our back shops, and in-house repair and overhaul capabilities, as a means of reducing some excess inventory requirements, and we see this as an area where we can potentially expand some capability at each of our locations,” he adds. Sophisticated pooling concepts are emerging, together with worldwide logistic support. This enables MROs to keep costs down and is a marked difference from previous business models.
For example, Montreal-based Aveos has just signed an expendable inventory program agreement with major distributors and OEMs that allows the company quick access to inventory in exchange for exclusivity and forecast information sharing.
New staffing strategies
If spare parts are needed to handle airlines’ quick-fire MRO requirements, it stands to reason that more people are also needed to satisfy faster turnaround times. Like the demands for inventory, the new staffing reality has prompted a change in strategy for MROs.
Pooling is a lot harder when it comes to staff, though. And the issue also has to include the falling workloads mentioned earlier as well as the confusion of a market that is growing amid a shortage of skilled mechanics in specific markets.
Kazmerski insists that safety comes first and foremost in the TIMCO approach to accessing how best to accomplish any task or process but that optimal use of staff is high on the agenda. “We have become quite rigorous over the past few years in finding opportunities to provide our customers better value, and to open additional capacity for more work with existing facilities and staffing,” he says.
To get the job done more quickly does not necessarily require more manpower, but rather greater productivity. This initiative is being helped by new technologies with increased reliability but countered by the need for more staff trained in the right areas.
That pushes wages and costs up. The expense mounts as MROs must also balance the introduction of new aircraft generations and engine types with investment in infrastructure, tools, employee training, and questions about intellectual property.
As Lufthansa Technik Chairman August Wilhelm Henningsen puts it: “These challenges can only be handled successfully by MRO providers operating globally and, at a certain scale, having the ability to tailor packages to individual needs.” That means fewer, bigger companies in the future—and that usually means higher prices.
That said, the lean culture mentality that has taken hold of the industry at large is clearly at play within the MRO sector. The real upshot of this, it seems, is to force MROs and airlines into even closer alliances.
“We try to work with our customers in planning their airframe visits in schedules that are mutually beneficial as early in the process as possible,” says Kazmerski. “If we can find a sequence of multiple visits that fit well for the customer’s operational needs while maximizing the availability of our labor and facility capacity, we gain work synergies and avoid disruptions to the work flow, ultimately saving costs for both parties.”
Linking processes with customer information will be the key to properly aligned operations. This includes identifying patterns to implement a more proactive strategy. For example, accumulated data can take the surprise element out of non-routine tasks, reducing time and material costs. End-to-end information flows are the order of the day, bringing focus, clarity, and priorities to the relationship. Jean Clermont, Vice President of Supply Chain Management at Aveos, provides an illustration. “We are working with Air Canada to establish an end-to-end electronic data interchange link using the Aeroxchange application to minimize the level of manual transactions, speed up the quote process, and reduce the level of error and wait time,” he says.
Such efforts have led to a trend towards stronger customization of the MRO business, defined by business models, aircraft type, and new technologies. Most MROs are adapting service packages that fit these individual needs. The MRO landscape may be changing, but the view is still good.