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Mideast remains robust for MROs
Published in The Saudi Gazette on 24 - 01 - 2009

Airline companies in the Middle Eastern region were barely hit by the present economic downturn, which means that its business momentum signals an increase in demand for maintenance, repair and overhaul (MRO) vendors.
“Growth in this region is still the biggest,” said Walter Herdt, senior vice president for marketing and sales at Lufthansa Technik.
However, both for airliners and business jets the available operational support is lacking, said Sheikh Ahmed Bin Saeed Al-Maktoum, chairman of Emirates, at the first Aviation Week MRO Middle East conference.
MRO spending in this region has shown the highest growth since 2003, and 2009 should represent around 5 percent of total spending in the sector, said David Stewart, a partner at AeroStrategy Consultancy. Spending will be around $2.2 billion, he added.
Yet much of the continued growth is driven by low-fare carriers, which remain a relatively new phenomenon to the Middle East. The sector appears far from reaching market saturation. The downturn “is going to affect us, but it will be less severe” than for others, said Mark Breen, chief operating officer of Sama, one of two Saudi Arabian low-fare carriers.
But pressures for airlines to more closely examine there costs also are rippling down to the region's MRO activities, where airlines are revising their approaches.
For instance, Gulf Air has let lapse its MRO agreement with SRTechnics. Gulf Air management last year already signaled it was unhappy with the cost base of the deal.
Sama also is shifting gears. Last week, it signed a large support contract with Lufthansa Technik to cover support of its growing fleet for the next seven years. Sama plans to field 35 aircraft in the foreseeable future.
Sama, with the help of Lufthansa Technik, also is bringing line maintenance in house. That represents somewhat of a reversal of the norm, with many low-fare carriers having bet on single-shop, outsourced support, to allow airline management to focus on day-to-day flight operations and revenue generation.
Additionally, Breen said in terms of heavy maintenance, the airline is going to be working with several vendors for a while to determine which offer the best services.
Other carriers in the region also now believe they may get a better financial proposition by more closely managing multiple contracts for maintenance services. Kuwait's low-fare carrier, Jazeera Airways, for instance, determined it wanted to have multiple contracts to avoid having too much riding on one contractual arrangement, says Abdulla H. Al-Hudaid, vice president of maintenance and engineering at the airline.
The airline plans to award a contract, soon, for line maintenance of its A320 fleet. The contract will go to Jazeera Technique, a unit that Al-Hudaid said will be entirely separate from the airline and not be a subsidiary, although there are larger group ties. The MRO operation will be established in partnership with a known service provider who has been identified, but Al-Hudaid didn't want to name.
There are more MRO deals in the offing in the region, too. Dubai low-fare startup FlyDubai is expected to sign for a major support deal in the coming months.
The local MRO base also is expanding. For instance, Abu Dhabi Aircraft Technologies in the next four years plans to add engine support to its skill set. The company, which grew out of Gulf Aircraft Maintenance Co. now generates 70 percent of revenue from third party work, says Ian Wolfe, chief commercial officer for the company. It also is building a three-hangar bay for A380s, at a cost of $115 million. But the maintenance provider has its capacity sold up to November, although Wolfe concedes market softness could take a toll and that up to 20 percent of capacity could be hit.
There are also concerns arising from the fact that the Middle East, as one of the stronger regions, is attracting a lot of industry interest. Christopher Dean, CEO of consultancy Team SAI, said “the region is on the edge of overcapacity.” Even before the current downturn in business there was a risk of too many actors flooding the region, he says. With the Middle East slowing, while still remaining one of the few growth areas, the situation has become more severe. That could drive rates for support work down.


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