MAINTENANCE REPAIR & OVERHAUL (MRO)

We integrate their competencies, leverage their performance, including warranty administration, and we deliver your tailored solution through one sing...

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MAINTENANCE REPAIR & OVERHAUL (MRO) Flying Officer Chalermpon Intarawong Executive Director EEC Infrastructure Management

1.

Table of Contents What is MRO?

2.

Player Shift over services and time.

3.

Future MRO

4.

Trends in Aviation & Impact on MROs

5.

Q&A

MRO MRO is stand for Maintenance, Repair and Overhaul. MRO can be defined as” all actions which have the objective of retaining or restoring an items in or to state in which it can perform its required function. So MRO can be applied to wide range of industries, from small products to bigger ones, like the aircraft. MRO can be Categorized into 4 groups

1. 2. 3. 4.

In-house MRO Independent Third Party MRO Airline Third Party MRO OEM MRO

Part-145 MRO Part-147/NAA Basic Training Course and examination

Part-145

Part-147

Experience

Type Training and examination

OJT & Practical

Part-145 - Company Procedure - Adequate competence - Language

B1/B2 Certifying/Supporting staff

MRO Part 145 Organization Part-66/NAA CRS

Release to Service Authorization

Global MRO markets

● Line Maintenance ● Airframe Heavy Maintenance ● Engine Overhaul ● Component Overhaul ● Modification/Retrofit

Line Maintenance Maintenance checks that are carried out to ensure that the aircraft is fit for flight but that do not remove the aircraft from service. Line Maintenance includes light checks plus day-to-day operational maintenance that is carried out to ensure that the aircraft remains in operational readiness, including trouble shooting, defect rectification, and component replacement. Technicians diagnose and correct faults on the aircraft on an ad-hoc basis and carry out minor and major aircraft checks on a scheduled interval basis. Line maintenance consists of three primary activity categories: Transit checks, Daily/Weekly checks and A-checks

Airframe Heavy Maintenance Airframe Heavy maintenance is regularly schedule inspection, maintenance, preventive maintenance and alteration that will take the aircraft out of service for a predetermined time at specified intervals. Individual airlines, in compliance with national aviation safety regulations, establish heavy maintenance schedules.

Scheduled work scopes are typically based on calendar time or a fixed number of flight hours. Generally, there are four levels for air carrier aircraft, termed “A”, “B”, “C”, and “D” checks. “A” and “B” checks are considered line maintenance, while “C” and “D” checks are classified as “heavy maintenance.”

Engine Overhaul

Engine overhaul services involves off-wing maintenance, preventive maintenance and alteration that restores the engine to designed operational condition; by regulation the engine must be disassembled, inspected, parts repaired or replaced as necessary, reassembled and tested. For air transport operators, engine overhaul is performed on an as-needed (on condition) basis, except for the replacement of life-limited parts (LLP) which occurs at a fixed time established by the national aviation authority.

APU

Landing Gear

Brake Unit

Component Overhaul Aircraft components such as non-rotating vanes, nozzles, vane rings, ducts, seals and non-rotating assemblies, Auxiliary Power Unit(APU), Landing gear and brake unit can be overhauled and repaired.

HPV

GEN

HYD Pump

Modification/Retrofit

The world commercial aircraft modernization, Upgrade & Retrofit market is in a healthy state and projected to expand as airlines take on new orders. At the moment the market is being driven by a combination of factors. This includes the number of aircraft which are currently operational, the number of active aircraft due to undertake heavy maintenance checks, fuel and cost savings from introducing light weight materials, demand for air cargo, flight regulations and a need by airlines (in particular operators of wide body aircraft) for brand recognition.

2. Player Shift over services and time. Supply Chain Services Operate

Maintain

Operator

Operator

Operator

MRO

MRO & OEM

MRO

OEM

OEM

OEM

OEM & 3 nd Party

OEM & 3 nd Party

OEM & 3 nd Party

OEM

OEM

OEM

10-20 yrs ago

Now

Future

Operator

Assemble

Manufacture

OEM

Design

Time

20-30 yrs ago

3. FUTURE OF MRO

INVESTED CAPITAL AND REVENUE IN THE VALUE CHAIN

Ref : IATA ECONOMICS BRIEFING

So…Why people still do airline business ? Allure State funded

Patriotism Some Airlines success

MRO Market Segment

Global MRO Forecast Total MRO in the air transport space for all aircraft classes is forecast to grow from $57.7B to $86.8B or 4.2% annually over the next ten years. rising to $86.8B by 2024.

Fleet Growth The global turbine-powered air transport fleet is about 23,000 aircraft 20 % of the fleet is in Western Europe; Eastern Europe adds another 5 %. Asia Pacific, China, and India combined have more than a quarter of the world’s fleet. Emerging markets are expected to see a greater share of the market, and therefore represent areas of MRO growth.

Boeing and Airbus aircraft drive nearly 90% of the MRO market. The A320 (CEO & NEO) and 737 (NG & MAX) are expected to drive the largest share of the MRO market over the forecast period.

MRO TRENDS SUMMARY

Aviation Industry Summery

Fuel efficiency is therefore an area of considerable focus for manufacturers as airlines retire less efficient aircraft •Retrofit •737 winglets •A320 sharkets •Composite airframes •Boeing 787 •Airbus A350 •Bombardier C-Series •Geared turbofan engines •Bombardier C-Series •A320 neo •737 MAX

A350XWB and B787 Dreamliner promise more improvements

A320 neo 737 MAX

Bombardier C-Series

Another challenge for MROs “OEMs are making big inroads into

traditional third party MRO markets through their aftermarket support services “

OEMs (original equipment manufacturers) such as Boeing, Airbus and Rolls-Royce are making big inroads into traditional third-party MRO markets through their aftermarket Support.

Engine OEMs lead the way in successfully capturing the value of the aftermarket stream History Mid 1990s, engine OEMs embarked on strategy to capture the total maintenance value as part of their product life cycle Approach Control material prices which is significant portion of maintenance costs Control intellectual property Value Proposition Provide predictable costs (PBTH) Remove asset ownership cost of spare parts Offer expertise that operators cannot easily maintain on their own Provide single source for all maintenance needs Spread the investment in exotic tooling over a larger base Manage the complexity

Today’s Reality for the3rd Party/Airline MRO Component and airframe OEMs have adopted similar models Component and airframe OEMs have developed less maintenance-intensive equipment which they control closely

Labor arbitrage applies pressure to 3rd party / airline MROs

.

Total Care OnPoint solutions are flexible long-term commitments designed to meet customers' unique engine service needs.

Reducing your investments, simplifying your material management For customers considering component repair and spare parts services, a cost effective solution will be shaped through the FHS Components’ module. This service is applicable to key system LRU and main elements. COMPONENT SPARE PARTS •Analysis and definition of critical parts list to base at customer’s (MEL, Minimum Equipment List, and DR ,Dispatch Reliability, related) •Customer based On-Site-Stock : Supply of critical parts at main base and outstation •Pool access service •Guaranteed lead times : 4hrs for AOG (Aircraft On Ground) / 3 days for routine items COMPONENT REPAIR SERVICES We manage first rank suppliers: OEMs, overhaul •Repair at OEM of all selected unserviceable components providers, forwarders and warehousing agents. We •Optimized turnaround time integrate their competencies, leverage their •Transportation between Customer and Repair stations performance, including warranty administration, and •Landing gears, nacelles, APU overhaul

we deliver your tailored solution through one single interface. We optimise spares recommendation, we mutually select what suits your operational needs and we guarantee your material repairs as well as your spare parts availability.

787 DREAMLINER

“If you aren’t an OEM MRO, you need a strategy to align yourself to deliver maximum value and stable costs to the customer over the long term.”

Furthermore, like the airline market itself, the MRO business is moving east. According to forecasts by 2021, Asia will hold the leading share, worth some $21 billion, with Europe second at around $20 billion and the Americas third at just under $20 Billion

Competitor’s

SIA: A Premium Service Provider and Cost Leader

SIA manages its two main assets planes and people so that its service is better than rivals’ and its costs are lower. The airline invests heavily in areas of the business that touch the customer in order to enhance SIA’s premium positioning. Everything behind the scenes is subject to rigorous cost control.

SIA spends more than its rivals in key areas: Buying new aircraft SIA replaces its fleet more frequently than do competitors. Depreciating aircraft It depreciates aircraft over 15 years compared with the industry standard of 25 years. Training The airline invests heavily in inducting and retraining employees. Labor costs on flights SIA staffs each flight with more cabin crew members than do other airlines. Innovation It invests in both radical and incremental innovations.

…And it spends less, partly as a consequence on: Price per aircraft SIA is usually a showcase customer for aircraft makers, places large orders, and often pays in cash.

Fuel, maintenance, and repair SIA’s operating costs are lower because its fleet is young and energy efficient.

Salaries SIA keeps salaries low by offering employees bonuses of up to50% depending on SIA’s profitability also, the airline’s reputation attracts younger workers.

Sales and administration Customer loyalty, a lean headquarters, and constant cost cutting keep the airline’s SGA expenses low.

Back-office technologies SIA chooses to lag behind rivals in areas that don’t affect the customer experience.

Singapore Airlines follows a 4-3-3 rule of spending: 40% on training, 30% on revising processes and procedures, and 30% on creating new products and services every year

SIAEC

Singapore is now one of Asia’ largest and most comprehensive MRO hubs, hosting more than 100 companies. It has seen 12%annual growth in recent years

SIAEC CORPORATE BACKGROUND 

60 years of experience in airline engineering



Market capitalization ~ S$4.0 billion



Staff strength of 6000 employees



SIAEC and its JVs contribute to about half of Singapore’s aerospace industry output



Total no. of JVs - 25



Managing FMP Services for over 170 aircraft for 14 operators



Supporting MRO Services for SIA’s fleet of 101 A380 / A330 / B777 / A320 / A345 aircraft



Providing Line Maintenance services at over 30 airports globally



Holds 25 national aviation authorities (including FAA, EASA, Bermuda DCA)

Financial Highlights FY 03/04

FY 04/05

FY 05/06

FY 06/07

FY 07/08

FY 08/09

FY 09/10

Revenue

S$678.7M S$807.5M

S$959.1M S$977.4M S$1,009.6M S$1,045.3M S$1,006.4M

Net Profit

S$139.0M S$170.4M

S$230.6M S$242.1M S$253.8M

S$260.6M

S$236.1M

FY 10/11

FY 11/12

FY 12/13

S$1,106.9M S$1,169.9M S$1,146.7M S$258.5M

S$269.1M

2 S$270.1M

SIAEC - JOINT VENTURES NETWORK

Component Repair & Overhaul Singapore 42.5% Singapore 40. 0 %

Singapore 49.0% Singapore 51.0%

Engine & Engine Component Repair & Overhaul Engine Overhaul

Singapore 65.0%

Singapore 49.0%

Singapore 49.0%

Philippines 65.0%

Vietnam 49.0%

USA 100.0%

Philippines 51.0%

Singapore 50.0%

Singapore 24.5%

Singapore 29.0%

Ireland 49.0%

Singapore 33.3%

Airframe Maintenance

Line Maintenance Indonesia 49.0%

Hong Kong 10.0%

Engine Component Overhaul

Singapore 40. 0 %

Hong Kong 47.1%

Singapore 50.0%

Australia 100%

Knowledge -Based

Taiwan 24.5%

Singapore 49.0%

Singapore 45.0%

SIAEC has extended its overhaul capability and introduced high value-added leading edge technologies through joint ventures with original equipment manufacturers (OEMs) like Pratt & Whitney, Rolls-Royce, Goodrich and Hamilton Sundstrand. 4

Korean Maintenance & Engineering

13

Lufthansa Technik Philippines(LTP), has made its mark in the fast growing low cost carrier (LCC) maintenance sector. Now, with one hangar

ST Aerospace is to add a sixth passenger-tocargo conversion line to cope with the success of its business

Maintenance, repair and overhaul provider ST Aerospace (Singapore Technologies Aerospace Ltd) employs more than 8,000 engineers and technical specialists worldwide. Even the recent turbulent times for the airline industry have failed to dent its growth.

Air India: setting up a joint venture MRO facility in Nagpur with Boeing

GHIAL out to woo Engine makers GMR Hyderabad International Airport (GHIAL), a subsidiary of GMR Infrastructure, is at an advanced stage of talks with major aircraft engine manufacturers to set up an engine MRO facility at the airport.

Flydubai invests $20m in MRO centre Dubai-based low-cost carrier (LCC), flydubai, is shaking off some of its reliance on its big state-owned neighbor, Emirates Airline, by creating its own in-house maintenance operation.

Aircraft Maintenance and Engineering Corporation (Ameco Beijing)

A joint venture between Air China Limited and Lufthansa. Ameco Beijing was established on August 1st, 1989 with Air China Limited holding 60% and Lufthansa 40% of the registered capital. The registered capital is USD 187.53 million and the joint venture agreement was signed for 40 years.

A Boeing led joint venture bringing a new standard of service into the MRO industry

Boeing Shanghai Aviation Services is a joint venture among Boeing, the Shanghai Airport Authority and China Eastern Airlines with The Boeing Company owning majority interest. Boeing Shanghai Aviation Services offers the advantages of an MRO with the skills, quality, and knowledge of the original equipment manufacturer. It leverages Boeing's best practices, including Boeing quality standards, information technologies and applications for efficient, cost effective operations. Since it’s inception in 2006, the Joint Venture has benefitted from the expertise and resources of The Boeing Company and its partners.

GAMECO

GAMECO’s new hangar, which is the largest truss structure hangar in China, is 400 meters long and 133 meters wide. With 96,000 square meters of space, it can accommodate four wide body aircraft (two Airbus A380 and two Boeing B747), or twelve narrow body aircraft (such as Boeing B757, 737 and Airbus A320) undergoing maintenance at the same time.

TAECO-Taikoo (Xiamen) Aircraft Engineering Company Limited

The shareholders include Hong Kong Aircraft Engineering Co. Ltd. (56.55%), Xiamen Aviation Industry Co, Ltd. (10.00%), Cathay Pacific Airways (9.09%), Japan Airlines (9.09%), Boeing Commercial Aeroplane Group (9.09%) and Beijing Kailan Aviation Technology Development and Service Co. (4.18%) and Hong Kong Kin Kuen Development Co., Ltd (2%)

Air China and CFM Finalize Engine MRO Joint Venture

Air China and CFM International agreed to establish an innovative maintenance repair, and overhaul (MRO) joint venture. In 2010, after three years negotiations, the two companies cleared the final hurdle and have received Chinese government approval for the formation of Sichuan Services Aero Engines Maintenance Company (SSAMC), a 60/40 joint venture between Air China and CFM, located in Chengdu, China.

China, India to lead MRO growth China has emerged as the big driver behind current and future growth in the aircraft MRO business, not just regionally, but globally. By the end of this year, according to various forecasts, the country will represent 5% of the world’s MRO output and a third of all Asia-Pacific activity.

India, too, is on the verge of an MRO explosion, although it is likely to be several years before MRO rivals China’s MRO development. Both Airbus and Boeing are heavily involved in MRO in both India and China, as are leading engine manufacturers.

OUTSOURCING TRENDS The potential cost savings are too attractive to ignore. Outsourcing, or contract maintenance, as some prefer to call it, has become an integral and growing part of today's cost-conscious airline industry

TYPE OF CHECK TO BE OUTSOURCED D-Check

OFTEN Outsourced

C-Check

SOMETIMES Outsourced

A-Check

Rarely Outsourced

Line Maintenance

Last Bastion to be Outsourced

IN SUMMARY…….. Business expectations are changing rapidly Relationship Based

Performance Based

Inventory Tolerant

Inventory Intolerant

Asset Utilization Not a Focus

Turn-Around Time Prioritized

Little Accountability

Accountability for Results

Limited Competitive Threat

Global Competition

Metal & Mechanical

Composites & Electronic

Western Focused

Eastern Focused TEAMSAI©2011

MRO growth strategies Less maintenance intensive airframes

Keep in mind MRO’s place and sensitivity to the total transportation value chain Capital requirements to develop new product lines

OEM MRO growth

Oil prices, airline cost pressures

MRO

Global labor shortage

Four strategies for MRO growth: especially pertinent to non-OEM MROs Labor

Value Creation

M&A

Diversification TEAMSAI©2011

Four basic strategies for MRO growth AIRLINE MRO

Labor

Value creation

Outsource non-core activity Develop expertise in core activity areas Implement cost reductions and new efficiencies Adopt supply chain innovations Embrace new, smart aircraft systems

TEAMSAI©2011

Capitalize on outsourcing needs of airlines Develop expertise in core activity areas Implement cost reductions and new efficiencies Adopt supply chain innovations Focus on reliability and dependability Expand market offerings Expand geographical reach Pursue full-service capabilities

Diversification

M&A

INDEPENDENT MRO

JVs and large scale parts pooling with other airlines Leverage alliances

Target small, bolt-on acquisitions Identify value-oriented innovations that contribute to airline customer’s cost focus

Seven Trends are Shaping the Long Term Structure of the Air Transport MRO industry

Worldwide MRO market size growing 3.8% Worldwide MRO Spend 10-Year Forecast

MRO Market size is increasing worldwide, but growth in Asia is double.

Asia MRO market increasing at double the world rate Asia MRO spend 10-year Forecast

Asia MRO size increasing 7.2 annually, but growth in India is double.

India MRO market will triple in the next 10 years from $560 millions to $1.8 billions Asia MRO spend 10-year Forecast (US $ Millions)

India MRO market growth expected to be 14.2% per annum, double that of Asia

2.Outsourcing will increase Over the Decade

Airframe Heavy

MRO Market is shifting towards Asia

Outsourcing Trends: Key things to observe

3. Operating Economics – increasing focus

Airlines are focusing on the future

4. Increasing Fuel Prices

Maintenance for Fuel Consumption Reduction

5. Less time on the ground more time in revenue service

Newer generation airplanes less to maintain

787 Designed for Lower Operation Cost-and 30% lower airframe Maintenance cost

What does new technology mean for airlines and MRO

Additional Day in services in service means $65,000 profit opportunity

6. The leasing Market Continue to grow…

Global Share of Lease Market

Lease return conditions will require more maintenance and more records validation

7. Mechanic on-call –increasing trend on single aisle airplanes

Number of landings with no defects – Single Aisle

Summery – Aviation MRO Opportunities

Q&A