Within two days in mid-July, Mubadala Development Co. announced plans to partner with Rolls-Royce on Trent engine manufacturing and maintenance in Abu Dhabi and then announced that it will sell an 80% stake in Swiss-based SR Technics to HNA Aviation of China.
Are the two linked? Not in terms of Mubadala needing the money from SR Technics to finance the engine opportunity, but they are linked if you consider them part of MRO market evolution.
Look at the facts. There is consolidation among independent MROs. Airline MROs are increasingly partnering with OEMs, and OEMs are pursuing deeper penetration of the aftermarket. Aftermarket companies are broadening service packages to create more specialized bundles for customers. And the greatest MRO growth over the next decade will be in the Asia-Pacific region.
So, while Mubadala would not reveal why it decided to sell an 80% share of SR Technics, Homaid Al Shimmari, Mubadala’s CEO of Aerospace and Engineering Services, did provide this insight about the transaction, which aligns with market trends: “For an independent player like SR Technics to compete in this environment, it is critical that it explore opportunities to both support a core customer base and expand into the growth markets of Asia.” HNA Aviation’s investment in the Swiss-based MRO “presents a significant opportunity for SR Technics to drive the next phase of growth,” he says.
A couple of interesting parallels to note: SR Technics was Swissair’s technical department before it was spun off; it became an independent company in 2002 after the airline’s collapse. Mubadala and a consortium of other UAE investors purchased the MRO in 2006, and Mubadala took majority control in 2009. After HNA acquires a majority stake, SR Technics will again be affiliated with an airline group, and Al Shimmari says those groups are “driving the competitive landscape” with OEMs. HNA Aviation owns Grand China Airlines, Hainan Airlines and Tianjin Airlines, among others—and in late 2010 it purchased MyTechnic, a Turkish greenfield MRO that launched in 2008. The group also owns HNA Technik in Hainan province.
HNA Aviation could not be reached for comment about the SR Technics transaction and synergies, but Jeremy Remacha, interim SR Technics CEO, says his company wants to “further expand into the fast-growing Asia-Pacific market.” To that end, it opened a component repair facility outside Kuala Lumpur in 2013. HNA’s investment should help, too.
With Mubadala retaining a 20% stake, the MRO still has a UAE link. And “aircraft services, be it component or engine financing or MRO, remain a significant opportunity for Mubadala,” says Al Shimmari.
This leads us back to the Rolls partnership, which expects to open the Approved Maintenance Center (AMC) at the Nibras Al Ain Aerospace Park in 2021 and service up to 150 engines per year. This will be the second Trent AMC not owned by Rolls-Royce; Delta announced the first in October 2015.
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