A year into its first Airbus A350 component pooling agreement, Lufthansa Technik (LHT) continues to gain valuable insight and add customers—a sign that the nose-to-tail MRO provider could end up as the big winner in the aircraft’s lucrative support market.
The German MRO provider won Finnair’s business in October 2015, and reports suggest the carrier is content.
Finnair is “really satisfied, based on the feedback to us,” says Harald Gloy, LHT senior vice president for component services. “They are satisfied with the performance of the fleet, with component support being part of that.”
LHT, Air France Industries-KLM Engineering & Maintenance and Airbus itself have emerged as the three major players in the large A350 component aftermarket support market. Airbus projects 75% of A350s will be tied to parts-pooling arrangements.
The shift to component pools has picked up in the last several years. Part of the reason is that airlines are becoming more savvy with their maintenance dollars, and flight-hour agreements offer both predictability and the option to tailor packages—such as which parts will be available at certain locations—based on risk tolerance.
The primary driver with the newest models such as the A350 and Boeing 787 is advancing technology. Many of their components are highly advanced and boast improved reliability, meaning they are needed less often than comparable parts on earlier-generation aircraft. This makes these parts more expensive to make and buy, as well as more challenging to stock in the right locations within an airline’s network.
Enter pooling arrangements.
At the end of August, five of the eight A350 operators had announced pooling arrangements, and two others—LATAM Airlines Group and Singapore Airlines—have similar deals on other models, suggesting they are likely candidates for A350 support. So far, only Qatar Airways seems intent on going it alone. Several future operators—including Air Caribes, Air France-KLM and Lufthansa—have deals in place, and many are expected to follow. LHT has three active customers—Finnair, China Airlines and Ethiopian Airlines—and will support Lufthansa’s fleet.
Airbus has said a 600-800-component pooling arrangement costs $15-20 per flight hour, or $15-20 million for a 12-aircraft fleet. The estimated equivalent in initial provisioning for a 12-aircraft fleet is about $30 million. Airbus estimates an airline would need about 80 A350s to justify its own spares pool.
Gloy says that while the fundamentals of an A350 package are comparable to those for legacy aircraft such as the A330, the support “is more sophisticated and more demanding from the airline operator side.” Airlines are pushing utilization rates for their newest aircraft to maximize revenue. This cuts into ground time, which puts pressure on support providers to determine where spare parts should be stocked.
With so few A350s in service—Airbus listed 36 flying as of Aug. 31—there is little data to help test assumptions such as component reliability. New component support agreements start with the OEM-recommended spares list to assess where parts should be stocked: at hubs, line stations, regional spares centers or—in the case of an LHT customer—the MRO provider’s main parts base in Frankfurt. The airline then weighs in with its risk tolerance, determining how far from specific stations it can have certain parts, while factoring in everything from flight schedules to the number of frequencies it operates to them.
As experience is gained, the operator, MRO provider and component manufacturer can fine-tune the estimates.
“You can do many simulations up front, but in the end, it is operations that shows you what is really true,” Gloy says. “We can take the statistical data and determine where we can make changes to the stocking concepts.”
Other changes to stocking strategies can come as providers ramp up their customer bases. In LHT’s case, Finnair’s recent emphasis on expanding into the Far East dovetails with the MRO provider’s recent win of an A350 support deal for China Airlines. The agreement means A350 parts will be stocked at the carrier’s Taipei, Taiwan, base. LHT also opened regional spares centers in Hong Kong and Singapore.
Because a geographically diverse set of stocking locations is important to every component support arrangement, strategic warehouse locations are not major differentiators. LHT is confident its other A350 capabilities and experience set it apart from its competitors.
LHT provided support, including line maintenance, to the first A350 revenue-service operations, launched by Qatar Airways between Doha and Frankfurt in January 2015. It also has agreements with most major A350 suppliers, giving it access to the data needed for component repair and overhaul services. Included in these deals is a pact with Honeywell, which supplies about 40% of A350 components, including auxiliary power units (APU). LHT will repair customer APUs as well as units sent to Hamburg by Honeywell. LHT also plans to develop new repair procedures for Honeywell components.
“One of our biggest assets is that we really bring a tremendous repair capability to the table,” Gloy says. “We know what we’re talking about because our mechanics have their hands on these parts.”