0V2500_P_0203-MTU-1.jpg MTU
(c) Andy Ridder, MTU Hannover verschiedene Reparaturverfahren

MTU Targets 10%

MTU charts course for double-digit MRO growth and steady margins over the next decade.

When MTU executives look out over the next decade, they see an increasing reliance on OEMs to feed their engine shops. Today, about 30% of its €2.2 billion ($2.6 billion) in annual MRO revenue comes through "OEM cooperation," as Chief Program Officer Michael Schreyögg puts it, with the balance coming via direct deals with airlines.

The GE Aviation GEnx and the IAE V2500 generate most of its OEM-linked work, and the increase in long-term agreements (LTA) on new engines, such as the Pratt & Whitney geared turbofan, means that ratio will go up. This will help MTU meet its internal goal of boosting revenues by about 10% per year on average over the next decade. It also will put pressure on margins, as the direct-contract work usually is more bottom-line friendly.

MTU has a multi-pronged plan to maintain margins in the high single digits. It will boost labor hours at shops in what the company calls "best-cost countries," including China and Poland, while maintaining capacity in high-cost locations, notably Germany. 

"In the entire MRO work from the labor hours, today it's 30% of working hours in best-cost countries," says Schreyögg. "We will increase this ratio to 50% going forward," he adds—part of an overall 50% capacity boost by about 2028.

The Munich-based company also plans to lower its materials costs through boosting used serviceable material and continuing to invest in repairs. 

MTU has seen MRO growth jumps of more than 20% in each of the last two years. A big contributor was the oil-price drop, triggering an unexpected jump in spending on older engines, in the form of an additional overhaul or a boost in content used per shop visit.

The heady days of 20% annual MRO growth won't last forever, but MTU believes the plan it has will keep it on track for solid returns. "We have always said that we want to grow in the range of 10%," Schreyögg says.

TAGS: Europe
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