Printed headline: MRO Makeover
Malaysia Airlines’ engineering division is playing a pivotal role in the carrier’s transformation program, as it rebuilds itself into a smaller but much more efficient maintenance organization that could eventually return to third-party work.
Having completed major cutbacks in employees and facilities, the engineering unit is in the process of introducing new systems and procedures aimed at lifting it to industry-leading levels. While the initial goal is to make the airline’s own fleet maintenance as effective as possible, in the longer term the changes will help it leverage competitive advantage in the region’s growing MRO market.
Malaysia Airlines began its restructuring program in 2014. The carrier had suffered a double blow to its brand after two high-profile aircraft losses, but it was already in an extremely fragile financial condition before these incidents. The government completed a takeover of the company in order to delist its shares and undertake sweeping reforms. The carrier was relaunched in 2015 under the name Malaysia Airlines Berhad (MAB), with major reductions in fleet, network and workforce.
Nowhere have these changes been as evident as in the engineering division. More than half of MAB’s engineers were laid off, and four of its six maintenance hangars were closed. The carrier shifted out of its main overhaul base at Kuala Lumpur’s older Sultan Abdul Aziz Shah Airport and refocused its maintenance operations at its Kuala Lumpur International Airport (KLIA) facility.
With just two hangars at KLIA and a reduced workforce, the engineering unit ceased third-party heavy maintenance work to concentrate on the Malaysia Airlines fleet. The company does all of its own airframe heavy maintenance, even on its six Airbus A380s. It had investigated contracting out the A380 maintenance, but found there was limited capacity globally and decided it could do the work more cheaply itself.
One of the KLIA hangars is primarily for narrowbody aircraft. MAB Engineering operates two scheduled heavy maintenance lines for Boeing 737s, although it has capacity for more in this hangar. The other, larger hangar currently has a heavy maintenance line for Airbus A330s and another for A380s. This hangar could potentially fit two A380s.
MAB is one of the few carriers that has the capability of conducting heavy checks on A380s. It is currently undertaking C3 checks on its fleet and has completed two of the six aircraft. Each will spend 60 days in the hangar.
The company has another maintenance facility at Kota Kinabalu. The single hangar at this location accommodates its ATR turboprops and can also handle a single 737. The airline has decided to bring its ATR heavy maintenance back in-house.
During the restructuring process, the carrier decided to contract out its component and spare part support. This gives it an “asset-light” approach, and stronger spares availability, says Paul Kear, Malaysia Airlines’ technical director. Such arrangements ensure it has “the right spares at the right time,” he says.
Engine work is outsourced, and MAB has sold its stake in an engine overhaul joint venture it formed with General Electric. The carrier still has a relationship with this business as a customer. After the sale of that stake, MAB has no other major MRO joint ventures. It has held joint-venture negotiations with other companies such as Lufthansa and Boeing, but these have not led to firm deals.
MAB performs wheel and brake maintenance in-house and is preparing to invest in a new facility for this work. This will allow it to improve its equipment and better integrate wheel and brake work into the line flow.
Before its restructuring, the engineering unit was a bloated organization, Kear says. However, the division lost a lot of experience with its workforce cuts. It is now trying to rebuild these experience levels while also making it a more productive operation. Although safety standards are where they need to be, the productivity side still needs improvement, says Kear.
MAB CEO Izham Ismail is attempting to instill a new corporate culture in the group. For the engineering division, this means a workforce “with a common purpose . . . uniting to deliver safety and efficiency,” he says. MAB has focused not just on technical capability but also on talent management and career development for engineers, Izham says. He notes that progress has been made in the engineering department, evidenced by dispatch reliability rates that have “improved tremendously.”
An important aspect of increasing efficiency is the introduction of new systems. MAB Engineering’s main effort on this front is the rollout of the AMOS software product, supplied by Swiss-AS. This advanced system is used by MRO organizations globally and helps manage all aspects of an airline’s maintenance, engineering and logistics.
MAB plans to switch over to the AMOS system in early December, Kear says. The carrier has about 50 people working on the project as data is migrated to AMOS. The carrier’s current systems are “fragmented . . . with a lot of inefficiencies,” says Kear. AMOS will be the backbone of the maintenance system, and it represents “a vital piece of infrastructure for the engineering [division]” to improve its efficiency.
The carrier is also introducing the Airbus Skywise system, an analytical big-data tool using information from all sources including the aircraft, maintenance, and ground and flight operations. This is expected to aid decision-making and boost efficiency and aircraft reliability.
About six months after the AMOS switchover, MAB plans to use electronic signature in base maintenance and move to an electronic technical logbook for line maintenance. This will allow the engineering unit to replace paper logs and records with tablet devices. All of these new technologies will mean that by mid-2019, MAB should be among industry leaders when it comes to its MRO systems, Kear says.
The aim of the organization at this stage is to get the basics right and put in place the necessary foundations for success, says Kear. The engineering operation must first prove that it can achieve industry-standard performance in terms of reliability and efficiency, and only then will it review whether it will seek third-party business.
Some manufacturers and MRO providers have already been eager to form joint ventures with MAB, but the time is not right for such moves, Kear says. When the carrier does consider working with outside entities again, it will examine what sort of partnerships would make sense. Options could include doing third-party work by itself, working with a strategic partner or forming joint ventures.
“Everybody sees the potential” of MAB Engineering, says Kear. “A lot of people want to work with us, but it’s a case of timing.” The company will reenter the third-party market “when we are ready.” Until then, it will continue to offer line maintenance support to outside carriers.
MAB does have several competitive advantages it will eventually be able to exploit. There are many other companies offering narrowbody heavy maintenance, but not as many in the widebody arena—particularly for A380 heavy checks, Kear notes. MAB can make it work in Malaysia because the company’s costs are relatively low.
The carrier also has a young, English-speaking engineering workforce. It is not facing the same looming headache as some European MRO companies, which have a high percentage of older employees approaching retirement. MAB is also benefiting from a strong supply pipeline, thanks to its training school. It has 300 engineering apprentices in its system, with 60-100 licensed engineers graduating per year. This is a key attribute, as the aerospace industry in general is facing concerns about a shortage of skilled workers.
The Kuala Lumpur Airport has three runways and no curfew, so aircraft access is not a problem. Unlike some other Asian hubs, there is plenty of land available to build additional maintenance facilities if necessary. MAB has excess capacity in its two main hangars, and as newer, more modern aircraft enter the fleet, the carrier’s own heavy maintenance needs will start to diminish.
On the narrowbody side of the operation, MAB has placed firm orders for 25 Boeing 737 MAX aircraft, with another 25 options. Deliveries of these will begin in late 2019 and will replace the airline’s existing 737s as they arrive. MAB now operates 48 737s.
Dramatic changes have already been made on the widebody front, as part of the airline’s restructuring. One of its early moves was to phase out its Boeing 777 fleet by 2016. Since then it has been adding more of the midsize widebody types that are better-suited to its network plans.
The carrier ordered six Airbus A350-900s, which have now all been delivered. These have been primarily used to replace A380s on the twice-daily London flights, as well as operating on routes to Osaka and Tokyo in Japan. The airline also leased six used A330-200s formerly operated by Air Berlin, boosting its A330 passenger fleet to 21.
MAB initially wanted to sell its six A380s as well. When no buyers could be found, the airline decided instead to set up a separate unit to operate the A380s in the charter market. The main demand for charter flights is expected to come from Hajj and Umrah religious pilgrimage traffic.
However, the plan for the A380s has shifted slightly since Izham took over as CEO, and he indicates more changes are possible. Originally, all six were to be transferred to the charter unit, which has been temporarily named Project Amal. Now, however, four will be allocated to the charter unit and two retained in the Malaysia Airlines fleet.
MAB is considering further orders for new-generation widebody aircraft. The carrier has just completed a request-for-information process and is now reviewing information submitted by the manufacturers. MAB will then seek board approval before opening a formal tender process. A board decision could be made by late this year or early 2019, Izham says.
The company will look at midsize aircraft such as 787s, A350s or A330neos for this requirement. However, Izham stresses that MAB will consider proposals for other types, too, including aircraft models that are still on the drawing board. One factor the airline will consider is that it will need to start replacing its current A330 fleet from about 2023.