MTU Maintenance has been leasing engines for 15 years, providing our MRO customers with spares engines during shop visits and AOG situations. In recent years, however, we have seen increasing demand for lease engines from both our existing clients – who are asking for broader, more integrated engine services – and the market in general.
At the same time the engine aftermarket is facing a lot of challenges. I believe that the time of offering only classic MRO is gone. The scope of services needs to become broader cover the whole lifecycle of an engine.
We’ve already started to see a lot of integration in our sector, with many established players, through cooperation, partnership or acquisition, trying to broaden their product portfolio. GECAS, for example, acquired parts trading firm Memphis Group, while GA Telesis bought maintenance provider Finnair Engine Services.
I’m happy to say that MTU is an early mover on this. With our technical skills and market knowledge, it is a natural next step to move beyond serving only our MRO customer base with lease engines. At the end of 2013, we signed a partnership deal with Sumitomo Corporation, a financially strong company with experience in aircraft leasing. Finding the right partner in such ventures is crucial because, alongside sharing the risks and providing financial security, they can open up new markets.
We started our joint business activities from our head office in Amsterdam in February and the next step is to invest in additional new assets. We’re still a young company, but we’ve already had a positive reaction from the sector.
A holistic approach
Our new engine leasing company is a key part of our broader service strategy for mature engines. This strategy, at its heart, is about allowing operators to focus on just one thing: powering their aircraft.
We believe that alongside the classic, short-term engine lease, we need to offer engine exchange and alternative solutions for such engines, including repairs and teardown.
With new, more fuel-efficient technologies entering the market and low finance costs, a lot of operators are bullish and want to renew their fleet. That means replacing older aircraft types which in turn means potentially accessing used serviceable material that can be either used for the existing fleet or re-marketed to others.
This highlights the importance of owners commanding the entire lifecycle of the engine and managing that appropriately. It’s about knowing when to enter into the market – the right time, the right asset, the right price – and also about knowing when to exit and release the residual value in an engine.
At MTU we’re taking a two handed approach, on one side offering instant power as an alternative to engine MRO – through exchange and leasing – and on the other side using the increasing amount of serviceable parts from retired aircraft and our technical skills to offer cost-effective engine repairs.
There needs to be a holistic approach for the entire lifecycle of an engine which supports the operators and owners to find the best economics for the asset.
Our customer base wants broader engine services and by offering leasing services, alongside engine exchange, MRO and teardown services, at MTU we are reacting to meet that demand.