MTU Maintenance V2500.jpg

Chinese Facility Boosts MTU Maintenance Margin

V2500 repairs are very much front and center of the German MRO's business.

Days after MTU Aero Engines revealed a massive new maintenance contract for JetBlue’s IAE V2500 engines, the German company reported that V2500 overhauls are at the heart of its MRO business.

“In terms of organic growth, revenue in the commercial MRO segment has increased by around 7%,” said MTU chief financial officer CFO Peter Kameritsch.

The company's maintenance margin was up 2.3 percentage points from the prior-year period, an improvement that Kameritsch attributed largely to MTU Maintenance Zuhai in China, a facility that specializes in MRO services for CFM56 and V2500 engines.

Even so, commercial maintenance sales declined in the second quarter and were broadly flat through the first half, although they did become more profitable as MTU acknowledged the V2500 as the “main revenue driver” of its MRO business.

Aviation Week’s 2019 MRO Fleet & Forecast data indicates that the V2500 maintenance market will be worth about $29 billion over the next 10 years.

At €632 million ($704 million), maintenance sales accounted for 57% of MTU’s total revenue and contributed to 37% of its pre-tax (EBIT) profit in the quarter ended 30 June.

Its more profitable OEM business generated a 22.5% EBIT margin in the second quarter (versus 10.4% for maintenance activities), and MTU is bullish about further OEM gains due to a forecast “high single digit percentage” growth in spare part sales.

Meanwhile, new engine sales jumped 13% in the first half driven by V2500 and PW1000G deliveries (MTU is a revenue sharing partner on both engine programmes) and MTU expects similar growth for the full year.

Another interesting development was MTU’s 13% higher R&D spending in the first half; the company said this was focused on future enhancements of the geared turbofan (PW1000) program, a goal that could well encompass developing the engine for Boeing’s yet-to-be-confirmed NMA.

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