Print headline: Eastern and Central Europe Transitioning
Maintenance providers in the Eastern European region largely focus on narrowbody and regional jet airframe maintenance and offer a significantly lower labor rate than their Western European counterparts—but that labor rate could be on the verge of increasing.
Mijana Tratnjek Ceh, Adria Tehnika’s chief commercial officer, thinks there will be more pressure on MRO prices in the region because of wage increases. “The prices we offer for MRO will have to go up,” she said of the Slovenian MRO at Aviation Week Network’s MRO Baltics, Eastern Europe and Russia (BEER) event.
Oliver Wyman pegs the Eastern European MRO labor rate at $53 per hour, close to North America’s average rate of $55. However, the Western Europe billing is $70 per hour, the highest MRO labor rate in the world, says Vice President Robbie Bourke.
Adria is not alone. Many MROs in the BEER region are feeling cost pressure, primarily because they are having a hard time retaining technicians. Blue Air, a Romanian low-cost carrier, trained more than 100 European Aviation Safety Agency B1- and B2-licensed engineers over the last decade, but “more than 50% left us,” says Adrian Ionascu, director of third-party contracts. He said most young engineers who left flocked to Western European MROs for the higher wages. The silver lining is that some return when they are a bit older. He says Blue Air is ready to increase salaries, but it can’t match Western European rates.
Oliver Wyman forecasts the region’s MRO market will slightly contract over the next five years, from $4.6 billion to $4.4 billion by 2023, but then it will grow to $5.4 billion by 2028. Bourke cites strong refleeting as the downward MRO driver until 2023, then airframe and modification work will drive the next five-year-period growth.
Ayrat Gilmutdinov, commercial director at VD Gulf in Sharjah, United Arab Emirates, say MROs in Eastern and Central Europe should look to cooperate, rather than compete, to bring in new customers. He says they must move beyond status-quo technologies due to MRO competition in the Gulf region.
Change already is afoot. As I was touring Adria Tehnika on June 7, a Wow Air widebody landed at Ljubljana Airport for structural repairs. This is Adria’s first widebody project.
LOT Aircraft Maintenance Services (Lotams), grew its external clients by 42% last year, said Rafal Momot, commercial vice president. He suggested during the conference that MROs in the region should partner to provide more complex, one-stop-shop services. “We need to partner [because] it’s hard to do on your own,” he said.
Lotams opened its first foreign line maintenance base in May—in Budapest, primarily for Boeing 787s—and is partnering with Aeroplex of Central Europe on nonstandard maintenance. Aeroplex restructured in 2016 and was “finally profitable in 2017,” says CEO Arpad Demeny, adding, “This year should be good and profitable, too.”
Definitely expect more partnerships in this region.