“We are on the brink of the third generation of the MRO industry,” argues Risto Mäeots, CEO of Magnetic MRO, which has gone global from its Estonian base. Mäeots is convinced his firm’s new approach to end-of-life management of aircraft assets is actually a move toward a new generation of MRO services.
First, MROs fixed things. Then some major MROs manage assets, guaranteeing aircraft or components in service. The Magnetic CEO believes optimizing the end of aviation asset lives will be next, and his firm has entered into this business.
“Ten years ago, MROs were cheap labor providers,” Mäeots says. “To survive, they transformed into total technical-care providers.” He believes the third phase will see MROs raising capital and managing assets, especially as these assets, or parts of them, near the end of their useful lives.
That last part could be tricky. “Few understand the underlying risks of end of life,” Mäeots stresses. He says Magnetic is among the few.
For one thing, teardown and part recovery must be handled carefully for environmental reasons. And documentation of each re-usable part must be in order. Yet so far the teardown process has not been not deeply regulated.
That is changing. IATA’s Aircraft Decommissioning Industry Group, or ADIG, is assembling guidelines for end-of-life assets and decommissioning airframes. The guidelines will take into account safety, economics and environment. Mäeots predicts the guidelines will define best industry practice, “just as you have EASA Part 145 regulating MRO or Part 147 regulating training.”
Magnetic has begun to define its own best practices to meet the big challenge of maximizing yields on end-of-life assets. In the past, there have been weaknesses in micro-managing old aircraft at the subassembly level. “The aircraft is often looked at as a whole, when it comes to disposal,” Mäeots explains.
There is a better way. “For example, a package of four Airbus A320s is coming out of operation. One has high cycles on the airframe, so needs to pass the extension program on the fuselage. Another has run out of LLPs (life limited parts), and there is no point in a too-costly full overhaul. Another has landing gear and the fourth perhaps APU issues," he explains.
So Magnetic has helped airlines put together a ‘Lego’ approach to end of life. It uses a fuselage with enough life, refreshes its livery, installs a new cabin, takes engines from another aircraft and landing gears from a third. “We have made a flyer, an aircraft that could operate another 24 months until the next C check is due.”
The benefits are real. “On an A320, that could be an additional $200,000 a month for 24 months, so you’re talking $4 to $5 million in extra revenue,” Mäeots emphasizes. “After that, we will gladly take over and do the teardown. We can even quote to the airline a guaranteed buy-back price after the aircraft is run out.”
It’s all common sense, in a sense. But applying common sense under many difficult technical conditions and regulations is tough, not to mention the complicated economics.