The Middle East commercial aviation maintenance, repair and overhaul (MRO) market is growing at a faster rate than the global average, and the majority of those expenditures are being driven by widebody aircraft. Globally, widebodies account for 18% of the in-service fleet, but in the Middle East that percentage surges to 50%, according to Aviation Week fleet data.
Over the next decade, expect Middle East operators to accept 1,900 new aircraft—with the Boeing 777-8 and -9 the highest percentage types—12%, Aviation Week fleet data show.
Besides widebody dominance in the region, the fleet will have a low replacement factor. The global average aircraft replacement factor is forecast to be 44%, according to Brian Kough, Aviation Week director of forecasts and analysis, but the Middle East fleet retirement rate is expected to be only 21% over the next decade.
This rate has an impact on MRO expenses. Airlines in the Middle East will spend $4.6 billion on MRO in 2015, according to Aviation Week forecasts. Engine expenses account for 41%, followed by components at 22%.
ICF International also predicts the Middle East MRO market at $4.6 billion this year but pegs it to grow 6.7% per annum to $8.8 billion in 10 years, compared to $8.7 billion in Aviation Week’s data.
ICF Principal Richard Brown says 76% of that $4.6 billion will be spending for widebody aircraft, with narrowbodies accounting for 19%.
Four carriers—Emirates (29%), Qatar Airways (15%), Etihad Airways (15%) and Saudi Arabian Airlines (8%)—account for two-thirds, or about $3 billion of Middle East MRO expenses, says Brown.
Those airlines all have in-house maintenance capabilities, which helps explain why 76% of heavy airframe MRO is performed within the region. Of that, 81% is conducted in-house, “which means the opportunity for third-party suppliers targeting Middle East airframe and modifications is relatively small,” says Brown.
The pool of independents shrank last year when Abu Dhabi Aircraft Technologies (ADAT) became Etihad Airways Engineering after the airline purchased ADAT’s airframe and component assets in May from Mubadala. Mubadala retained ADAT’s engine capabilities and is aligning it with its plans to produce engine parts in Al Ain for General Electric and Rolls-Royce. Expect Etihad to continue offering third-party MRO services from its facilities in Abu Dhabi.
Emirates, the largest airline in the region with 233 widebodies—and also the most expansive engineering group—offers some third-party maintenance services through Emirates Engineering. It completes most MRO in-house and relies on OEMs for maintenance that it cannot perform.
However, with a large order book—and plans to accept 26 more new aircraft this year alone—Emirates would consider setting up partnerships to expand its in-house component repair capabilities. “The supply chain readiness has not been there for component repairs and material support for next-gen aircraft,” says Abdullah Osman, vice president for engineering material management and supplier support. If Emirates pursues this option, it would primarily be to cut component repair turnaround times and logistics.
Razali Idris, vice president for maintenance and engineering for Jazeera Airways in Kuwait, says the Middle East is a hard region in which to operate due to its political volatility and punishing environment. He is confident in the airline’s ability to keep passengers safe, but says that “the extreme heat, sandstorms and dust” are a big challenge. Idris would like to see more support especially for engines because they do not last as long here.
Tailored support to address the region’s operating environment and logistics costs was a frequent topic during Aviation Week’s MRO Middle East Conference Feb. 2-3..
In trying to address this issue, the government of Dubai is building a 145-sq.-km (56-sq.-mi.) planned community—Dubai World Center—around Al Maktoum International Airport, which became operational in October 2013. The community includes eight planned districts, including ones dedicated to logistics and aviation that cover 45,000 sq. meters (11 acres).
Tahnoon Saif, vice president for aviation for Dubai World Center, says the community is trying to attract a variety of OEM and aftermarket services businesses. “We want to become a worldwide aerospace hub to support airlines and private aircraft,” he says.
During the MRO Middle East Exhibition, Dubai World Center and Lufthansa Technik Middle East signed a letter of intent for the MRO to become an anchor tenant. This new facility will nearly double Lufthansa Technik’s space and should be available by the fourth quarter of this year.
Ziad Faisal Al Hazmi, CEO of Lufthansa Technik Middle East Services, says the potential growth stems from regionalizing customer support—putting more parts, more repairs and more technical expertise here—which can lower turnaround times and costs.
Lufthansa Technik Middle East Services started with a limited range of technical services and sales activities—but has added composite repairs and painting, material support and Cyclean engine-washing in Dubai. “We’ve built up logistics processes this past year so we can store, repair and replenish customers’ parts,” he explains.
When asked about adding capabilities, Al Hazmi says the company considers service solutions that make economic sense to perform in the region. For instance, given that transporting a large thrust reverser from Dubai to Europe and back can cost $40,000 or more, placing these types of services in region can quickly cut maintenance bills, notes Al Hazmi.
Finding the right services to place in the region is important, but attracting and retaining technical talent has consistently been a challenge, too.
ICF’s Brown asked the Aviation Week MRO Middle East Conference audience: “Is there enough capacity in terms of skilled labor to support this growth in the region? Can this be supported cost-effectively?”
The consultancy predicts the Middle East MRO market, which has a compound annual growth rate of 6.7% compared to the global average of 3.8%, will require 11.7 million maintenance man-hours by 2024.
Technical education programs and throughput have not kept pace with hangar mania.