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MRO Japan In Steady Expansion Mode

Japan is home to major airlines Japan Airlines and All Nippon Airways. Its MRO industry is less developed—but that’s changing.

Printed headline: MRO Japan: Steady Growth

 

Japan has one of the most mature commercial aviation markets in Asia, and its two major airlines, Japan Airlines (JAL) and All Nippon Airways (ANA), fly more than 420 aircraft in extensive domestic and international networks. However, the MRO sector—with its high labor costs—is lagging behind, so many aftermarket services are outsourced overseas. ANA, for example, sends its aircraft to China, Taiwan and Singapore for heavy maintenance.

However, things are about to change, albeit at a measured pace. With the Okinawa prefectural government looking to diversify its economy, it decided to set up an airframe MRO facility to serve the domestic and potentially regional aviation market.

The Okinawan Initiative

Okinawa is known for its U.S. military facilities and, more recently, as a tourist destination. The government understands the need to diversify the local economy and not rely solely on the tourism sector. So it is hoping to kickstart a commercial aviation hub revolving around Naha Airport, similar to the Singapore Seletar Aerospace Park.

MRO Japan was incorporated in June 2015, initially with 100% investment by ANA Holdings of 10 million yen ($94,000) and first starting operations in one of ANA’s old hangars at Osaka International (Itami) Airport in September 2015.

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Following the move to Okinawa, the paid-in capital of the company was raised to 1 billion yen, with additional investments from JAMCO Corp. (25%), Mitsubishi Heavy Industries (20%) and five Okinawan corporations holding 2% each: the Okinawa Development Finance Corp., Bank of the Ryukyus, Bank of Okinawa, Okinawa Kaiho Bank and the Okinawa Electric Power Co.

“We managed to use the hangar with reasonable rent, and with that we can reduce the costs transferred to the customers. It is an advantage,” says Tadaaki Nobusue, vice president for corporate planning, sales and marketing.

The Facility and Capabilities

The MRO Japan hangar measures around 200 X 100 m (650 X 330 ft.) in a site spanning 29,396m2 (316,400 ft.2). Viewing the hangars from the runway, to the left is the narrowbody hangar that can house three Boeing 737s or Airbus A320s, and to the right, a mixed-use hangar for a widebody aircraft, accommodating a 777-300ER, with additional extraction and ventilation systems for aircraft painting. Because Okinawa has strict guidelines governing wastewater disposal, runoff from painting is stored in a separate tank below the hangar and processed separately.

The hangar was officially opened Nov. 9, 2018, with commercial operations starting in January 2019.

Nobusue said its strength and specialty is narrowbody aircraft, including heavy maintenance capabilities for the Boeing 737, Airbus A320 and Bombardier Dash 8 Q400 turboprops. MRO Japan’s widebody aircraft capabilities, with the exception of the Boeing 767, are limited to light maintenance for the 777 and 787. He adds that there are no plans to increase capabilities for servicing widebody aircraft.

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MRO Japan will also be working toward adding MRO services for the Mitsubishi SpaceJet (formerly the Mitsubishi Regional Jet), after the manufacturer selected MRO Japan as its preferred MRO provider in 2016. The choice of aircraft is no surprise, as these represent all of the aircraft types ordered or in service with the ANA group of airlines.

MRO capabilities include scheduled maintenance, aircraft component replacement, structural maintenance with heat treatment and machining, as well as other services, including nondestructive testing and painting.

“Painting is also something we take pride in. ANA is known for its special livery such as Star Wars, Pokemon, etc.—all of which are done by MRO Japan,” Nobusue says.

Its primary customers are still ANA and its subsidiaries such as low-cost carrier Peach Aviation, Solaseed Air, Airdo and StarFlyer. Parent airline ANA alone has 50 Boeing 737s, 38 767s, 54 777s and 69 787s, and 27 A320-family aircraft in its fleet.

The facility is handling 10-15 aircraft monthly, which is less than 50% of its full capability.

“The focus now is to increase the number of technicians and engineers so that the facility can take in more projects,” he adds.

Manpower

Labor shortages are currently one of the primary limitations putting the brakes on MRO Japan’s expansion.

When MRO Japan was incorporated, around 170 staff were seconded from the airline to set up the company, and upon moving to Naha, the priority has been to hire locally. Local wages are about 30% lower compared to those in Tokyo, but that gap has narrowed recently with a better economic situation in the prefecture. The goal is to have more than 400 employees at MRO Japan, mostly coming from Okinawa, who will eventually take over roles held by the seconded ANA staff.

Today there are about 190 technicians and engineers, some hired locally, but Takuma Otsuka, manager of sales and marketing, explained that it is hard to find aviation talent in Okinawa, since most people would rather work in tourism or IT. MRO Japan hopes to increase the awareness of aviation on the island and introduce an aviation curriculum at local schools.

While there are no immediate plans to hire foreigners, MRO Japan would consider that in the future to find qualified staff to support their future growth aspirations.

Growth At A Steady Pace

Nobusue says business is “very good” but is realistic about MRO Japan’s capacity to handle ANA’s massive portfolio and MRO workscope needs, so the majority of ANA’s heavy maintenance will still be done overseas.

“We see ANA bringing its aircraft here for 1-2 weeks of C1 check maintenance, saving it the ferry costs and downtime when compared to sending them to China,” he says. “Since the 737s have accumulated a lot of hours, most of the month-long C4 checks will still be done in China, where the low costs will outweigh other miscellaneous costs.”

Although he said there are no intentions to venture into the engine MRO business, Nobusue hopes MRO Japan can become a one-stop shop, adding more value to its airframe business. Both Nobusue and Otsuka add that MRO Japan could present a challenge in the market as its costs gradually fall and overseas MRO costs rise.

The Road Ahead

MRO Japan holds Japan Civil Aviation Bureau (JCAB) Part 145 certification and is working toward attaining European Aviation Safety Agency (EASA) Part 145 certification, hopefully by 2020. Nobusue says EASA certification precedes FAA or other certification, as MRO Japan is currently the only company in Japan to provide MRO services for the A320. It hopes to strengthen the capability as the A320 fleet increases across ANA’s subsidiaries and among potential clients in the region.

Nobusue says the coming months will be busy for MRO Japan. As the facility handles all of ANA’s Dash 8 Q400 maintenance, it is preparing for a major package signed recently with ANA Wings, the regional arm of ANA. The airline’s fleet of Q400s are reaching the 40,000-flight-cycles milestone, and all will be sent to Naha for heavy maintenance as it comes due.

The company has also set up a new sales and marketing division to promote its base maintenance capabilities. MRO Japan is also in talks with the government to clarify its future aviation plans, which could include reaching out to global aviation companies.

The Japan Air Self-Defense Force (JASDF) air base shares the same runway with Naha airport, situated just opposite MRO Japan across the runway. ANA has been selected as an airframe and engine maintenance provider for the KC-46A, which JASDF decided to introduce starting in 2020, and MRO Japan has a role to provide airframe maintenance such as C checks, for the KC-46A. Nobusue says it is an exciting challenge for MRO Japan to provide its services for military as well as commercial aircraft.

Otsuka thinks that the popularity of the island with tourists and increased traffic at Naha airport will benefit the company, and with the island building a second runway by 2020, the increasing traffic will bring new opportunities for ANA. He is also looking forward to discussions with new partners for future opportunities and hopes airlines can see the value of its MRO services, with the renowned Japanese focus on quality.

“Our staff have supported ANA operations for a long time, and we can provide MRO service from an airline’s point of view,” Nobusue adds. 

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