Publication: Regional International
With IATA predicting air travel to double over the next 20 years, and OEM market outlooks forecasting that 40,000 new aircraft will be required in the same timeframe, it is no surprise that the demand for MRO services is growing so rapidly.
Latest reports from industry experts forecast that the maintenance segment will be worth €104bn by 2030, with airframe and engine components set to see the fastest increase within the segment at an average growth rate (CAGR) of 4.3%. Used Serviceable Material (USM) growth will outpace both air travel and MRO growth, a market that is set to increase from €4bn today to €7.7bn over the coming decade. The supply and demand for USM is becoming increasingly important for airlines when it comes to reducing their maintenance cost overheads. The industry is at its most competitive. Airline profit margins are continuously squeezed as operators compete for market share. With four airlines recently ceasing operations in Europe this year, and many more under pressure, it is evident that operators require support from the MRO sector in the form of reliability as well as the provision of innovative, cost-saving solution services. Regional International talks to Chris Hooley, Director – Airframe Division at AerFin, about the importance of accessibility to high-quality serviceable aircraft parts to support these challenges, especially for small or regional operators.
The current situation
The role of regional aviation is growing, particularly in developing markets such as Asia-Pacific and Africa, with also sustained demand in the more mature European and North American markets. The E-Jet market for instance, which is AerFin’s core product focus in the regional space, is currently at peak number of aircraft in operation, with approximately 1,500 across the E170 and E190 family.
“The natural lifecycle of the E-Jet, coupled with the larger regional operators now reviewing aircraft upgauging strategies or transitioning to next-generation equipment, means that we are starting to see market fragmentation, where these older aircraft are delivered to either regional start-ups or existing carriers who are new to the E-Jet aircraft type”, explains Hooley.
“The concentration of operators is now starting to spread as competition increases and these new startups require as much support from the MRO provider as possible to ensure a seamless operation EIS for the E-Jet.”
To stay competitive, regional carriers seek to demonstrate a high level of reliability across their fleet. To do so, they require a significant level of inventory to support their operations and are therefore constantly exploring ways to achieve better value and become more sophisticated in their inventory management methods.
AerFin believes that component support contracts, such as FH (Flight Hour) programmes are particularly suited to small and regional operators, with fleet sizes in the region of four to 30 aircraft, especially when considering the management of risk and cost. “By offering airlines access to inventory, without any significant initial investment, along with the provision of a cost-certain service over the course of a fleet’s operation with guaranteed service levels, provides huge value to airline operators”, says Hooley.
Moving away from the status quo
With continued OEM dominance in the new generation market, Hooley believes that operators of older aircraft types, typically eight years or more, are more likely to secure their FH contracts with independent component support suppliers rather than OEMs. “In 2017, AerFin secured the first major E-Jet fleet phase-out anywhere in the world, provisioning AerFin with the largest stock of E-Jet component inventory outside of the OEM. AerFin saw this as the prime opportunity to develop BeyondPool™, an alternative aftermarket solution for Embraer E-Jet operators. After speaking with E-Jet operators, we wanted this solution to address their key considerations when selecting a suitable service provider. Firstly, cost – we knew that with the amount of E-Jet component inventory we owned, we could deliver the most cost-effective solution on the market. Secondly, service levels. With our breadth of experienced personnel from both airlines and MRO backgrounds, we knew we had the in-house technical excellence and experience of delivering to our customers’ expectations via our dedicated contracts team. Thirdly, quality and reliability. We have long-standing relationships with a significant number of OEM repair vendors and have secured highly favourable fixed cost repair agreements with many of them. In addition, we are also highly selective about which independent MROs we partner with. This approach ensures we provide components to the latest modification status giving our customers the reassurance that no matter the situation, they will have a dependable partner that allows them to focus on their other core business activities.”
AerFin is confident that this comprehensive fully integrated BeyondPool™ flight-hour agreement service will continue to see rapid growth and expects to imminently announce more operators who will join BA CityFlyer and IKAR in its contract portfolio.
The US is another big target for AerFin due to its large concentration of E-Jets. However, the market differs significantly from Europe as it doesn’t generally adopt the pool concept. Instead operators are more self-sufficient and manage their material requirements in-house due to the sheer size of their operations. To help support the market and further develop the company’s presence in the US, AerFin opened an E-Jet storage and distribution facility in Atlanta earlier this year. Hooley explains the company is “continually increasing the volume of equipment stored at its E-Jet facility in Atlanta as we continue to penetrate the E-Jet aftermarket in the Americas”.
By focussing on meeting the needs and requirements of its global customer base better than anyone else on the market, AerFin strengthens its position as a leader in aftermarket component support services for the regional market
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