Aging widebody fleets in need of renovation are driving a requirement for international maintenance, repair, and overhaul (MRO) assistance to Middle East airlines as the reemergence of passenger traffic from the Covid slowdown gains momentum.
“We are all glad that this is over and this is reflected in the business that we are seeing from the region,” Tim Butzmann, Lufthansa Technik (LHT) senior director for Middle East and Africa sales, told AIN. “A relatively quick recovery has been seen, especially in the Middle East region, compared to Europe, for example, which in turn has translated into additional business, with a number of new agreements being signed.”
Earlier this year, LHT announced it would overhaul A380 main landing gear for Emirates Airline in London and provide it with extra capacity for the superjumbo’s base maintenance, including C-checks, in the Philippines. According to the Germany-based group, the latter agreement marks the first-ever outsourcing of heavy checks from Emirates’ in-house A380 MRO capacities to an external provider.
Butzmann believes Emirates and Qatar Airways rely on single agreements for certain technologies, mainly with OEMs. “These airlines continue to do that on the component side and have not really ventured largely into any kind of, for example, power-by-the-hour agreements that other carriers have,” he explained. He also cited Flynas’ recent receipt of board approval to order 250 aircraft and Air Arabia’s $14 billion order for 120 Airbus A320 family aircraft as significant growth opportunities for LHT’s business.
“Most importantly, it is growth that is very well substantiated by traffic demand. Load factors and also the figures that low-cost carriers such as Air Arabia and Flynas are presenting all indicate they have well-functioning business models. Obviously, that is something we are looking into,” Butzmann explained. “We would like to be partners to airlines with such models because we share their focus on long-term sustainable business conduct.”
Over the next 10 years, LHT will also provide its total component support to Saudia’s 57 aircraft-strong Boeing 777 and 787 fleets. Butzmann added that Saudia Aerospace Engineering Industries intends to provide MRO for new airlines Riyadh Air and Neom Airlines, as well as the other three Saudi carriers.
“That’s the ambition,” he said. “Considering the size of the site in Jeddah—I think there are 11 hangars there—most of them are capable of handling aircraft types all the way up to A380s. They have the square footage for component shops that is well beyond what Lufthansa Technik has on-site in Hamburg. It is huge. I would be surprised if this was aimed only at supporting the Saudia fleet. Obviously, the ambition is way beyond that.”
Turkish Technic signed two agreements with Emirates this year for base maintenance for a total of 22 Boeing 777s that call for work set to begin in July. The company’s current aircraft base maintenance agreement extends until June 2024. “We have [also] established enduring relationships with airlines based in Oman, Kuwait, Saudi Arabia, and the UAE, reflecting our dedication to consistently delivering satisfactory services,” Turkish Technic CEO Mikail Akbulut told AIN.
Mike Stengel, principal at Michigan’s AeroDynamic Advisory, cited data suggesting that MRO demand from the Middle East would amount to $12.3 billion in 2023 and projections calling for 3.7 percent growth to $12.7 billion in 2024. Stengel expects the region’s “farm out” phenomenon won’t last. “I believe part of this outsourcing may be temporary as interior retrofit projects take place at the airline-owned facilities,” he told AIN. “Emirates kicked off its largest interior modification program last summer, which will touch 67 Airbus A380 and 53 Boeing 777 aircraft and is expected to last at least another 12 to 18 months from now. Once these retrofits are complete, we could see more MRO volumes being [handled] in-house.”
Etihad Engineering entered another area of the business when its passenger-to-freighter joint venture with Israel Aerospace Industries (IAI) launched over the summer. Stengel said third-party work accounted for 75 percent of the MRO’s business before the pandemic, making it already a significant player in the region. “The addition of freighter conversion capabilities fits well given the prominence of the aging 777 fleets in the region, which will provide feedstock, combined with IAI’s desire for additional conversion capacity around the world as the 777 conversion STC nears certification,” he said.
The concentration of widebodies in the Middle East means that the region presents a strong bellwether for the health of those fleets. Stengel believes the Middle East sits at the nexus of several emerging economies, and that, in the long term, the region will become an MRO hub as Singapore is in Southeast Asia.
“At the same time, the projected growth of fleets in India means that more MRO work could be drawn to within India’s borders, so it will be interesting to see how MRO players in the Middle East position themselves to adjust to that new reality,” Stengel said.
Klaus Mueller, senior advisor at Aerodynamic, based in Hamburg, argues that the Middle East is “stuck in the middle” between Eastern European players, Turkey, and an up-and-coming India with gigantic ambitions. Both regions enjoy access to plentiful cheap labor. “From my experience, I would see this as a race between these regions to develop image and reputation—as Singapore and Hong Kong did together with Chinese platforms like MTU Zhuhai, Haeco Xiamen, and Gameco in Guangzhou,” he concluded.