OEMs Make Big Moves into MRO

Business jet manufacturers are taking giant steps into the MRO realm as they seek to tap into new revenue streams, as well as address ongoing capacity and supply constraints. “It’s a whole new way of looking at business,” said Ken Thompson, managing director of regulatory affairs for the National Air Transportation Association.

These moves are necessary to increase capacity because the business jet fleet is growing. But so too are the sizes of aircraft.

“Some of these larger [independent] MROs are building bigger hangars because the aircraft are getting bigger,” Thompson added. But not all have that ability. “Some new aircraft are too large for their hangars.”

“Maintenance requirements and fleet size have outgrown existing shop capacity,” agreed Tim Ferrell, senior v-p at JSSI Tech Services. “OEMs and independent MROs have been expanding their footprint to meet demand, which is beneficial to operators worldwide and eases availability constraints.”

At the same time, there are OEMs that are bringing work back in to manage parts and components. “They want to control the environment rather than be at the mercy of the vendor,” Thompson said.

As for the move by the OEMs into MRO, “It’s a big change. I think it is the opportunity being seized,” said Rolland Vincent, JetNet IQ creator and president of Rolland Vincent Associates. “There’s been recognition for many years that the aftermarket is where OEMs make money. It’s been that way for the engine world forever. In a development program, the monies are made long term—10 years out, 20 years out sometimes, especially with the airlines. So that business model has been introduced to business aviation over the past years.”

He added that he sees this as a recognition by the OEMs that they need to do a better job of keeping customers and not let them drift away to third-party independents.

Manufacturers of the largest business jets—Bombardier, Gulfstream, and Dassault—have invested heavily in expanding their MRO footprints.

Bombardier has poured hundreds of millions into its strategy to “Bring Our Jets Home.” The Canadian manufacturer of the super-midsize Challenger and ultra-long-range Global families has increased its MRO facilities footprint worldwide by 1 million square feet in the past two years alone, noted Paul Sislian, executive v-p of Bombardier aftermarket services and strategy. And more is coming. “It’s a massive investment we’ve made into our future,” Sislian said.

This growth comes from a strategy laid out about six years ago. “In 2017, we set the vision as a company of this is who we want to become and then we set the journey of the whole team driving towards there,” he said. “It was a pinnacle strategy to Bombardier because it sent a clear message to the industry and mostly to our customers that we are here and we want to make sure that we take care of our customers and we add value.”

He noted Bombardier supports a fleet of 5,000 aircraft. “We have to make sure that we properly serve our customers. It’s a life cycle, the relationship we have with them.”

To back that sentiment, he said, Bombardier needed to have the right infrastructure.

This is key because Bombardier’s aircraft have become larger with the addition of the Global 7500, which sports a 112-foot fuselage length, a wingspan of 104 feet, and a height of 27 feet. With the expansion at London Biggin Hill, Bombardier now has one of its largest centers based in the London area and the ability to fit 14 Global 7500s in its service center at a time. Its new Miami-Opa locka center has that same capability, while the Singapore center was quadrupled in size.

While not ready to detail Bombardier’s plans, Sislian made it clear that the company is continuing to explore opportunities for further growth. “As far as I’m concerned, it’s an evolution, there’s no destination, you just got to keep going,” he said.

Bombardier vies to double its services revenues from $1 billion in 2020 to $2 billion in 2025, and this year brought in $424 million from services in the first quarter alone, a 17 percent year-over-year increase.

While it continues to look for opportunities, perhaps in new areas, Sislian said Bombardier faces the same constraint as the rest of the industry: workforce. “Do I think that we have enough brick-and-mortar capacity presently to meet the demand? The answer is yes. Do I think that we’re going to need to grow our brick-and-mortar over the next five years? Yes. But do I think that we have enough human capacity today? Not yet.”

Bombardier is working with local officials and schools in the regions it enters to develop a talent pipeline, which in turn will help the company increase capacity within the same square footage.

Another aspect of having its own centers is supply chain, Sislian said. “Obviously having your own MROs, you have a little more control over that. There’s a very, very close coordination between the MRO needs and our supply chain capability.” Bombardier is able to balance its inventory between its original equipment manufacturing and MROs. “If parts are in scarce resources, then having your own MROs allows you to be able to move the materials to best suit the customers.”

Gulfstream is another OEM that’s poured hundreds of millions into its service center network—in fact, the company estimates upwards of $500 million—as it looks to keep up with its growing fleet. Just in April, the manufacturer of the G280 super midsize aircraft and a line of large-cabin long-range models announced it was investing another $100 million into its service center at its headquarters facility at Savannah/Hilton Head International Airport in Georgia.

This is only one of numerous projects that Gulfstream has been developing over the past 15 years as it saw a need to increase capacity as its aircraft sizes grew. In the past decade, Gulfstream has added more than 2 million sq ft of hangars, shops, warehouse space, and offices and has numerous other expansion projects still ongoing in the U.S. and the UK.

“When the G650 was introduced in 2008, we saw the need to modernize our service facilities to accommodate the very large cabin business aircraft Gulfstream brought to the market, and with that came building larger hangars and streamlining the support experience for our customers,” explained Derek Zimmerman, president of Gulfstream customer support. “The introduction of the G400, G500, G600, G700, and G800 further reinforced that need for modernization and expansion.”

Not only is the aircraft size growing but the fleet itself is rapidly expanding, Zimmerman said, which is also prompting the airframer to implement the strategic expansion plan throughout the U.S., Europe, and elsewhere. This plan spans increased footprint, but also investments in people and parts.

And like Bombardier’s Sislian, Zimmerman agreed that having in-house repair and overhaul capabilities “help[s] us gain more control of the supply chain.”

As far as future projects, he said, “We feel confident in our current footprint and customer support offerings and continually assess them to identify opportunities for growth.”

Gulfstream believes its factory-owned networks provide it a venue to directly engage with its customers, Zimmerman said. “We work closely with them so that we can understand their end-service experiences and use this information to enhance our programs and projects.”

While it has an expansive network, Gulfstream has the advantage of having Jet Aviation as a sister company as well. Acquired by parent company General Dynamics in 2008, Jet Aviation helps extend Gulfstream’s service network, Zimmerman said, noting the multi-faceted aviation business chain remains its partner of choice in the regions it serves.

Like its competitors, Dassault has made significant strides in securing a strong MRO presence, a strategy that it embarked upon some five years ago. But unlike its business jet OEM brethren, Dassault has sought expansion as much through acquisition as through new-build facilities.

This was evident in 2019, when the French manufacturer of super-midsize, large, and ultra-long-range Falcons made three strategic acquisitions: Luxaviation’s ExecuJet MRO facilities, TAG Aviation’s MRO business, and Ruag operations in Geneva and Lugano airports in Switzerland. In all, that culminated in 19 additional facilities and 1,000 employees—helping Dassault extend its reach worldwide.

And since then, the company has been investing in those centers. “Throughout the TAG MRO and ExecuJet network, we’re growing,” said Jean Kayanakis, Dassault senior v-p of worldwide customer service and service centers, pointing to centers coming online in Kuala Lumpur and Dubai’s Al Maktoum International. The latter will be able to accommodate 18 to 24 business jets at a time, with space to house the Falcon 6X and 10X.

This is providing the necessary capacity for Falcon customers. “These [centers] are now doing more than 30 percent Falcons,” Kayanakis said.

In addition, Dassault plans to add a 175,000-sq-ft facility under its own brand in Melbourne, Florida, that will help prepare to bring the large-cabin Falcon 6X and 10X into service.

As for capacity after that, Kayanakis called America the primary booming market and said the company may look at the Northeast after its withdrawal from Wilmington, Delaware. “The rest, I think, right now we have enough.” But he added, “We are preparing for the 10X in America. We want to be solid.”

The additions of the service network enable Dassault to have more direct control of the customer experience, Kayanakis said. “You feel responsible from the beginning to the end of the customer experience.”

But, he said, “Clearly, we bring something more because we have been able to integrate into the whole customer service organization the ultimate needs of the customer up to the engineering. And that is now producing a significant effect for the aftermarket.”

For independent MROs, developing an engineering solution might be a difficult business case for individual aircraft, whereas Dassault can more easily develop one and offer it to the fleet, he said.

OEMs do turn to independent MROs for authorized service center relationships. But Vincent said, “My sense is that these authorizations have been trimmed back here and there, especially at some of the OEMs.”

Some look at these authorizations as long-term strategic partnerships. “If you want to sell an airplane, you’re going to need somebody on the ground to do the work to help you out there. So, in the long-term, you need these international partnerships to keep your fleet active and flying and your customers happy,” he said.

Bombardier’s Sislian agreed. “I think that the strategy towards the authorized service centers hasn’t changed, and we’ve been very clear. Our strategy is to bring our jets home. We want to be able to serve our customers,” he said. “Do we think that we could do that in every region? No, and we do have certain authorized service facilities. Will we maintain them? The answer is yes.” However, he added: “Are we looking to expand that? No, we’re not.”

Gulfstream’s Zimmerman also said his company’s focus is remaining on its own service center expansion, but it is also expanding its authorized warranty facilities (AWF) footprint. “We have aircraft based around the world and these AWFs offer convenient access to warranty service, maintenance, and parts for our customers,” he said.

However, he noted advantages to in-house service in that company-owned centers focus only on Gulfstream aircraft while AWFs typically serve multiple OEMs. Further, Gulfstream’s in-house technicians are training for new products while they are in development and have a more mature level of expertise by the time they reach the market, he added. “No one knows Gulfstream aircraft better than we do.”

Dassault, meanwhile, continues to look at expanding its authorized service center (ASC) network, but it too is based on where its fleet is growing. “It’s case-by-case when we need [them],” said Kayanakis.

As far as a future concern of a competitive struggle between the independent MROs and the OEMS, NATA’s Thompson said he doesn’t think the independent MROs are looking at it that way. “I don’t think they’re thinking that in the future as much as I’ve got all this work in front of me.” But he acknowledged “it is an ebb-and-flow situation.”

“This is the constant yin-and-yang sort of struggle that goes on,” Vincent agreed. “When times are good, you sort of look around and say well, what else can we do here? And, that’s what is going on. Capital allocation has been going over towards building and expanding service centers and new locations.”

However, when things slow down, such activity may pull back, he further said, adding economists strongly believe that will happen more broadly. “If we see an economic slowdown, what happens first? Flight activity slows and has slowed already. That tends to reduce the demand for MRO.”

But in the current climate, Vincent does not look at that as a negative. “It’s good for our industry. We really have too much demand for the supply. That has been the story here for a couple of years.”

A worry about the overheated demand is that quality control may suffer, he added. “Not every shop provides the same level of service. If I go to Shop A, I get this. If I go to Shop B, I don’t get this,” Vincent noted. “One of the things I like about this OEM strategy of growing their aftermarket businesses is  hopefully we’re going to see a little bit more standardization of service quality.”