Latin America & Caribbean Engineering & MRO Summit
Earlier this month the MRO Network and the Latin American and Caribbean Air Transport Association (ALTA) hosted their annual LATAM Engineering and MRO summit. This year the event took place in Bogota, Colombia and attracted many key industry figures that represented airlines, OEMs and MROs.
Following an opening address from ALTA’s executive director, Eduardo Iglesias, the event’s keynote address was delivered by Hernan Pasman, CEO, LAN Colombia. He focused particularly on the market in Colombia, the LATAM merger, and current challenges faced.
Describing Colombia as a country with “enormous potential”, Pasman explained how the aviation industry is vital to the mountainous region; he also highlighted that LATAM didn’t experience any growth from 1976-2006. However, thanks to incentives and investment, an increase in regional airlines and improved safety and security in the region it is now going from strength to strength.
In recent years, Bogota’s airport traffic has grown by 12.7 per cent and the region’s national terminal is expected to be completed in Q1 2014. Pasman also told the audience how LATAM Airlines (the new name given to LAN Airlines as a result of its association with TAM) currently holds 40 per cent market share, claiming that “out of every five passengers that fly in the region, two are flying with us”. Pasman also stated that the airline group is “moving 60 per cent” of aircraft in the Latin American region per year.
ICF SH&E VP, Jonathan Berger, then provided a market forecast and agreed that the region is set to experience a period of “tremendous growth” over the next decade.
In the LATAM region, Brazil currently operates the largest aircraft fleet – a total of 730 aircraft with an average fleet age of 14 - followed by Mexico, while Venezuela and Bolivia operate the oldest fleets. Global fleet growth is expected to rise by three per cent over the next ten years while LATAM is predicted to experience an increase of 4.3 per cent.
The LATAM MRO market spend in 2012 was $3.1bn; the majority (37 per cent) was spent on engines, followed by 22 per cent on components and 16 per cent on airframe. Narrowbody jets are the region’s main aircraft type while turboprops are being phased out as aircraft mature.
Berger predicts that over the next decade, LATAM MRO growth will exceed North America and Western Europe, with LATAM’s difference in MRO spend ($) from 2012 to 2022 standing at $2.8bn compared to $2.2bn for North America and $2.1bn for Western Europe.
LATAM’s industry dynamics were also discussed, with Berger explaining that Latin American countries continue to polarise around two alternative trading blocs: the Pacific Alliance and the Mercosur. The Pacific Alliance is made up of Chile, Colombia, Costa Rica, Mexico, Peru while the Mercosur consists of Argentina, Brazil, Paraguay (currently suspended), Uruguay, Venezuela, and Bolivia (accessing member). Intra-regional trade makes up just 27 per cent of total trade in Latin America, compared with 63 per cent in the European Union, and 52 per cent in Asia.
Panama-based airline, Copa Airlines was highlighted as “probably one of the most profitable airlines in the world”, earning a total net profit in 2012 of $326m with a 14.5 per cent profit margin.
ICF SH&E also highlighted five key MRO industry trends to watch: Energy & aviation industry convergence, 3D printing, mergers and acquisitions in MRO, airframe MRO and surplus parts.
3D printing was of particular interest as this new technology has become increasingly popular with companies such as Heico, Boeing, and GE Aviation. According to Berger, it has the potential to become the next disruptive technology in aviation. It is estimated that 3D printing technology could lower the cost of structural parts by up to 90 per cent and GE plans to invest $3.5bn in the technology within the next five years.
Other trends that were mentioned were the decline in average labour hours per heavy maintenance check and the continued investment activity in the airframe MRO sector.
The rest of Day One was made up of panel discussions, one of which covered recruiting and retaining the best talents and was moderated by CCMA chairman and senior manager of industry affairs, Hernan Sznycr, ALTA. He explained that in the next 20 years an additional 49,000 pilots and 48,000 qualified engineers will be needed. Avianca was highlighted as one airline that has a national apprenticeship programme and InselAir’s Ivo Oduber said that it is “very important to start doing more training in-house… to accommodate for the market’s future needs as there aren’t many trained personnel at this time”.
The pre-lunch panel discussed what is most important to airlines when choosing an independent MRO provider in terms of cost, turnaround and quality. Avianca Taca’s VP, engineering & maintenance, Miguel Montoya, brought attention to the lack of space at airports in the region, which results in limited hangar space. A notable trend among airlines is the move to doing more maintenance in-house with InselAir supporting this by “concentrating and doing more surface work in-house”.
The PMA parts panel discussion welcomed everyone back after lunch and became the platform for an interesting debate. Wencor Group’s VP PMA, Andy Shields, went head to head with CIT Aerospace’s Stuart Schwartzberg, Vice President, Fleet Planning and Technical Services, to argue whether PMA parts are accepted in the market. CIT stressed that an airline “has to plan ahead” and supported its point with the fact that the European Cockpit Association (ECA) prohibits PMA parts.