The Middle East’s challenge: can MROs keep up with growth?
According to the firm’s data, Middle Eastern MRO demand in 2015 was $5.1bn; eight per cent of the global $64.3bn total. It is expected to grow annually at a rate of 7.4 per cent to 2025, when ICF’s Brown expects it to reach around $10.2bn – “effectively doubling” in the next decade. “The region’s significant widebodies will be the leading driver of MRO spend over the next 10 years,” he adds. “Strong historic fleet growth from Emirates, Qatar, Etihad and Saudia will mean they account for about 70 per cent of the region’s MRO demand.”
Unfortunately for independent firms such as JorAMCo, much of this work will be done by the major carriers’ own corporate MROs. “Major carriers such as Saudia, Emirates, and Etihad all have their own dedicated MRO shops,” confirms ICF’s Stewart. “Emirates and Qatar Airways are building up the scope of their MRO capabilities; leaving less work for third-party MROs.” The result is that it is very difficult for new MROs to start up in the region without a core customer base. This has limited the growth of new MROs in the Middle East.
The silver lining to this cloud is that “there is more demand for independent MROs such as JorAMCo to serve smaller local carriers in this region,” said Fattaleh. “We are seeing growth in workload, from new customers coming in from Europe, India and Turkey.”
Engine support is currently limited
One area where the Middle East is thin on MRO facilities is in the engine repair and overhaul sector. There are only five Middle Eastern engine MROs in all; one of which is Turbine Services & Solutions Aerospace (TS&S). It was spun off as an engine MRO from Abu Dhabi Aircraft Technologies (ADAT) in 2014, when the UAE’s Mubadala Development sold ADAT to Etihad Airways. Currently, TS&S is working to attract global A330 customers using the Rolls-Royce Trent 700 engine; leveraging TS&S’ status as the world’s only independent Trent 700 MRO shop.
“Because there is not a lot of support for engine repair and overhaul locally, much of this work goes to Asian and European engine MROs,” Stewart notes. But that could change in the years ahead, according to Ian Taylor, TS&S senior manager of sales and commercial. He told delegates at the 2015 Airline Engineering & Maintenance Middle East conference in Abu Dhabi that “I estimate there will be two new major [engine MRO] entrants into the Middle East market,” [as reported by www.arabianaerospace.aero]. “I suspect these will be in Saudi and Qatar.”
Taylor notes that the regional market is ripe for this expansion, due to the steady growth of Middle Eastern airline fleets. “This will have a massive impact on the Middle East’s engine MRO business and the regional jet market is largely untouched,” he says.
Another country where MRO opportunities exist is Iran. In tandem with the country’s push into modern commercial airliners, Iran also wants to expand its in-country MRO capabilities. According to ICF’s Brown, Turkish Technic and Mubadala are talking to Iranian ‘entities’. Lufthansa Technik has also expressed interest in an Iranian joint venture.
Two of these possible ventures have been mentioned by PressTV.ir, the official Iranian news site operated by Islamic Broadcasting of Iran. “The Abu Dhabi-based investment firm Mubadala is reportedly in talks with a major Iranian aircraft maintenance centre over a potential acquisition,” reported PressTV in May 2015. In November 2015 the news site reported that Turkish Technic plans to enter into a joint venture with an Iranian entity, with a likely focus on transferring knowledge to the Iranian workforce and training, according to Ozcan Bastekin, the company’s sales and marketing director.
“With the sanctions just coming off Iran, it is early days for such joint ventures,” declares ICF’s Stewart. “But the interest in setting up such facilities is still there; both on the part of the Iranian government and possible international MRO partners.”
Need for qualified technicians
Against the backdrop of 7.4 per cent annual growth, Middle East MROs are faced with an ongoing need for more qualified technicians. Unfortunately, “it can be very difficult to source such skilled people locally,” says Stewart. “This is why JorAMCo has established its own training facility in 2007. We have partnered with AST [Air Service Training, based in Scotland] to create a specialised academy to EASA Part 147 standardthat graduates mechanics who are accredited by the UK’s Civil Aviation Authority. Our academy provides 40-50 licensed mechanics to our MRO facilities each year,” explains Fattaleh.
To make matters worse, the declining Middle East economy is forcing MROs to reduce the salaries and benefits that they can offer to new applicants and current employees; motivating the most marketable prospects to seek betterpaying work and living conditions elsewhere.
Taken as a whole, the Middle Eastern MRO market offers both opportunities and challenges for the companies who support commercial carriers in this region. So what will the next five years be like for the Middle East’s MROs? JorAMCo’s Fattaleh sees Middle Eastern MROs “attracting more work from Europe and Russia”. ICF’s Stewart is upbeat about the future of Middle Eastern MROs. “Overall, the economic, traffic and airline growth in the Middle East over the 10 years is expected to be well above the global average,” he reiterates. “This will result in a more than doubling of spend on MRO.”