CHINA’S MRO MARKET BOOMING

Chinese airlines now require $4.4 billion in annual maintenance, headed for $7.8 billion in 2020, according to ICF-SH&E. Boeing predicts 110,000 more maintenance techs will be needed for China’s mainline jets in the next 20 years. And China wants to play a bigger role in the global market.

“They always want to open new hangars,” joked Dennis Ling, ICF-SHE director Asia-Pacific. Even small carriers with 20 aircraft want hangars, for control of airframe work and growth.

Current airframe and engine capacity exceeds demand. Components are a different and mixed story. “There are still many mom-and-pop shops that repair a few parts,” Ling said. “There is opportunity for consolidation.” High-end components like avionics, wheels and brakes often go overseas.

The Chinese government wants two world-class MRO facilities. Ameco Beijing merged with Air China Technics is likely one. GAMECO is likely the other. Ling says HAECO is insufficiently close to the government to be favored. Politics counts in China. The Hainan Group tried to start an FBO in Beijing, but the government discouraged it. “They put a fence around it and told Hainan to go home,” Ling noted.

China’s appeal in global markets hinged on three trends: labor costs, which are rising; competition from other Asian nations; and improvements in Chinese productivity.

Many China shops are now overstaffed, partly to prepare for future growth and partly because the government seeks to keep unemployment low. As demand increases it should be easy to get labor utilization and productivity up.

With 5,600 employees and two four-bay hangars, Lufthansa Technik’s and Air China’s Ameco is China’s largest MRO. It does heavy maintenance on 737s, 747s, 767s, 777s and A340s, overhauls Rolls-Royce, Pratt & Whitney and CFMI engines and supports 10,000 components, including landing gear, wheels and brakes, hydraulics, pneumatics, mechanics and avionics. An announced merger with Air China Technics will make Ameco even bigger.

GAMECO, a joint venture of China Southern and Hutchinson Whampoa, does 70% of work for CZ, the rest for other carriers, including international airlines. Its 4,200 employees do MRO on Boeing, Airbus and Embraer airframes and components. Engines are sent to MTU in Zuhai.

GM Norbert Marx is concentrating on growth, efficiency and innovation. With 10 heavy lines now, GAMECO just broke ground on eight new hangars, which will require 1,500 workers, and is planning four more. It is extending its airframe network to Chong Qing for A320s, Urumqi for 757s, Shanghai for 777s and Zhengzhou for 737s. GAMECO will strengthen component capabilities with new facilities and wants to do more work on structures and reversers.

Training is one hurdle. “We have lots of young people,” Marx said. “Training them all will be a challenge for the foreseeable future.” But he is bullish. “We will certainly do our best to become a world-class facility.”

HAECO has joint-ventured with TAECO in Xiamen, with Goodrich and Honeywell on components, Spirit Aerosystems on composite repairs and Dunlop on aircraft tires. It formed TALSCO for landing-gear overhaul and overhauls GE90s in Xiamen. HAECO now has a presence in Xiamen, Jinjiang, Beijing, Shanghai, Tianjin, Jinan and Chengdu, in addition to Hong Kong.

TAECO has six hangars in Xiamen, Taikoo Shandong five narrowbody hangars and Taikoo Sichuan one narrowbody hangar. HAECO group director commercial Summit Chan predicts China will have excess hangar capacity in the next several years.

HAECO concentrates on widebody engines, with HAESL in Hong Kong overhauling Rolls-Royce RB211s and Trents and TEXL in Xiamen doing GE90 work.

Chan cites renminbi appreciation and training as major challenges. HAECO has established a training facility for up to 1,000 students in Xiamen. “We plan to grow that.”

 Boeing Shanghai Aviation Services is a joint venture of Boeing, China Eastern and Shanghai Pudong Airport. Six hundred employees maintain 737s, 767s and 747s in three widebody hangars. Also serving Russia, the Ukraine, Korea, Thailand and Mongolia, BSAS works mostly for non-Chinese carriers.

The facility will expand into 747-8s and 777s in 2012 and double its size by 2014. But BSAS president Bernard Hensey said the primary aim is not to grow but to understand MRO markets and how to serve customers better. BSAS wants to lead in quality, development of safety management systems and new MRO business models.
“China has been a follower in the market, a decade behind the West,” Hensey said. “But things are changing quickly. China is beginning to set what MRO markets will look like in the future. Business models that worked in the West in the past will not work in the future.”

Engines, Components and Training

SSAMC, a joint venture of Air China and CFMI in Chengdu, overhauls CFM56-3s, -7s and -5bs. Three other shops overhaul the popular narrowbody engines, Pratt’s in Shanghai, an MTU-China Southern partnership in Zuhai and an ST Aero-Xiamen Airlines joint venture. Even with 2,400 CFM56s in service or on order, CFMI service program manager Hugh Walsh said capacity is leading demand. “Shop visits have not caught up with capacity.”

Walsh saidtraining has not been difficult, as plenty of airline techs have experience with CFM-56s. “It is easy to train for heavy work if we hire from airlines.” CFMI annually trains 500 line mechanics, who can be upgraded for overhauls. And China’s three technical aviation universities provide a very good education.

Pratt & Whitney has 1,200 employees in China. Shanghai Pratt & Whitney Aircraft Engine Maintenance Company, a partnership with China Eastern, works on CFM56-3s, -5Bs and -7Bs. A Pratt joint venture in Zhuzhou services rotors, impellers, light alloy cases and shafts, while another in Chengdu produces compressor disks, combustors, aircraft environmental accessories and high-pressure compressor stators and a third in Xi’an makes compressor blades and vanes, fan blades and structure parts for engines. Finally, a Pratt training center provides technical training for airlines in China as well as Russia, Singapore, Thailand, Korea and other countries.

A new Pratt joint venture in Zhuzhou will overhaul PW100s and PT6As. It will start with line maintenance, followed by heavy maintenance and overhaul.

Spirit Aerosystems’ Taikoo Spirit, a joint venture with HAECO and Taikoo in Jinjiang, repairs and manufactures composites on both Boeing and Airbus models. “Spirit has no plans for additional facilities in China,” said Don Brugman, senior manager of business management. “We are committed to Taikoo Spirit as our MRO presence in the region.”

Brugman said operating in China differs from operating in other countries only because growth is so dramatic. On the plus side, Chinese airlines and MROs do not have legacy facilities, like Western Europe’s World War II-era buildings. “Their capabilities have been designed and built to take advantage of the latest thoughts on flow and layout, allowing MROs in China to achieve efficiencies that other facilities may find hard to match,” Brugman said. Another favorable factor flows from stunning growth. “OEMs and related service providers are seeking to set up within China. This makes material and part acquisition easier and reduces lead times, which is much improved from 10 years ago.”

Rockwell Collins has a joint venture with China Eastern in Shanghai that supports communication, navigation and surveillance components and IFE for narrowbodies. “We have sufficient capacity to handle our Chinese customers and ample opportunity to grow it when demand grows,” saidTC Chan, vice president and managing director, Asia Pacific. Rockwell has been selected to provide components on COMAC’s C919.

Rockwell has tailored support programs for the Chinese market. “For example, our Global Asset Management Pool, situated with China Eastern Airlines Import Export Corporation, is operational and will support airlines, regional and business customers with various asset programs,” Chan said. He expects the business-jet market to grow and require more FBOs in China.

Honeywell has more than 30 subsidiaries and joint ventures in China, including facilities in Xiamen, Nanjing, Suzhou and Shanghai. It is working with
COMAC to provide Inertial Reference Systems, Flight Control Electronics, Wheels & Brakes and Auxiliary Power Systems on the C919. The company opened Honeywell China Aerospace Academy in 2010 to provide training.

Pak Chin, VP-Asia Pacific Airlines, sees growth and further opportunities for partnerships in China. “With an investment of more than $500 million, Honeywell focuses on increasing energy efficiency, innovation, research and development.” In 2011, Honeywell secured a long-term contract with Harbin Dongan Engine for C919 engines, plus APU, avionics and wheel-and-brakes maintenance agreements with all major Chinese airlines.

Lufthansa Technik Shenzhen offers airframe-related and other component services, including thrust reversers, cowlings, radomes and control surfaces. Proximity to both Guangzhou and Hong Kong provides fast access to many destinations. The company is preparing for new aircraft with fuselages and wing structures constructed with carbon fiber.

Boeing Maintenance training director Steve Pennington noted that aircraft MRO must compete with other booming Chinese sectors for those workers who are talented, have good hand skills and attention to detail and must increasingly be at ease with digital technologies like Windows-based systems.

Indeed, computer literacy has become a more pressing need than English competence. “We can translate,” Pennington said. “And in my experience the Chinese may not be able to speak English, but I guarantee they understand it.”

Boeing, Shanghai Airlines and Pudong Airport have set up a training facility for mechanics. The facility recently added a full-flight simulator and classroom for the 787. Groups of 16 students spend six weeks each on a combination of an airframe-engine–avionics course and a pure avionics course for the 787.

MRO candidates from China’s technical universities are highly motivated and focused on success. Pennington estimated that only one out of 150 candidates fails to complete maintenance training.