After two years of very strong disruptions related to the international air transport crisis following the Covid-19 pandemic, the MRO market has recovered nicely. Nevertheless, depending on the specializations of operators or the more or less rapid opening of regional markets, the pace and dynamics of the recovery need to be refined.

A lag on the recovery of MRO engines

"I cannot communicate a turnover since it is not public information but, in any case, we can say that the recovery is there even if global air traffic and activity are not yet at 2019 levels. The last few months have been marked by a significant recovery with, obviously, regional disparities, a very strong US market, Asia which is picking up again, excluding China, with domestic and international passenger traffic very much affected, while cargo activity remains sustained. So, for the MRO activity, we are seeing a recovery in contracts signed and contracts renewed. This is notably the case for renewals with Philippine Airlines or Air Canada for engines, but also for "€equipment" contracts. There are also contract extensions, both for engines and equipment, once again. The level of trade-ins is still affected by the search for cost optimization based on "green time" and the use of the full potential of engines before their complete maintenance in the workshop. While this optimization is still being sought by airlines and proposed by major MRO operators, we can feel that business is returning, and the outlook for next year, and even more so for the year after, is good," explains Anne Brachet, Executive Vice President of Air France-KLM Engineering and Maintenance. Remember that an aircraft engine and its modules have a certain number of operating cycles available. The time remaining under the wing is called the "green time" in the civil aviation maintenance sector. If an engine is to be overhauled and another engine still has cycles available and a certain number of flight hours, it is possible to use this potential completely before going for an engine overhaul. It is also possible to replace only certain modules that are at the limit of their potential and to extend the use of the engine. "This is something that all major MRO operators have done, especially during the crisis. Our airline customers had cash flow problems, since business had come to a virtual standstill, and so when business picked up again, we made extensive use of the engines' available potential to avoid committing to more costly engine overhauls. From this point of view, there has been a reduction in the MRO engine business, but much less in the aircraft business, since even if an aircraft is not flying, it must be maintained unless it is stored for a very long time. But "green time" has a limit. At some point, engines will have to be overhauled in the workshop," says Anne Brachet. Mechanically, the use of green time on engines has created a small delay in the full recovery of MRO operators who work on engine overhauls. "We expect the MRO market to be back to 2019 activity levels by 2023, early 2024. We are starting to pick up contracts again and increase our backlog, although there is still a small gap in engine activity. But we're confident in the long term that activity will return. This will depend to some extent on what happens at the global and macroeconomic levels, with the impact of the recession and its scope. For the aircraft maintenance business, the support of our own fleet or the maintenance of military aircraft, we are already back to 2019 levels. The small e- and delay is therefore linked to the engine business, but we knew that and we anticipated it. "It all depends on when we consider the crisis to be over. In 2020, Sabena Technics was obviously impacted by the civil business. The objectives we set for 2021 and beyond were all met and brought Sabena Technics back to its pre-Covid level. With 2021, we are back to the level of revenues we had in 2019, and with a better financial performance. 2021 was therefore the year of recovery and is even a good vintage," explains Philippe Rochet, Chairman of the Sabena Technics Group.The particularity of the Sabena Technics business model is based on two major points: a fairly perfect balance between the civil and military activities we maintain, and the fact that Sabena Technics' MRO offer is mainly focused on the airframe (the airplane's airframe, consisting of the fuselage, wing, tailplane (horizontal stabilizer and vertical stabilizer) and landing gear), whereas other MRO operators are more focused on equipment and engine maintenance. Sabena Technics is not in the engine business. We know how to install, remove and adjust an engine, but we don't have any engine workshop activities. The engine activities we do have are all carried out in the military sector, for which we have an outsourcing strategy with the major engine manufacturers. We have had a little more difficulty with our equipment maintenance activities because they are very dependent on our customers' flight times. They have therefore weakened a little, but not excessively so. As for our airframe activities, they have been recovering well since 2021. This good performance will continue into 2022, with an order book that is regaining a nice depth with interesting visibility." 

Sabena Technics is playing the proximity card 

While many industry experts thought that the Covid-19 crisis was likely to lead to consolidation within MRO shops, it seems that, in the end, this phenomenon did not occur. "Sabena Technics' positioning is focused on the "airframe" with a large presence in the provinces. In this field, I am not aware of any examples of airframe MROs with our volumes around us. Nor do I know of any examples of mergers or consolidation of "component" workshops. Consolidation has mainly occurred in the aircraft manufacturers' supply chain," says Philippe Rochet. "The story of Sabena Technics is nevertheless an example of consolidation in itself, from Dinard to Bordeaux via Nîmes. Just before Covid, in 2019, we took over NewEAS in Perpignan with its staff, infrastructure and the capabilities that the maintenance company represented. We do not regret this decision because we have managed to achieve a good level of activity in Perpignan and with very good European airlines. We are now in a rhythm of development of Perpignan and increase in staff ". Air France-KLM E&M. "To date, we can't say that there is a major consolidation of MROs. This was indeed mentioned during the crisis, but it hasn't happened yet," explains Anne Brachet, Executive Vice President of Air France-KLM Engineering and Maintenance. "On the other hand, we are doing a lot of partnering on our side. Historically, we have done so, for example, with Boeing on equipment for the B737 or B777. Typically, we recently announced a partnership with Triumph in the United States for nacelles. These partnerships can go as far as the creation of joint ventures, if necessary. This is the case for what was announced with Triumph, for the latest generation of nacelles, such as those for the 787. Each of the partners brings its own expertise to develop a market and provide support as close as possible to our customers' operations, in this case the United States. It is our strategy to continue and expand this partnership policy. This policy of all-out partnerships also enables Air France-KLM E&P to have the widest possible geographical coverage. "In Singapore, we have a joint venture with Sabena Technics, an equipment workshop. We have our own Bareld, in Miami, USA, which is also active in equipment. For dismantling, we also have a joint venture with Bonus Tech, also in Miami. We have two joint ventures with Safran, one dedicated to nacelle maintenance, based in Dubai, and the other, Airfoils Advanced Solutions, which repairs engine parts, near Valenciennes. For engine parts repairs, we also have CRMA, a wholly-owned subsidiary based in Elancourt (Yvelines). We also have Epcor, which specializes in APUs in the Netherlands. We also have a joint venture with Royal Air Maroc, based in Casablanca, which does maintenance on A320s and Boeing 737s. In Norwich, KLM UK Engineering, which is a wholly-owned subsidiary, does maintenance and aircraft inspections. In China, based in Shanghai, we have a wholly-owned subsidiary which is an equipment overhaul workshop. For many years now, we have been pursuing a policy of partnerships or developing our own business, whenever possible, to be close to the markets we want to cover, in the United States, China or, more generally, Asia. We always have areas where we have projects. The Americas is a very important zone, which is also the first to have recovered a high level of activity. But we have a fairly well-balanced network. We have locations everywhere, but we are listening to opportunities and ways of pursuing our partnership policy on a case-by-case basis," explains Anne Brachet. This approach is somewhat different from the strategy pursued by Sabena Technics, which wants to play the proximity card. "Our vision is to continue consolidating our offer in Europe before moving to the other side of the world. We believe there is still plenty of room for improvement in this market. MRO, and particularly airframe MRO, is primarily a local service. Over the past ten years, Sabena Technics has more than doubled its turnover. And I'm convinced that it will take less than ten years to double it again, because there are still major needs in Europe. We have customers who are very sensitive to their carbon footprint and avoid moving aircraft for nothing," says Philippe Rochet, president of the Sabena Technics group.

New connected ways of working 

The Covid19 crisis has not only had negative effects. It also allowed MRO operators to continue to evolve their o¢re, including accelerating the digitalization of the industry. "It is often the merit of times of crisis to generate and drive innovation and performance. This was reflected in a performance plan that we focused on the organization of our production and our supply chain. At the same time, we have steadily pursued our digitalization initiatives to optimize our businesses. We are paperless and have developed connected working methods from the mechanic to the support services," adds Philippe Rochet. "The crisis has forced us to restructure, but at the same time we have continued to develop digital projects, in particular to bring innovation and greater efficiency to our operations, and to develop predictive maintenance for the needs of the Group's airlines, but also for the benefit of other customers," adds Anne Brachet, Executive Vice President of Air France-KLM E&M. "We have set up a customer portal that enables us to be much more efficient in our interactions with them. Epcor, our subsidiary specializing in APUs, has set up remote inspections that allow customers to interact with the workshop virtually, without having to travel, and we are also doing this for engines. To avoid our customers having too much cash outflow, we have continued to develop "under-wing operations", which allow us to bypass very large repairs or downtime. Digitization has not only been developed at the level of predictive maintenance but also in our own operations, particularly at the level of operations control."

Find this article in its entirety in the MRO dossier of Air&Cosmos No. 2800 dated October 14, 2022.