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www.avm-mag.com Jim Keenan SVP United Technical Operations
Jim Keenan Senior Vice President United Technical Operations
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Where is the state of the commercial aviation maintenance industry? The MRO industry has been in a phase of tremendous change, and I expect this transformation to continue. Prior to deregulation, most airlines were vertically integrated, i.e., they performed virtually all of their maintenance in-house. As post-deregulation pressures increased, notably the emergence and growth of low-cost carriers, network carriers struggled to reduce their cost structure to compete more effectively. As a result, the industry has become much broader, first with independent MROs and then OEMs looking to enhance their share of aftermarket business. The many shocks that have impacted the industry in the past 10-15 years (geo-political unrest, 9/11, fuel price increases, and the current global economic slowdown) promise to continue if not accelerate the pace of change, for both the airline industry overall and for MROs. How is 2012 looking so far in terms of the health of the industry? Is 2012 the comeback year? Similar to 2011, I expect 2012 to be a challenging year for the industry with high fuel prices driving the need for cost-reduction and capacity restraint. Cost containment, as well as continued expansion of ancillary revenues and fuel surcharges, will help to mitigate these pressures somewhat. I would not call it a “comeback year.” Do presidential (or global) politics impact your business? Absolutely. One example particularly important to the MRO industry is the ongoing debate over potentially restricting competition through limits on use of foreign repair stations. We are pleased that the latest FAA reauthorization bill does not place anti-competitive restrictions on the industry, but we can expect these debates to continue. How’s the regulatory environment right now? Is there any legislation coming up that might impact your business? United is vigilant about following all regulatory discussions in Washington because we know there are always political issues that can affect carriers, OEMs, independents and our entire industry. Also, I must point out that, along with traditional income and payroll taxes, airlines and our customers pay many special taxes and fees to a variety of authorities, both at home and abroad. Among these are maintenance taxes. U. S. and foreign taxes have grown in number, amount, and
José Luis Quirós Senior Vice President Commercial and Business Development Iberia Where is the state of the industry?
José Luis Quirós Senior Vice President Commercial and Business Development Iberia
The MRO business is definitely entering into a transformation period where the OEMs are playing a much more active role in the after sales services, with the consequent defensive moves taken by airlines and independents. The manufacturers, by extending their activity to the maintenance services, will offer to the operators some benefits, from deep knowledge of the product to direct responsibility to correct design problems affecting maintainability, although there are also undoubted associated risks, like transferring non recurrent and even direct manufacturing costs to the maintenance services. Also mergers and consolidations between MROs, sometimes driven by airline’s mergers, and large investment groups are changing the landscape of this industry, generating synergies that lead to cost efficiency. How is 2012 looking so far in terms of the health of the industry? Is 2012 the comeback year? From our perspective, MRO activity still have reasonable margins that guarantee the level of investment required to follow development of technologies applied to products. In terms of growth, it should not be extremely conservative to foresee an overall 3.5 percent over 2011. We do still see overcapacity as the main challenge MRO Industry have to face, although we expect some workload recovery along 2012, but it would be very difficult to name it “the comeback year.” Do global politics impact your business?
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It is almost impossible to not find traces of impact of geopolitics in this industry. In the first place, it affects airlines in many different ways, from interest in certain destinations to fuel prices, a major cost driver in this activity. Also the political instability in typical low cost labor regions, where MRO businesses started to develop some years ago, is preventing some customers to allocate their assets in there. On the opposite, the reduction of the airline activity in the aforementioned regions is also diminishing their maintenance needs, with subsequent loss of business in the global figures. How’s the regulatory environment right now? Is there any legislation coming up that might impact your business? The reinforcement of environmental regulations makes this area the one where the Industry shall put more efforts in order to adjust itself to the new frame. Not only exhaust emissions, with the
22 Aviation Maintenance |
avm-mag.com | April / May 2012
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