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MRO FACILITIES For the Americas Region MRO FACILITIES For the Americas Region
Presented by:Presented by:
Las Vegas, NV, USANovember 9, 2005
Las Vegas, NV, USANovember 9, 2005
“Plenty of” Room for Growth“Plenty of” Room for Growth
Jonathan M. BergerVice President – Technical ServicesSH&E, Inc.
Jonathan M. BergerVice President – Technical ServicesSH&E, Inc.
1
OverviewOverview
MRO Industry Dynamics
Facilities, Capacity, and Capabilities
Latin America – Primed for Growth
The History of MRO and Next Generation
MRO Industry Dynamics
Facilities, Capacity, and Capabilities
Latin America – Primed for Growth
The History of MRO and Next Generation
2
MRO Facilities – Industry DynamicsMRO Facilities – Industry Dynamics
Industry downturn
New generation aircraft and engines
Outsourcing trend
Military base closures
Industry downturn
New generation aircraft and engines
Outsourcing trend
Military base closures
Industry Trends Have Resulted in a Glut of MRO Facility Vacancies and Excess CapacityIndustry Trends Have Resulted in a Glut of
MRO Facility Vacancies and Excess Capacity
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Vacant MRO FacilitiesVacant MRO Facilities
Delta in Tampa & Dallas
USAirways in Tampa & Pittsburgh
Northwest in Atlanta & Duluth
United in Oakland
Ex-Ozark in Bentonville, Arkansas
Ex-Commodore in Miami
AMC in Portland
Ex-Tower & Ex-TWA in JFK
Matrix in Tijuana
Delta in Tampa & Dallas
USAirways in Tampa & Pittsburgh
Northwest in Atlanta & Duluth
United in Oakland
Ex-Ozark in Bentonville, Arkansas
Ex-Commodore in Miami
AMC in Portland
Ex-Tower & Ex-TWA in JFK
Matrix in Tijuana
A Large Number of Facilities Are Currently Available and Seeking Owners/Tenants
A Large Number of Facilities Are Currently Available and Seeking Owners/Tenants
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MRO Facilities – Recent DevelopmentsMRO Facilities – Recent Developments
New Construction
– GOL: Brazil (2005)
– JetBlue: Orlando (2005)
– AirTran: Atlanta (2004)
– Southwest: Dallas (2003)
Leases
– AAR: IMC, Indianapolis (2005)
– IAI/Bedek: Empire Aero, Rome NY (2003)
New Construction
– GOL: Brazil (2005)
– JetBlue: Orlando (2005)
– AirTran: Atlanta (2004)
– Southwest: Dallas (2003)
Leases
– AAR: IMC, Indianapolis (2005)
– IAI/Bedek: Empire Aero, Rome NY (2003)
Even With Excess Facilities Available, New Hangars Are Being Built
Even With Excess Facilities Available, New Hangars Are Being Built
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Airframe MROs – The Americas Top 10 by VolumeAirframe MROs – The Americas Top 10 by Volume
Varig E&M Joins the Top 10 for the First Time
Source: Overhaul & Maintenance Magazine – May 2005
Varig E&M Joins the Top 10 for the First Time
Source: Overhaul & Maintenance Magazine – May 2005
VEMVEM
Cascade Aerospace
Avborne
Evergreen Air Center
AAR Aircraft Services
Pemco Aviation Group
Air Canada Technical Services
Goodrich Aviation Technical Services
ST Aerospace (Mobile & San Antonio)
TIMCO Aviation Services
Cascade Aerospace
Avborne
Evergreen Air Center
AAR Aircraft Services
Pemco Aviation Group
Air Canada Technical Services
Goodrich Aviation Technical Services
ST Aerospace (Mobile & San Antonio)
TIMCO Aviation Services
650K650K
750K750K
798K
920K920K
999K999K
1.20M1.20M
1.30M1.30M
2.80M2.80M
3.30M3.30M
4.70M4.70M
2004 3rd Party Airframe Maintenance (Total Man-hours)2004 3rd Party Airframe Maintenance (Total Man-hours)
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Major North American MRO Providers Major North American MRO Providers
•• ACTSACTS•• American M&EAmerican M&E•• Delta Delta TechOpsTechOps•• United ServicesUnited Services
AirlinesAirlinesAirlines
•• AAR AAR •• AvborneAvborne•• CascadeCascade•• ChromalloyChromalloy•• Empire AeroEmpire Aero•• EvergreenEvergreen•• PemcoPemco•• MTUMTU•• ST AerospaceST Aerospace•• Timco Timco
IndependentsIndependentsIndependents
•• GEGE
•• Pratt & WhitneyPratt & Whitney
•• Rolls RoyceRolls Royce
•• HoneywellHoneywell
•• Rockwell CollinsRockwell Collins
•• Hamilton Hamilton SunstrandSunstrand
•• Goodrich Goodrich
•• NordhamNordham
•• Middle RiverMiddle River•• EADSEADS
•• GoodrichGoodrich
OEMsOEMsOEMs
Key to Success:Scale & Long Term AgreementsKey to Success:Scale & Long Term Agreements
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Major Latin American MRO ProvidersMajor Latin American MRO Providers
ChileChile
LAN
BrazilBrazil
Varig E&M
TAM
GE Celma
PeruPeruAIPSAC
SEMAN
Costa RicaCosta Rica
Coopesa
El SalvadorEl Salvador
Aeroman (Grupo TACA)
MexicoMexico
Aeromexico
Turborreactores
Mexicana
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Latin American MROs Are Poised for SuccessLatin American MROs Are Poised for Success
Low labor rates
Proximity to large North American market looking to outsource
Continued growth of Latin American airline industry
Stable, high quality workforce
Demonstrated performance and credibility
– Aeroman supporting JetBlue and America West
– VEM with B767 pax-cargo conversions
Low labor rates
Proximity to large North American market looking to outsource
Continued growth of Latin American airline industry
Stable, high quality workforce
Demonstrated performance and credibility
– Aeroman supporting JetBlue and America West
– VEM with B767 pax-cargo conversions
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Ten MROs Lie Within Easy Access of the Miami, Atlanta and Houston Markets – Ideal for Narrowbodies and RJsTen MROs Lie Within Easy Access of the Miami, Atlanta and Houston Markets – Ideal for Narrowbodies and RJs
2,000 Milesfrom HOU
2,000 Milesfrom MIA
Guadalajara
ATL
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South American MROs Require Greater Ferry Times, and Therefore Are Better Suited for Widebody AirframesSouth American MROs Require Greater Ferry Times, and Therefore Are Better Suited for Widebody Airframes
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Challenges Facing Latin American MRO ExpansionChallenges Facing Latin American MRO Expansion
Efficient material handling and customs clearance
Acceptance of Continuous Improvement Programs
Competition from China and SE Asia
Dependence on parent airline
US political backlash from “off-shoring” concerns
Antiquated IT systems
Efficient material handling and customs clearance
Acceptance of Continuous Improvement Programs
Competition from China and SE Asia
Dependence on parent airline
US political backlash from “off-shoring” concerns
Antiquated IT systems
While the Future Looks Good, Challenges RemainWhile the Future Looks Good, Challenges Remain
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MRO – A Historical PerspectiveMRO – A Historical Perspective
Industry is Moving Toward MRO Management FirmsIndustry is Moving Toward MRO Management Firms
OneOne--StopStop--ShopShop
Engineering & PlanningAirframeEngines
ComponentsLine
Air
line
Prior to 1990
All Work In-HouseAll Work InAll Work In--HouseHouse
AirframeEngines
ComponentsMR
Os
Core CompetencyCore Competency
Engineering& Planning
LineAir
line
1990 - 2005
Partial Outsourcing of Work
Partial Outsourcing Partial Outsourcing of Workof Work
OneOne--StopStop--ShopShop
Engineering & PlanningAirframeEngines
ComponentsLine
MR
O M
gm
t. F
irm
2005 - ?
All Work OutsourcedAll Work OutsourcedAll Work Outsourced
13
MRO Industry – The Next GenerationMRO Industry – The Next Generation
Ultimately will drive aircraft manufacturers’ to pursue aftermarket revenue stream
Successful strategy for Engine OEM’s (e.g. Rolls Royce and GE)
Ultimately will drive aircraft manufacturers’ to pursue aftermarket revenue stream
Successful strategy for Engine OEM’s (e.g. Rolls Royce and GE)
Intense Competition Between Aircraft Manufacturers’ Will Continue to Reduce Aircraft Prices and Profit Margins
Intense Competition Between Aircraft Manufacturers’ Will Continue to Reduce Aircraft Prices and Profit Margins
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MRO Industry – The Next GenerationMRO Industry – The Next Generation
Focus on core business functions (flying passengers);more MRO outsourcing
Need to reduce operating risks and capital expenditures
Strong desire to shift volatile variable costs to predictable costs; hence, the advent of the PBH
Focus on core business functions (flying passengers);more MRO outsourcing
Need to reduce operating risks and capital expenditures
Strong desire to shift volatile variable costs to predictable costs; hence, the advent of the PBH
At the Same Time…Operators Continue to Search for a Sustainable Business Model
At the Same Time…Operators Continue to Search for a Sustainable Business Model
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MRO Industry – The Next GenerationMRO Industry – The Next Generation
Aircraft manufacturers’ developing programs modeled after the automobile leasing business
– Maintenance burden bundled with aircraft purchase / lease
– Includes negotiated service level / aircraft availability guarantees
– Eliminate the need for Operators to invest and carry inventory
Impact to MRO’s
– Change of primary customers base – the aircraft manufacturer
– Drive the implementation of sophisticated, integratedIT systems
Aircraft manufacturers’ developing programs modeled after the automobile leasing business
– Maintenance burden bundled with aircraft purchase / lease
– Includes negotiated service level / aircraft availability guarantees
– Eliminate the need for Operators to invest and carry inventory
Impact to MRO’s
– Change of primary customers base – the aircraft manufacturer
– Drive the implementation of sophisticated, integratedIT systems
The Combination of These Two Forces Will Result In…The Combination of These Two Forces Will Result In…
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SH&E MRO Consulting ServicesSH&E MRO Consulting Services
Strategic Business Planning
MRO Outsourcing Strategy: From RFP Development to Contract Negotiation Support
MRO Cost & Performance Benchmarking
Supply Chain Management
LEAN Continuous Process Improvement Implementation
Sales, Marketing & Pricing Strategy
Safety & Compliance Audits
Cabin Interior Program Management
Strategic Business Planning
MRO Outsourcing Strategy: From RFP Development to Contract Negotiation Support
MRO Cost & Performance Benchmarking
Supply Chain Management
LEAN Continuous Process Improvement Implementation
Sales, Marketing & Pricing Strategy
Safety & Compliance Audits
Cabin Interior Program [email protected]
www.sh-e.com
www.sh-e.com
