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Aviation: Exploring Africa’s $2.4 Billion MRO Market

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Aircraft Maintenance, Repair And Overhaul (MRO) market has fluctuated in recent years. Currently, the aviation industry has indicated signs of recovery with considerable growing demand forecast over the next decade in certain regions. In this piece, ANTHONY AWUNOR writes on the challenges, potentials and way forward for MRO market in Africa.

In Africa, aircraft Maintenance, Repair And Overhaul (MRO) Market has been estimated to worth over US$2.4 billion and it is still  growing on daily bases. Unfortunately, this goldmine has remained untapped over the years in most parts of Africa.

Aircraft MRO is an essential requirement to ensure that aircraft are maintained in pre-determined conditions of airworthiness to safely transport passengers and cargo. The commercial aircraft MRO market is influenced by external factors in the wider air transport industry including global fleet size, aircraft utilisation and increasing and decreasing air traffic volumes for both passengers and cargo.

Currently african airlines MRO providers include: Air Algerie Technics, EgyptAir Maintenance & Engineering, Ethiopian Airlines MRO, Kenya Airways, Royal Air Maroc, Morocco, South African Airways Technical and TunisAir Technics.

Nigeria on its own part is making efforts to join the league of these providers following a recent breakthrough through diversification into aircraft maintainace with the establishment of a maitainance , repair and overhaul (MRO) facility by the oldest domestic carrier, Aero Contractors. So far, the airline has carried out the first C-Check on Boeing BB737 Classic in Nigeria after almost two decades.

Speaking at the 22nd Annual Seminar League Of Airports And Aviation Correspondents (LAAC) held recently in Lagos, Chief Executive Officer of African Aviation Srvices Limited, Mr Nick Fadugba said to achieve success in MRO business in Nigeria, for example, there should be a sound business plan & competent management to drive the process.

According to Fadugba, access to low interest rate funding, access to cheaper land from the Federal Airports Authority (FAAN), investment in modern hangar, tooling and manpower and partnerships with established international MROs such as airframes, engines and  components must be avaiable.

Speaking on his paper titled ‘MRO Financing‘, Fadugba said one of the benefits of African MROs is that it would spark off competition for foreign providers leading to more competitive pricing for African operators. He said such situation would also enhance time effect, create jobs and training for the local population while making substantial contribution to the local economy.

Enumerating African MRO barriers, Fadugba who stated that global competition cause barriers to entry for African MROs listed other chalenges as access to capital, tooling and lack of proper infrastructure, bureaucratic interference, sourcing, attracting, training and retaining a skilled workforce, reputation for performance and tolerance for risk.

On key challenges facing african airlines, Fadugba said most African Airlines are Small, with a Fleet size of less than 10 Aircraft, and don’t benefit from economies of scale. They have Weak Balance Sheets and frequent Management changes, which adversely impacts on their long-term planning. The Yamoussoukro Decision has not been fully implemented and many African Airlines face difficulties accessing air transport markets in Africa. In addition, the African market is  dominated by stronger foreign airlines who control over 70 percent of traffic to and from Africa. The Top 3 African airlines combined are smaller than Emirates.

Lamenting that there is no major MRO facility in West Africa as at today, Fadugba noted that the Nigeria’s National Hanger Project is still on the drawing board after many years of discussions while Arik Air and Lufthansa Technik did not have an MRO Partnership.

Although, the aviation expert confirmed that Aero has in-house MRO capabilities which he said, could be expanded,  he is equally worried if the facility has the necessary funds vis-à-vis its core business.

He listed potential customers base from airlines using MMIA to include: Aero Contractors, Air France, Air Italy, Arik Air, ASKY, British Airways, Brussels Airlines, Cargolux Airlines International, Dana Airlines, Delta Air Lines, EgyptAir, Emirates, Ethiopian Airlines, Etihad Airways, Iberia and Kenya Airways. Others are KLM Royal Dutch Airlines, Lufthansa, MEA, Med View Airlines, Overland Airways, Qatar Airways, RwandAir, Royal Air Maroc, South African Airways, Turkish Airlines etc.

While noting that Akwa Ibom MRO project needs aircraft customers, Fadugba believes West Africa and Nigeria in particular remains a potentially big MRO market, adding that “Airbus forecasts that between now and 2030 Africa will have an average annual passenger growth rate of 5.7 percent compared to a world average of 4.8 percent. Boeing predicts Africa will see RPK growth of 5.1 percent between 2010 and 2030, and cargo growth (RTK) of 5.2 percent . However, Africa represents  only around 3 percent of the total world air traffic, so there is still room for significant growth“.

On Aircraft fleet modernisation, he said “Airbus forecasts that airlines in Sub-Saharan Africa will require more than 528 new passenger aircraft by 2030, with a value of US$65 billion to cater for traffic growth and replace older aircraft. On the other hand, Boeing predicts that Africa as a whole will require 800 new aircraft between 2011 and 2030 worth US$100 billion. ATR, Bombardier, and Embraer are all bullish about Africa“.

Analysing MRO trends globally, Fadugba disclosed that most airlines today are concentrating on their core business of flying aircraft, earning revenue and maximizing yields, optimising product and minimising costs.

“Most airlines are looking for cost-effective solutions to address their MRO requirements / outsourcing arrangements, potentially with subsidiaries and through joint ventures. The larger MROs are providing a wider range of products to cater for higher levels of outsourcing by airlines.

Noting that older aircraft are being retired as new technology aircraft are entering airline fleets, he said there is high aircraft utilisation by low-cost carriers, who typically outsource their maintenance requirements.

The implications of such scenerio, Fadugba observed, means that new technology aircraft will generate fewer maintenance events, in the short-to-medium term.

While new technology aircraft are more complex and reliable and require more advanced and expensive MRO capabilities, he added that new skills, knowledge, capabilities are equallyrequired.

“Original Equipment Manufacturers (OEMs) are providing options at point of new aircraft sales:  Engines and components becoming more complex and reliable. Independent MROs impacted as OEMs grow market share. Outsourcing of engine and components overhaul is now a standard practice for most airlines. Airlines are opting for Pooling contracts with reliable component suppliers“, Fadugba said.

Stating that Africa is becoming an increasingly attractive to investors. Fadugba said that the key to MRO sucess is Clear understanding of market dynamics, becoming a reliable source for on-time delivery, quality and price and also aligning key performance indicators with airlines.

Appealing that Governmental support is also key to bringing investment into the local economy, the expert advocated that African MROs may need to partner so as to increase expertise, improve systems, develop worldwide marketing coverage and generate reciprocal business with suppliers

“MRO Business is Capital Intensive and High Technology. The best way forward for africa is co-operation, collaboration and win-win partnerships“, Fadugba advised.



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