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Sunday, April 1, 2007

Commercial: Global Maintenance from the Middle East

Douglas Nelms

A rapidly growing worldwide reputation has allowed Abu Dhabi’s aircraft maintenance company to become a formidable player throughout Europe, Southeast Asia, the Middle East and beyond.

The Gulf Aircraft Maintenance Company, or GAMCO, recently signed maintenance contracts with two relatively new Indian carriers, further justifying its planned growth as the leading Middle East aviation maintenance facility.

Late last year the Abu Dhabi, UAE-based company signed agreements with India’s Air Deccan and Kingfisher Airlines to provide MRO support for those airlines’ A320 jetliners. Air Deccan, formed in 1995, is India’s first low cost carrier while Kingfisher Airlines is India’s newest airline, commencing service in May 2005.

GAMCO also announced last year that it has signed with Iberia to provide full D-checks on that carrier’s A340-300, further expanding its European customer base. Past and/or current European customers include DHL, Air France, Thomas Cook Airlines, First Choice and My Travel. The company has also provided maintenance in the Middle East for U.S. companies such as Evergreen International Airlines, American Trans Air, Federal Express and the U.S. military.

To meet the growth in its customer base, GAMCO has already begun building new facilities to handle more, and larger, jetliners — including the giant Airbus A380 soon to be introduced into service.

GAMCO was created in 1987 as a joint venture between the government of Abu Dhabi and Gulf Air, with Abu Dhabi controlling 60 percent and Gulf Air 40 percent. The initial intention was for GAMCO to take over Gulf Air’s heavy maintenance requirements at GAMCO’s new facilities in Abu Dhabi, while light maintenance would remain in the hands of Gulf Air’s main base maintenance center in Bahrain. GAMCO also quickly announced its ability to handle third-party work.

With very little competition for aircraft maintenance in the Middle East during the 1980s and early 1990s, GAMCO quickly became the leading provider of maintenance in that region.

In 1999, under a $450 million contract signed between the government of Abu Dhabi and Gulf Air, GAMCO took over all the maintenance operations for Gulf Air, although work on the airline’s narrowbody aircraft remained in Bahrain.

At that time, Gulf Air was owned jointly by the governments of Abu Dhabi, Bahrain, Oman and Qatar. However, in 2005, the government of Abu Dhabi pulled its shares out of Gulf Air. As a result, early in 2006 Gulf Air pulled out of GAMCO, leaving the Abu Dhabi government as the sole owner. Qatar, which started Qatar Airways in 1994 as its own national carrier, also pulled out of Gulf Air.

Abu Dhabi had already started its own national carrier, Etihad Airways, in 2003, providing another "built-in" customer for its rapidly growing maintenance operation. Etihad currently has a fleet of 21 widebody aircraft, including 10 Airbus A330-200s, four A340-500s, one A340-300, one Boeing 767-300 and five 777-300ERs. It also has additional Airbus aircraft on order, to include four A380s.

Gulf Air pulled its maintenance out of GAMCO early last year, signing a $750 million, five-year contract with Zurich, Switzerland-based SR Technics, with plans for a new $50 million maintenance base in Muscat, Oman. In September 2006, SR Technics was purchased by a consortium of UAE investment bureaus, including Mubadala Development, a part of the Abu Dhabi government that will control 40 percent of SRT. The two other investors, Dubai Aerospace Enterprise, the aerospace investment arm of that emirates, and Istithmar, a Dubai-based investment holding company, will control 30 percent. The remaining shares will be retained by the management of SRT.

GAMCO had also undergone a change in upper management, with former Gulf Air President and CEO Dr. Al Nahyan becoming GAMCO chairman, as well as taking over leadership of all civil aviation in Abu Dhabi, including the chairmanship of Etihad Airways. Saif Al Mughairy was named general manager.

The Middle East is now one of the fastest growing markets for commercial jetliners, according to both Airbus and Boeing forecasts. Airbus predicts a growth of 6.4 percent between 2006 and 2025, primarily based on liberalization of the airline industry and a growing desire for travel to and from the Middle East. Greatest growth will be between 2006 and 2015, at 9.1 percent, slowing down somewhat between 2016 and 2025 to 4.9 percent.

While this growth will obviously increase the need for aircraft maintenance, it will not be proportionate. Additional aircraft for fleet growth will increase maintenance requirements, although those new aircraft plus the new aircraft purchased to replace older aircraft will not have the maintenance requirements of the aircraft they replace.

At the time of its split with GAMCO, Gulf Air had accounted for approximately a third the company’s maintenance work. Some of that loss will be absorbed by Etihad Airways. However, with its brand new fleet, Etihad is expected to account for only about 14 percent of GAMCO’s work this year.

While the new SRT consortium is still in the development phase as a new competitor, GAMCO currently competes primarily with three other Middle East maintenance facilities: Alsalam Aircraft Co., based in Riyadh, Saudi Arabia; Emirates Engineering in Dubai; and Falcon Aircraft Maintenance based at Sharjah International Airport designed to support Qatar-based Air Gulf Falcon. However, Alsalam was primarily planned to handle Saudi Arabian Airlines plus the Saudi military maintenance requirements while Emirates and Air Gulf Falcon primarily support their own airlines with some additional third-party work. Alsalam is also 50 percent owned by Boeing Industrial Technology Group, which pushes it toward favoring Boeing aircraft. Its Airbus certifications include only the A300 and A320 series aircraft. However, Alsalam is heavily into VIP corporate aircraft maintenance. While GAMCO is certified to work on the Boeing business jet version of the 737 and Airbus corporate jet version of the A318/A320, corporate VIP maintenance is not an area in which GAMCO is particularly involved.

While GAMCO is primarily a commercial operators facility, it does do work on military aircraft. It has been appointed by Lockheed Martin to be an Authorized Service Center for the C-130 Hercules used in some 16 countries in the Middle East, Africa and Asia, including the Dubai Air Wing. It also provides maintenance for the British RAF Lockheed L-1011 TriStars and for operators of the Dassault Mirage 2000. It was selected to provide depot maintenance for the GE F110-132 engine used to power the Lockheed Martin F-16.

GAMCO also is certified to perform overhaul maintenance on the Eurocopter SA342L Gazelle and AS332 Puma (AS532 Cougar) family of helicopters as well as Bell 205, 206 and 212 helicopters.

GAMCO struggled financially up until the past five to six years, but has shown a steadily increasing profitability since the turn of the century. It showed a 20 percent increase in revenues between 2004 and 2005, going from $292 million to $350 million, while profits rose 105 percent, from $11.7 million in 2004 to $24 million in 2005. For the first eight months of 2006 (latest figures available) GAMCO generated revenues of $196.87 million, a slight drop over revenues for the same period 2005, although total profits increased to $18.52 million. In announcing the financial results, Al Nahyan said that the improved profit "confirms the success of our efforts to reduce costs and increase profits…a key element of our strategy to position GAMCO for sustained profitable growth."

Al Nahyan also noted that the company’s "most valuable investment lies in human resources," with special attention applied "to employing a grown number of graduate nationals with aviation background, as well as other administrative staff." For the first five years of this decade, GAMCO’s employee numbers have more than doubled, from around 1,000 to 2,200.

GAMCO is diversified into major core units including civil and military airframe MRO, large and small engine MRO, components overhaul and industrial engine repair and overhaul services.

The company has four hangars at its facility at Abu Dhabi International Airport: a 12,268 square meter main hangar capable of holding four widebody aircraft; a 2,500 square meter narrow body hangar; a 10,000 square meter hangar built for the upcoming A380s; and a 4,000 square meter paint hangar. It is currently building a new hangar designed to simultaneously hold three 777s. The 777 hangar will expand the company’s capacity by 30 percent and is expected to be finished next year. Although Etihad’s A380s have not yet been delivered, the A380 hangar is currently in use and can hold three to four widebody simultaneously, depending on the size of the aircraft. All of the current hangars are now fully booked up to May of 2008.

GAMCO has certificates to provide full service maintenance up to D-checks on Boeing aircraft to include the 737 NG, all 747s except the -400, 767 and 777, and all current members of the Airbus family, from the earliest A300-B2 to the A340-500/600. Current plans call for the company to get certification for the Airbus A380 and potentially the 787 and the A350XWB as soon as those aircraft become operational. Other capabilities include both minor and major periodic inspections, line maintenance, repairs and modifications, and implementation of aging aircraft programs.

GAMCO’s latest customer is a new low-cost business-class only French carrier that started 757 service between Paris’ Orly airport and New York on January 2 following wingtip modification, painting and interior completion of its 757-200 at GAMCO’s Abu Dhabi facility late last year. The winglet installation of Boeing Blended Winglets to replace the standard 757 wingtips required removal of roughly six feet of skin from the upper and lower wing surfaces, reinforcement of stringers, and installation of adaptor plugs and the winglets. Al Mughairy said that the capability of GAMCO to do the modification, along with the certification to do it, "is a huge boost to our business. With high fuel prices contributing to such a large percentage of an airline’s expenses, investing in Blended Winglets makes sense even for older aircraft." A 757 with the Blended Winglets reduces fuel burn by up to 5 percent, he said, adding that the new capability is being expanded to include winglets for the 737. The cabin upgrade included installation of 90 fully adjustable premium business-class seats in the entire cabin, together with individual entertainment system. In announcing the contract with GAMCO, the airline said that future plans are to expand into the Middle East, the Persian Gulf and Eastern Europe.

GAMCO’s engineering department has achieved European Aviation Safety Agency (EASA) Part 21J Design Organization Approval. This approval will allow GAMCO to develop and independently approve deviations from published design standards that might be required during aircraft, engine and component maintenance on European registered aircraft. GAMCO has also achieved ISO9001 certification.

Along with its airframe maintenance programs, GAMCO also has a very active engine overhaul capability to include being both a module change facility and module overhaul facility, according to Ali Hussain Al-Hosani, manager, large engine overhaul division.

The engine facility is the only overhaul facility in the region for the CF6-80C2 and CFM56-5A. The CF6-80C2 capability is significant in that it is the most popular type of engine operating on Middle Eastern airliners, controlling a 28.4 percent market share out of more than 600 turbine engines. The company also does module change and testing of the Rolls-Royce Trent 700 engine, and expects to get certified for overhaul of the engine this year, Al-Hosani said. GAMCO does the split and mating of modules for the GE90, although GE does the overhaul and testing. It also provides complete overhaul, refurbishment and modification work on the Rolls-Royce RB211-524 and -22B.

In the area of avionics, GAMCO does about 30 percent of repair and testing on its equipment, with the rest done by the manufacturers "But this is growing," according to Stefan Bobtchev, development engineer. "The use of software and fly-by-wire is growing, becoming the new concept, so it eventually will be 50 percent. All the systems are becoming computerized and more sophisticated."

GAMCO’s avionics division is currently certified to perform light and heavy maintenance on systems such as TCAS, ACARS, GPWS, EGPWS, SATCOM, FQIS, RVSM mods and In-Flight Entertainment (IFE) system.

GAMCO has teamed with Thales to provide additional repair and testing of the customers’ in-flight entertainment systems. Currently GAMCO maintains about 25 percent of the IFE components, "but we are expanding those capabilities and by the end of 2007 should do about 60 percent," Bobtchev said. GAMCO also has a repair facility in Toulouse, France, under a joint venture with Thales IFE repair center.

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