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Saturday, August 1, 2009

Intelligence: News

Special Report: Not Your Usual Paris Air Show

The worldwide economic downturn put a cloud over this biennial exposition, but it didn’t totally dampen spirits. Editor-at-Large David Jensen’s coverage from the Paris Air Show, held in June, is featured throughout this month’s Intelligence section.

At first blush, it appeared like past Paris Air Shows: screaming fighter jets corkscrewing into the sky, a plethora of aircraft parked wing-to-tail along a blocks-long flight line, and a throng of aviation professionals and enthusiasts scurrying like ants in halls among the displays. Indeed, despite the absence of key original equipment manufacturers (OEMs), such as Cessna Aircraft and Gulfstream Aerospace (which reportedly find the European Business Aviation Conference & Exhibition [EBACE] a more fruitful venue), show officials could claim the number of exhibitors this year (more than 2,000) exceeds that of all the previous 48 Paris Air Shows.

However, it didn’t take long to sense a distinct mood at this year’s exposition. It was quieter, less exuberant. And, not surprisingly, virtually every conversation and media briefing referred to the current, worldwide economic downturn. Many exhibitors brought fewer of their staff to Paris, and some closed their chalets early. Have "lean" manufacturing and support practices been applied to air show participation? Apparently so.

There seemed to be no sense of gloom, however. Perhaps because the industry has witnessed economic ups and downs before or because its developmental lead times make it accustomed to looking years into the future, the attitude appeared to be that today’s worldwide recession, too, will pass and that this is a good time to do business in preparation for a recovery.

Boeing gave one of the most upbeat economic outlooks, even though it cut production rates this year and suffered more than 60 order cancellations, primarily for its new 787, which did not make its maiden flight by show time, as some had hoped. "We may have reached bottom in freight and air traffic, and we’re perhaps bouncing off the floor," said Scott Carson, executive vice president for Boeing Commercial Airplanes. Foreseeing a "long-term, robust" commercial aviation market, Carson believes the current credit squeeze will end soon, and the recovery could begin as early as mid 2010, "even a modest recovery in late ‘09."

Carson said Boeing revised its 20-year forecast, and the company now predicts a global commercial fleet of 35,600 aircraft by 2027, 200 fewer than before the revision. Boeing sees a strong single-aisle market because carriers will be offering more flight choices and more direct routes to destinations. Carson acknowledged constraints such as environmental regulations, but predicted the certification of low-carbon fuels within two to three years and a carbon-free aviation industry by 2040.

Other economic forecasts were not as upbeat. Louis Gallois, chief executive of Airbus parent EADS, wouldn’t predict either the depth of the recession or the timing of a recovery. Mairead Lavery, vice president, strategy and business development for Bombardier, said his company anticipates "continued volatility" in the industry in the near term but adds, "the market fundamentals are strong in the long term." Over the next 10 years, Bombardier forecasts the delivery of 11,500 business aircraft worth $256 billion and 12,400 commercial aircraft in the 20- to 149-seat market worth $589 billion, according to Lavery. Another Bombardier official confided that while sales activity was "totally flat" during this year’s early months, there has been "some activity" recently. Perhaps most downbeat was the Intl Air Transport Association (IATA), which nearly doubled its March prediction of airline losses in 2009, from $4.7 billion to $9 billion. IATA’s director general and CEO, Giovanni Bisignani, also warned that a glimmer of economic hope "can send oil prices higher."

It should be noted that this year’s Paris Air Show wasn’t devoid of new aircraft orders. For example, Qatar Airways signed a contract at the show for 24 A320s powered by V2500 engines. But the number of orders were dwarfed by those from past shows. OEMs, therefore, tended to talk more of new green technologies, aircraft sustainability and the much-anticipated economic recovery. — David Jensen, Editor-at-Large

Etihad’s Big Expansion Benefits ADAT

Despite the aviation industry’s unclear economic outlook, many of the major maintenance, repair and overhaul (MRO) companies exhibiting at Paris, could report expansion in business and capabilities. Not surprisingly, Abu Dhabi Aircraft Technologies (ADAT) plans to significantly increase engine repair and overhaul capacity, taking in more engine types. It is not surprising because its principal customer, Etihad Airways, announced at Paris a record $7-billion order for 239 engines, plus 19 spares, to power the 100 aircraft the Abu Dhabi-based airline has on order. (Etihad holds options for 105 additional aircraft, which means the potential engine order could reach 469, worth $14 billion.) To service Etihad’s aircraft and engines, ADAT signed several key agreements at Paris. One, with GE, will make ADAT the world’s first MRO network provider for the GE GEnx-1B and -2B engines. This corresponds with Etihad’s announcement at Paris that it will acquire 78 GEnx-1B engines to power its 35 Boeing 787-9s on order. The GEnx engine, incidentally, made its maiden public appearance at the Paris exposition. ADAT is also set to become a member of GE’s network of On-Wing Support (OWS) service providers, initially focusing on the GE90 engine and subsequently adding the GEnx. Ten 777-300ERs, also part of Etihad’s new aircraft order, will be powered by the GE90-115B, for which ADAT will establish a modular capability. ADAT also signed an agreement with Intl Aero Engines (IAE — a consortium comprising Pratt & Whitney, Rolls-Royce, MTU Aero Engines and Japan’s Aero Engines Corp.) to become, by 2011, the Middle East’s first IAE-approved shop for the V2500-A5 and V2500 SelectOne engines. Etihad ordered 44 V2500 SelectOne powerplants for the 20 Airbus A320s it ordered. Adding to its Etihad business, ADAT will seek maintenance and repair work on the GEnx and V2500 engines from customers throughout the Mideast and North Africa. In addition, the MRO announced an agreement with Engine Alliance (EA — a Pratt & Whitney/GE partnership) to become an EA-branded repair and overhaul provider for the GP7200 engine in the region. Thus it will be capable of servicing the 45 engines Etihad ordered for its 10 A380s. Software and hardware upgrades will be made to ADAT’s single engine test cell to accommodate the new engine types. Expansion in engine-maintenance capabilities represents only part of ADAT’s growth. Its new paint hangar has been operational for about six months, and in the August/September 2010 timeframe, the MRO plans to open a new maintenance hangar capable of taking in three Boeing 777s at Abu Dhabi Intl Airport. Ian Wolfe, ADAT’s chief commercial officer, told AM the company also is constructing a new and expanded wheel and brake shop, mainly to support Etihad’s fleet expansion. He reported that ADAT’s airframe overhaul work, representing some 40 percent of its business, has grown in both revenue and man hours, the latter expected to reach two million this year.

Growth Continues at Other MROs

ADAT wasn’t alone in announcing growth. GE Aviation, StandardAero and the Canadian low-cost carrier, WestJet, signed a 12-year deal at Paris valued at $850 million. It covers the MRO of CFM56-7 engines powering WestJet’s 79 Boeing 737NGs. Under the agreement, GE will supply the material and high-technology component repair to StandardAero, which will provide the engine MRO. WestJet’s engines will be serviced at StandardAero’s Winnipeg facility. Construction of an 80,000-square-foot facility currently is taking place to house maintenance and overhaul of the GE CF34 engine for regional aircraft. The new facility, which is scheduled to be operational later this summer, will have the capacity to overhaul 300 engines annually, according to Ian Smart, StandardAero’s senior vice president of airlines and fleets. Ground-breaking was scheduled to take place in July for the second expansion, which will provide an additional 25,000 square feet for CFM56-7 work. Smart said this facility will be able to overhaul 50 engines a year. Each expansion will include a new engine test cell; both cells will be able to test the CF34 and CFM56-7 engines.

ST Aero, Xiamen Partner

MRO giant ST Aerospace reported at Paris that it has established a joint venture with Xiamen Aviation Industry Co. to build a new engine repair and overhaul business, ST Aerospace Technologies (Xiamen) Co. (STATCO), in the southeast Chinese city of Xiamen. ST Aerospace president Tay Kok Khiang told AM the 306,770-square-foot facility, which will work on CFM56-5s and -7s and have the capacity of overhauling 300 engines annually, will be operational by the end of this year.

Further expansion in China includes a second maintenance facility in Shanghai. Built for the Shanghai Technologies Aerospace Co. (STARCO), a joint venture with China Eastern Airlines, the new facility will include ST Aerospace’s first hangar large enough to house the A380. Constructed at Shanghai’s Pudong Intl Airport, the new hangar will be near STARCO’s two hangars at Shanghai’s other airport, Hongqiao Intl. Combined, the three hangars can take in up to six widebodies and three narrowbodies for airframe maintenance simultaneously.

Outside of Asia, ST Aerospace also is expanding, having acquired STA Solutions (formerly SAS Component) in Europe and set up a new airframe maintenance and overhaul facility in Panama.

In addition, the Singapore-based company currently is working with GE to install the tooling necessary to make its subsidiary, STA Engines, an On Wing Support provider for the GEnx-1B and -2B engines. In January, ST Aerospace signed a 20-year agreement with GE to provide the service.

ST Aerospace’s president said his company’s network of facilities, in nine countries, can work on a total of 25 widebodies and 43 narrowbodies at one time.

He emphasized, however, that while half of the work comprises airframe overhaul, growth has been in component and engine repair. ST Aerospace has enjoyed a steady increase in revenue from 2001 to 2008, and its worldwide workforce has grown to about 8,000 employees.

Moving Business to Brazil

TAP Maintenance & Engineering made no announcement at the Paris exposition, but told AM it currently is expanding Airbus maintenance and overhaul in Brazil, which the Lisbon, Portugal-based company attained when it purchased Varig Engineering & Maintenance in 2005. The centers, in Rio de Janeiro and Porto Alegre, once worked largely on Boeing aircraft; however, TAP-Portugal, which primarily services Airbus aircraft, started transferring Airbus overhaul and maintenance to Brazil last year. TAP-Brazil has been working on A310 and A300-600 aircraft, and according to marketing sales director Armando Ferreira, it is expected to receive FAA certification in July and EASA certification in August to provide repair and heavy maintenance on the A330 and A340 in the South American country as well.

"When the economy picks up, we will be shifting more and more of our [Airbus] widebody work to Brazil. Our capacity in Lisbon is limited," said Ferreira, referring to TAP’s base in Portugal. TAP recently integrated its Portuguese and Brazilian sales and marketing teams, and presented itself at the air show as a fully unified, transatlantic company.

Consolidation at SR Technics

SR Technics, a Swiss-based sister company to ADAT, didn’t announce facilities expansion. Indeed, it has closed its Dublin, Ireland, maintenance center and will be fully removed from the site by this year’s third quarter. It did introduce at Paris an equal maintenance package for the A320 family of aircraft.

Called an "E-check," this service was designed to reduce aircraft down time by 17 days over a six-year period by converting the traditional A- and C-check tasks into a sequence of 36 labor packages. Each package takes eight hours, which means it can be completed overnight. SR Technics launched this concept with easyJet and now offers it to the commercial aircraft market. In addition, ADAT’s Ian Wolfe said his company and SR Technics plan to work jointly in expanding its component repair capability. "We’re looking at avionics particularly," he told AM. "That’s our next big growth opportunity."

Servicing the SuperJet

An aircraft receiving considerable air show hype was the Sukhoi Superjet 100 (SSJ100), which made its first public appearance at Paris. Russia’s Avialeasing signed a firm order at Paris for 24 of the 100-seat regional jets (with options for an additional 16 SSJ100s) in a deal valued at $715 million, and Hungarian carrier Malev signed a letter of intent at Paris to purchase 30 Superjets (half firm orders and half options) worth about $1 billion. Superjet deliveries are to begin in 2011, which has Superjet Intl busy in establishing the aircraft’s aftermarket support. Superjet Intl, which is 51 percent owned by Alenia Aeronautica and based in Venice, Italy, is responsible for the SSJ100 worldwide logistic support, as well as marketing the regional jet in most regions outside Russia. Sukhoi, which owns the company’s remaining 49-percent share, markets the aircraft in Russia. In turn, Superjet Intl has selected Lufthansa Technik Logistik to manage spares distribution centers around the world for the SSJ100. According to Patrick Sullivan, Superjet Intl’s head of customer relations in North America, the joint venture company has its maintenance planning document "about 85 percent complete." It wants to establish a worldwide MRO network in which SSJ100 customers will deal directly for airframe overhaul and other services. Superjet Intl will supply each MRO with the tools, technical documents and training necessary for servicing the SSJ100 free. The company announced its first memorandum of understanding (MoU) with an MRO — Nayak in Colon, Germany — to become a factory authorized SSJ100 repair and overhaul center. Nine other MROs have signed letters of intent to achieve such authorization. In Russia, Superjet Intl is working with its initial customers, Aeroflot and Armavia, to establish full support capabilities. Both Superjet Intl and PowerJet, which manufactures the SSJ100’s SaM-146 engines, will encourage customers to adopt power-by-the-hour maintenance support and, through a phased-maintenance schedule, forego the A-, C- and D-check arrangement. PowerJet, a partnership of Snecma and Russia’s NPO Saturn, plans to have technical teams dedicated to each SSJ100 customer. Superjet Intl anticipates Russian type certification and first delivery of the SSJ100 this year and EASA certification in 2010. Wolf-Eckard Herholz, head of technical support, said the company foresees Superjet sales beginning in Russia, then expanding into Europe, then the rest of the world outside of North America and, finally, in North America.

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