MTU Update
Recorded at the Singapore Airshow, 7 Feb 2018
MTU Senior VP MRO Programs Leo Koppers discusses growth in Asia’s engine MRO sector and MTU’s plans for expanding its facilities in the region. MTU has a joint venture engine repair facility in Zhuhai with China Southern Airlines and a joint venture engine component facility in Kuala Lumpur with Lufthansa Technik. Capacity in Zhuhai will be doubled over the next few years as MTU pursues a strategy of expanding existing facilities rather than opening new shops or pursuing new JVs.
Transcript
Leo KoppersThis is a part of the world that we always have been heavily participating into. Since 1990, we are participating in Singapore airshows, we established in 2000 our own engine shop together with China Southern Airlines in China, in Zhuhai, and so it's a part of the world that grows rapidly. It's important to our business today and in the future.
If you look back over the last 10, 15 years, there is a change in that sense that airlines are much more conscious about their engine maintenance costs and much more focused towards how the cost of engine maintenance is developing and, of course, they're trying to develop protection mechanisms in the form of flight by hour agreements or in the form of fixed price or not to exceed type of agreements. The biggest challenge in this region is to cope with the growth. This region is gonna grow from around about $10 billion of engine MRO revenue in the next 10 years to about $20 billion of MRO revenue and will, by 2035, probably be bigger than the United States and the European engine MRO market together. The challenge that companies, such as ourselves, have is to grow with that growth and make sure that we have capacity available to serve that market.
There are a couple of things that you need to understand. This is a relatively young airline community and as a result of that, they operate also a relatively young fleet. The Chinese Southeast Asian fleets are among the youngest fleets in the world. What is coming the next couple of years is that these engines from these new aeroplanes are seeing shop visits, some of them fro the first time. What we're doing is we're working with these airlines to get them, in an early stage, up to a level where everybody understands what is coming to them. We offer them solutions in a whole set of ranges from direct engine maintenance towards leases, towards assistance when they phase out the aeroplanes in a later stage, in 10, 15 years from now. We can offer them a model which we call mature engine model, where we combine our lease functions with their needs for lease returns, which are typically, depending, from lesser to lesser.
The engine shop in Zhuhai is a joint venture with China Southern Airlines, which is one of the largest airlines in China. We started that in 2000, first operation in 2002, and since then we've expanded the facility already two times. We're going to expand the facility again in the next 12 months so that we can support about 400 shop visits for the next couple of years. We have plans in place to further grow the facility, up to about 600 shop visits, in case market demands require that.
Now, we serve narrow-body engines, so that's the CFM56 family, both the dash 5B and the dash 7, and we serve the V2500. And so, the largest community are the A320 and 737 fleets, and we can serve both fleets. We haven't decided upon a large engine, a wide engine, such as by example GEnx, that's something that we're looking at to see at which point in time it could be of interest to expand the facility to also serve a wide-body fleets. Of course, we need to have an agreement with OEMs to do that.
Today, our philosophy is that we grow the existing facility, and when we got an indication on the long term that we need additional facilities, then we'll look at it. But the focus today is doubling the size of the existing facility, first. Next to the engine shop that we have Zhuhai, we also have a joint venture with [inaudible 00:05:07] in Malaysia and Kuala Lumpur where we repair components, engine components. That facility will continue to see some growth in the next couple of years, but we're far away from a point where we say we'll open up another component repair facility in the region. For the next four or five years, our focus is serving the market with the existing, expanded facilities, rather than building new facilities or new joint ventures.
When the opportunity opens up with another major airline to look at it again, we'll look at it again, but so far, it's the plan as I said. Grow with what we have and double the size of the current facilities.
Well, we got our own training school in our own facilities. We pick people and we train them for two to three years to be able to work on aircraft engines. Now, the Chinese market with it's 1.1 billion people should be able to supply sufficient labour to at least cover that for the next 10 years. We need to continue to educate them and train them. You don't find trained engine mechanics, but you can find people with a basic skill and you can train them up to that level and we will continue doing that.
Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.