Partners Across the Atlantic

By Ian Parker

In Europe and America, air travel is growing at such a rate that maintenance companies can look forward to more and more work. In addition, there is an increasingly liberal attitude in both regions as to which companies are allowed to do work where; air transport may finally become the fully internationalized business it always promised to be.

According to European Union (EU) governments and the European Commission, transatlantic air travel will increase by 50 percent by 2013. Similar increases are expected within Europe and North America. Someone will have to look after all those planes and companies on both sides of the Atlantic are positioning themselves to take best advantage of the opportunities.

Europe and America signed an ‘open skies’ deal last March which basically means that airlines from each can fly to any destination in the other.

Douglas Alexander, the UK’s transport secretary, hailed the removal of all “arcane” restrictions on EU-U.S. routes. Airfares will fall still further saving customers an estimated $14 billion by 2013. The implications for maintenance companies are positive.

For example new U.S. airline Virgin America Inc., which began operations on Aug. 8, has signed an agreement with Germany’s Lufthansa Technik (LHT) for the company to look after its fleet of Airbus A320s which will reach 31 aircraft when deliveries are complete. There is ongoing investment and job creation in the United States as a result.

Virgin America is the first customer for LHT’s Total Material Operations (TMO) package, the latest to be offered by the maintenance company. The 10-year contract is worth more than $250 million. In the first phase, line maintenance will be provided at San Francisco, New York (JFK), Los Angeles (LAX), Washington, D.C. (IAD), Las Vegas, and San Diego. Further airports will follow as the airline’s network expands.

Stefan Schmuck, LHT’s regional director for the United States, tells AMT, “TMO is the highest integration of services we can offer on the component sector. Our most successful business in the United States is components. It goes hand-in-hand with line maintenance.” He’s based in Tulsa, OK.

However there are still some entrenched views. He says, “We still encounter a ‘buy American’ mentality but it’s not as it used to be. It’s more open now — what matters in the end is the price. Time zones and language can be a problem, but we are constantly improving our language skills.” Of course the weak dollar against the Euro makes profitability more difficult.

LHT had a turnover of $120 million last year with U.S. carriers, and Schmuck tells AMT, “We will try to double this in five years.” At present most of the work is done in Europe but LHT wants to grow its infrastructure in the United States, he says.

Today, LHT employs 1,800 people in the United States and further growth will occur as Virgin America expands. LHT has more than 580 customers around the globe. Schmuck says, “We’re the leading independent MRO company in the world.”

Another example is Air France Industries/KLM Engineering and Maintenance and its U.S. company AMG, with the help of which it supports more than 20 airlines in North America. These include major passenger carriers such as Delta, United, Northwest, Continental, and major cargo operators such as Atlas Air.

Jonathan Soesman, vice president sales, United States and Canada at the joint company, tells AMT, “We offer a comprehensive and complementary portfolio MRO service for Boeing, Airbus, and regional aircraft. This includes GE and CFM engine overhaul, component support (including APUs), and airframe services, backed up by a global logistics network and the operator experience of Air France and KLM.

“Our ambition is to grow further as a major MRO player in North America. We can now offer local component repair capabilities and logistic support in the Americas through our affiliate company the Aero Maintenance Group (AMG). With AMG we have set up a logistics center in Miami. Together with Boeing, we offer a component support program (CSP) for the Boeing 747NG and 777.”

Recently Belgium’s Sabena Technics acquired EADS Barfield, a U.S. company, in the service support and component repair and maintenance business. Christophe Bernardini, CEO of Sabena Technics, says, “Barfield’s expertise, its strong experience, and brand across North and South America, combined with Sabena Technics know-how as a former airline operator and leading MRO, reinforces our group’s service in this region of the world. (Our) pool of rotables and capabilities on regional aircraft types will strengthen Barfield’s service. Moreover, Barfield’s ground support equipment activity will strengthen the Sabena Technics offering. Barfield employs about 250 people in Miami, Phoenix, and Louisville. The acquisition “accelerates Sabena’s integration into the North and South American markets.”

Two-way street
Teaming is also happening in the opposite direction across the Atlantic. Boeing will supply GoldCare lifecycle support to Rolls-Royce for the UK company’s Trent 1000 TotalCare program. GoldCare provides repair and overhaul for 787 Dreamliner underwing rotables as an option on the Trent 1000.

More than 500 Trent 1000s have been ordered for the 787 and about 80 percent of all Trent customers since 2001 have selected TotalCare.

Also Boeing has signed up six airlines so far this year for its Airplane Health Management (AHM) service most of which are non-U.S.-based. In addition to the new Virgin Atlantic, Air Austral, Austrian Airlines, Emirates, TNT Airways, and an unnamed carrier have joined the program.

United Airlines has recently indicated that it is considering outsourcing its maintenance, and industry sources suggest that there is every chance that European companies will be involved. Air France/KLM already supports United in some spheres.

One of the most successful U.S. companies doing well in Europe and elsewhere outside America as well as within is AAR. Formed in 1951, the company specializes in the supply chain and MRO among other things. Large airline customers in Europe include, Air France, KLM, Alitalia, and Lufthansa. Headquartered in Wood Dale, IL, the company has about 4,000 employees and more than 40 locations around the world.

“AAR’s sales to commercial and defence customers in Europe grew 22 percent year over year and currently account for 18 percent of the company’s overall sales,” Timothy J. Romenesko, president and chief operating officer of AAR Corp., tells AMT. “We see significant opportunity for AAR in European markets as regional carriers become more prevalent and as new and existing commercial carriers and defence forces look to operate more efficiently and effectively.”

Quality and security
Some commentators in the United States have cast doubt on the ability of non-U.S. companies to perform work to the required standard, with the required security and the ability of the FAA, or other designated agency, to oversee them properly. While there will always be isolated incidents and examples of poor work and poor oversight, generally European standards are extremely high. The UK’s Civil Aviation Authority has long been regarded as the toughest aviation agency in the world and much of that has fed through into EASA.

Schmuck of LHT says, “We have a strong brand and a high reputation in the market. There are no doubts about our quality and integrity.”

The FAA is different from other country’s aviation authorities in that part of its mandate is to promote the business (certainly not so in European authorities). But sometimes the FAA can be a bit protectionist. One top level source says, “The legislation makes it difficult for foreign companies to get a strong foothold. The FAA says it will become easier for us, but it becomes more and more complicated.”

Europe is integrating socially, economically, and industrially. The United States of Europe is coming and if it can get Russia to behave and join in, Europe will be the other superpower in the world. Those people and companies best placed to take advantage of the metamorphosis are those who can see this inevitability and are positioning themselves accordingly.