Decision Time: What to know about outsourcing MROs

MRO_AAR facility_smallFor Tim Komberec, 2004 was a crossroads year. After operating a fleet of Fokker F27s for FedEx Express regional service over several years, the president and CEO of Idaho-based cargo carrier Empire Airlines was poised to re-fleet and expand with ATR-42 aircraft, which were being converted to freighter configuration.

Then there was the question of maintenance for the converted aircraft. “We did not have enough capacity in house in our Spokane facility to handle it, so we ultimately ended up having a facility built up here in the Coeur d’Alene Airport,” Komberec said.

That facility in Idaho, he soon learned, was “quite a bit more than I knew we were going to need” once the converted aircraft arrived. Being a company that had a do-it-yourself attitude since its founding in 1977, Empire decided it would open up its new Idaho facility for outside maintenance, repair and overhaul (MRO) services, naming it Empire Aerospace.

As Empire Airlines continued providing feeder service for FedEx, Empire Aerospace was just as busy developing the expertise and the experience to run its own MRO. “First couple of years, we were pretty much consumed by our own work,” Komberec said. “By around 2006, we started to take on other airlines.”

Today, Empire’s MRO, Komberec said, is growing every year and adding more revenue, but the story of Empire has become an increasingly rare one. The small- to medium-sized carrier that decides to get into the MRO business has become somewhat of an endangered species in the air cargo market, as most carriers decide to outsource their maintenance work to third-party MROs to save on costs, space and time.

“Most airlines today will do some line maintenance and some lesser A- and B-checks, but not larger checks,” said Brian McCarthy, vice president, marketing and sales, for Precision Aircraft Solutions. “Conversions are the easy part. They’re predictable – you basically count the days until it is done. The hard part is maintenance, when you’ve got engine checks and landing gear checks and other non-routine maintenance.”

For those carriers that already have the space and expertise to handle their own maintenance, a full-fledged MRO could end up providing a significant boost to the bottom line, considering the projected growth of aircraft demand. For instance, Air Cargo Management Group estimates that nearly 2,500 new freighters will be on the market in the next 20 years – and that’s just maindeck lift. According to McCarthy, most commercial aircraft built in the 1990s will need between US$ 1 million and US$ 1.5 million worth of upgrades in avionics alone to meet future standards.

The issue comes down to a tough decision for a carrier: What kind of aviation business do you want to be?

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