News

2016-06-01

The power of the MRO in the Gulf

The UAE has established itself as a leader in the global military and aerospace technology industry

Due to its already proven leadership in the world’s fast-growing Maintenance, Repair and Overhaul (MRO) industry, the United Arab Emirates(UAE) has established itself as one of the industry’s most important geographical focal points for decades to come.

The third edition of the Global Aerospace Summit, which took place during Abu Dhabi Aviation & Aerospace Week (ADAAW), from 7 to 8 March 2016, posed a number of key questions for the UAE’s growing military aircraft Maintenance, Repair and Overhaul (MRO) sector.

The 2016 Global Aerospace Summit, an invitation-only strategic forum for senior international industry leaders in aerospace, aviation, space and defense industries, was held under the patronage of His Highness General Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, Deputy Supreme Commander of the UAE Armed Forces. Participants at the recent Global Aerospace Summit 2016 enjoyed an especially insightful panel discussion involving three global MRO industry leaders: Staff Brigadier General Fahed G. Al Shamesi, CEO at Advanced Military Maintenance, Repair and Overhaul Center (AMMROC), Leonard Favre, group managing director at 1BlueHorizon Group, Rahul Shah, senior vice president of strategic growth and business development, Asia Pacific, Middle East and Africa, at AAR Corporation.The discussion was moderated by Matthew Cochran, chairman of Defense Services Marketing Council (DSMC).

The UAE

The Gulf region, led by the United Arab Emirates (UAE) has, in a relatively short time, firmly established itself as a leader in the global military and aerospace technology industry.
From its humble beginnings, the UAE military aircraft Maintenance, Repair and Overhaul (MRO) sector stands to be a central beneficiary of the unique confluence of geopolitical and economic uncertainty in which the world today finds itself.

The UAE has repeatedly demonstrated its standing as a good international citizen through its participation in recent multilateral missions in a range of countries throughout the region in order to protect life and critical infrastructure. At the same time, the convenient geography of the UAE has positioned it as an ideal partner for supporting large-scale deployments by partners to the Gulf.

These experiences have enabled the UAE and its local industries to develop a unique operational expertise supporting in-theatre operations continually for well over a decade.

In MRO, this has meant a rapid scaling up of the aviation platforms serviced, as well as seismic improvements in operational skill and demand planning that have rapidly launched the UAE to the very cutting edge of the industry globally.Responding agilely to emergent opportunities and threats will be determinative in ensuring this success continues.

The Inertia of Global Change

In the last 20 years, the world has undergone seismic shifts in almost every facet of life. Technology, much of it derived from defense research and development, has brought information and knowledge to the fingertips of billions.

The shockwaves of recent geopolitical crises, however continue to reverberate around the world, with strategic threats – both State and non-State based, never far from the minds of military and defense policymakers.

The growing instability caused by the emergence of new dangers, both within and outside the region, has created a greater need than ever for a flexible, adaptable, quick response capability equipped to defend threatened populations and protect critical infrastructure.

In particular, we have witnessed a dramatic shift in military posture, as shifting from a static, defensive focus to a need for long-term expeditionary operations in distant parts of the globe.

Against the backdrop of an uncertain global economic outlook, military capabilities are being stretched further than ever. New asset expenditure is being delayed, existing platforms are seeing their lifespans extended and governments are seeking out new avenues for achieving efficiency in the maintenance of a battle-ready posture.

The mechanisms increasingly being employed by governments range from developing partnerships for MRO operations all the way up to multilateral development of entirely new platforms; most notably the F-35 Joint Strike Fighter.

How the MRO industry responds to these emerging opportunities will be determinative in shaping the geographical focal points of the industry for decades to come.

The United Arab Emirates has, in a relatively short time, not only established itself at the forefront of the fast-growing MRO industry, but also as a leading regional trade partner with the USA; the world’s largest operator of military and civilian aircraft.

The aviation and aerospace relationship between the USA and the UAE has gathered pace over the last decade, during which the UAE has become the USA’s largest trading partner in the Middle East region, with $25 billion in bilateral trade in 2014, and the biggest customer for both the Boeing 777 and 787 wide body passenger jets.

Since 2000, UAE based airlines have ordered in excess of $200 billion of US-manufactured aircraft and its military has acquired over $20 billion of US-made hardware and services.

At the same time, the UAE has been the US’s closest regional military partner, supporting allied actions in six separate Middle East and North African theatres in the past decade and a half.

In this context of a stronger than ever relationship between the UAE and the world’s largest military, there now exist unprecedented opportunities for growth in regional MRO. But in order to meet the demands of the modern military, operators must develop a reliable capacity and reflexivity, supported by a seamless and secure supply chain.

The Shifting Sands of the MRO Industry

With the unpredictable nature of modern conflict comes a heightened requirement for operational flexibility; militaries are now demanding ever greater levels of asset readiness, with (key performance indicator) KPIs for some contracts as high as 95 or even 99 percent.

Balancing these stronger demands against increasing budgetary pressures is a challenge that will exist among MRO operators for the foreseeable future. One consequence of reduced new asset investment will be a requirement to expand the useful life of existing airframes ever further.

Supporting ageing aircraft fleets, therefore, will become an ever larger share of the work of MROs.

This trend is already apparent with some aircraft types, the prime example of which is the F-16, already in service for 40 years and expected to continue to fly for another four decades. Over its lifespan the MRO operators, in partnership with governments and the Original Equipment Manufacturer (OEM), will continue to improve the capability of this aircraft type through incremental upgrades, ensuring it remains an effective fighting force for its customers with a cost-effective base.

The C-130 is an even more extreme example of longevity; first flying more than 60 years ago, the lifespan of this platform is expected to total more than a century. While the same basic airframe, the C-130 of 2050 is unlikely to resemble the original in any of its other technology.

This approach can be an effective response to uncertain military budgets and political circumstances, as well as a mechanism to mitigate the risk of new asset programs generating wasteful or ineffective results.

However, the geopolitical climate must also remain front-and-centre; in particular, the rate of new technological development within competing military forces and the criticality of neutralising any advances – whether through new assets or platform upgrades. Forecasting remains central to effective mission-capable planning.

This is essential not just in view of where and when assets are likely required to deploy, but at the same time what the MRO requirements will be to support that deployment on an ongoing basis, especially given the requirement for lengthy lead times in the MRO parts supply chain (which is discussed further in the next section).

Concerns around sovereignty and security of intellectual property have tended to place limitations on sharing a supply chain for inventory, resulting in greater inefficiencies for each country in this area.

However, acknowledging this practical limitation, MROs have nonetheless identified significant opportunities in ensuring their customers are able to effectively operate a variety of platforms.

The UAE handles this kind of demand particularly well, anticipating demand for support for future assets and building that investment into their forward planning in order to enhance their customers’ force readiness when they urgently need it.

To this end, there has also been a heavy focus on pursuing partnerships based on mutual trust and understanding. The form of partnership is less important than the genuine intention to cooperate from both sides. This is true both in terms of government and public-private partnerships.

A perfect example of the latter is the work that AMMROC, an Abu Dhabi-based company specialised in military MRO services, is doing with the OEM and military stakeholders on the upgrade of the F-16. By focusing on the common threads linking innovation, education and the defense sector, they are making a real contribution to the improvement of that platform with a view to employing the F-16 in active service for the next several decades.

A related open question is the extent to which strategic partnerships between militaries will permit military MRO providers to accommodate other platforms outside the scope of the partnership.

This is especially relevant for a company like AMMROC, which is building one of the largest and most advanced MRO facilities in the world at Al Ain.

Ultimately, the world’s militaries are going to make a judgment call on the deployment of their budget; the recent trend has been away from the acquisition of new aircraft and towards spending on keeping existing assets in the air, or opting for much cheaper platform upgrades.

These competing cost pressures are vexing for decision makers, and will continue to be for the foreseeable future.

Those MRO providers that respond best to this uncertainty, with strong planning and agility, stand to gain the most.

Developing Secure and Reliable Supply Chain

While suppliers of MRO services will inevitably and inexorably be impacted by forces of geopolitical change, there are mechanisms and initiatives that companies can adopt to operate more responsively to the dynamic needs of their clients.

Of primary importance is the development of a robust and reliable supply chain for the inputs necessary to keep customers’ assets at peak mission capability. At its core, maximum efficiency will only be achieved through a combination of technology and scale.

The first of these involves the employment of cutting-edge systems for tracking inventory, alongside effective demand planning to ensure the right inputs are available when necessary without carrying an overly burdensome level of inventory.

This is especially important when considering older platforms, for which parts may be more difficult or expensive to secure. With OEM lead times for parts typically ranging from 90 to 180 days, demand forecasting is critical to the assurance of maintaining mission capable fleets in line with key performance metrics.

Securing reliable supply chains in this context usually involves (in some capacity) the OEM for the platform. This kind of ongoing partnership certainly adds value to the customer.

For an aircraft type in wide use, such as the F-16, sourcing parts from the manufacturer will not usually present a major problem. However, for older or less common platforms it can be necessary – perhaps in response to time delays or budgetary pressures – to secure alternative avenues of supply.

Increasingly, we are seeing the emergence of partnerships or regional alliances (such as NATO), pooling resources to ensure a reliable supply chain.

For key platforms, leading UAE-based OEM companies are today achieving higher than 95 percent mission capability levels for their customers. Achieving exceptional results on one platform increases customer confidence in their expertise, which is in turn attracting new platforms to those facilities.

This trend of consolidation is lending confidence to regional GCC militaries, who are increasingly engaging in joint collaboration on MRO, enjoying greater economies of scale as a collective. It is likely this trend will continue including, perhaps extending (in a limited way) to some of their larger partners operating locally.

The issue of obsolescence is one that presents its own set of challenges in MRO. After all, a supply chain is only stable as long as parts remain available on a predictable basis. However, OEMs do occasionally reach a point where they consider it unviable or otherwise undesirable to continue to support an aging platform.

Technical collaboration is one – the development and transfer of IT technologies that assist the management of inventory and prediction of demand is key to improving reliability and cost-effectiveness in MRO operations.

Almost as importantly, collaboration in research and development will be critical to finding new and innovative ways to support militaries in their readiness for critical operations. Working together in these areas will help lower the overall cost and enhance the global competitiveness of the UAE region.

Developing a Dynamic Workforce

As aerospace platforms become ever more specialised and complex, the specialists charged with their maintenance and repair must also develop greater levels of specialist expertise.

In the competitive MRO marketplace, the practical impact of this demand is ever greater competition for the most highly qualified and experienced technicians, engineers and managers.

While the talent pool is growing, it is being outstripped by demand; this is placing ever greater importance on the development of technical capability in-house.

There are significant benefits to developing a proprietary knowledge base, but this must be supported by close relationships with military customers centred on knowledge acquisition and transfer.

One common example of cooperation of this nature that has added a lot of value to the sector is the willingness of customer forces to second specialists to MRO firms specifically for the purposes of knowledge transfer.

Redundancy in human capital is an essential, but often overlooked, corollary to supply chain management. As they plan for all eventualities in ensuring the timely supply of physical parts and componentry, it is incumbent upon MRO specialists to also ensure they have plans in place for unforeseen staffing eventualities that might undermine capacity to deliver services up to the agreed standard.

Any weakness in the supply of parts or essential labour is an opportunity for critical and unacceptable failure in mission support.

Where To From Here?

Strengthening alliances, especially in relation to Middle-East centred conflicts, will continue to dominate trends in the industry for the foreseeable future.

However, it is important that this does not detract from the industry’s ability to seize new opportunities to strengthen ties, both across and outside the MRO sector, which will in turn improve its capacity to support its existing customers and attract new business.

Partnerships will remain a priority for regional militaries; however, progress is likely to be limited in a geographical environment where alliances have been known to switch within short timeframes. Instead, focus is likely to shift towards how to do more with less – how to drive efficiency in maintaining existing fleets without compromising a strong operational posture.

This will require more flexible approaches than those with which some military forces are presently comfortable, but present tremendous opportunities in MRO as an ever greater proportion of military spending is diverted from acquisition and into expanding the lifespan of existing platforms.

Technological improvements will continue to drive innovation and efficiency gains in the sector, as data analysis techniques improve the capacity of operations to predict future MRO demand and respond with a more integrated strategy. Knowledge transfer across the UAE MRO sector should cement existing market share and support continued growth into the future as the sector becomes even more responsive to the needs of its customers.

With its unique combination of geography, economic freedom and stability the UAE will continue to be a destination of choice for allied forces operating within the region.

Properly managed, the unprecedented growth of the last two decades should continue unimpeded, presenting the local MRO industry with an unsurpassed level of opportunity to help maintain and modernise the world’s premier fighting forces.

Ref:

DSMC white paper on Global Aerospace summit 2016

Comments () Views (3954 ) Print

Send To Friend