Australia Looks To Raise Its MRO Fortunes

While Australia’s MRO industry is growing in terms of spending, it faces long-standing challenges as well as vulnerability to more recent global afflictions.

Aviation Week Network’s Fleet & MRO Forecast data estimates Australia’s commercial aftermarket spend at $1.9 billion for this year. But with few close neighbors, a dominant airline duopoly, aging aircraft and a culture of MRO outsourcing, Australia has suffered heavily from more recent industry problems related to supply chain lags, a constrained labor market and a competitive market for available assets. Some of these discussion points were scrutinized at Aviation Week Network’s MRO Australasia conference, held in Brisbane Nov. 13-14.

Outsourcing vs. Insourcing

With fewer MRO providers and a lack of services such as engine overhauls, Australia has long outsourced commercial aviation maintenance. Much of this activity is centered on the country’s two largest airlines, Qantas and Virgin Australia. Combined, the two operate more than 300 aircraft and account for 95% of the Australian domestic aviation market.

Qantas has base maintenance capabilities through its engineering division, which operates its main hangar in Brisbane with prime locations in Sydney, Melbourne and Perth. The carrier has tended to outsource heavier MRO activities in recent years to places like Singapore and the Middle East, said Viv de Beus, head of base maintenance at Qantas Engineering.

“It’s not what I would envision to be the best thing, and it’s something we want to work on going forward, but obviously there are constraints to that,” de Beus said.

Home to Qantas’ main widebody and narrowbody operation, the Brisbane facility offers base maintenance services covering Airbus A330 and Boeing 737 classic and NG variants as well as full technical handling on other aircraft types. De Beus identified Qantas Engineering’s greatest constraints as the labor shortage, talent retention and the MRO supply chain. “We have the facilities, but they’re not being utilized as much as they should be,” he added.

Distance and Performance

Given Australia’s remoteness, the time it takes to transport a part to an operator can be considerably longer than in North America, Europe or the Asia-Pacific region. Coupled with the global supply constraints frustrating much of the industry, this means Australian aviation’s supply chain performance is being scrutinized heavily—perhaps more than ever in recent history.

Virgin Australia is the country’s second-largest carrier by fleet size and passenger numbers. Like Qantas, its primary maintenance hangar is in Brisbane. And it is doubling down on supply chain performance.

Afrooz Ahmadi, the airline’s components and purchasing leader, said intermittent parts shortages and distance from major suppliers lead to a volatile supply chain. “The standard practice is to have a close collaboration with the OEMs, so everyone is aware of what lies ahead and is focusing on forecasting, optimizing and inventory management,” she said.

Ahmadi noted that Virgin Australia has changed its approach to procurement in certain areas. “[Parts manufacturer approval (PMA)] consideration is one of them, as that reduces reliance on the OEMs to some extent,” she said. “Used serviceable material [(USM)] is another alternative way of sourcing parts, and we have continued to evaluate repairing components versus sourcing new. That not only extends the life of a part, but it also provides a more cost-effective way on sourcing the parts.”

Ahmadi said Virgin Australia, which operates an all-Boeing fleet composed of 737 NG and MAX aircraft, will continue to take measures over the next 18-24 months to minimize the number of its aircraft-on-ground incidents. “Increasing inventory is one way of looking into it, exchanging parts and utilizing the quality provider services,” she added.

One overseas vendor for Australia is Hong Kong-based HAECO Group. “It’s difficult from a logistic point of view, but sometimes I have the feeling it’s also difficult prioritizing the Australian market because of the size and the customers we have there,” said Lars Moeslein, HAECO’s senior vice president of group commercial for the Asia-Pacific region. “I see a little bit of a tendency to supply military first and then a tendency to supply maybe other major markets, and not the Australian one.”

Technical and durability issues that have shaken aircraft and engine markets over the past few years have led airlines in Australia to take a safety-first approach in order to narrow the reach of supply chain challenges.

“Most of the airlines . . . really don’t want to return the aircraft because of the new-generation aircraft issues and engine issues,” said Andrew Thie, head of technical at asset management specialist Bellinger Aviation, which has offices in Sydney and Singapore. “Extensions are great, but you need to be aware of what major events are coming up with heavy airframe checks and with engines,” he noted. “If we do take aircraft back, the demand for material now is high.”

Thie said that the ongoing USM shortage from issues with new-generation aircraft, alongside the extensions of in-service aircraft leasing, is affecting the availability of vendors acquiring assets ready for teardown. “A lot of the parts companies are really struggling to find assets to secure for teardown to the point that some of them are starting to bid for aircraft on lease, as well,” he added.

Labor Competition

If labor shortages in Australia are affecting big players like Qantas, which have a size advantage when recruiting, independent MRO specialists are feeling a tighter personnel squeeze. Troy Marshall, managing director of Ipswich, Queensland-based Eco MRO, said he has seen firsthand the impact of a strained labor market since establishing the engineering services business in 2021.

“It really reinforced for us the lack of qualified engineers that we’ve seen post-[COVID-19] pandemic in the country and the region,” Marshall said. To address this, he said Eco MRO has played on its agility as a smaller business and applied for licenses for older aircraft, such as Boeing 767 and 737 classics, to land in Australia for maintenance work. “Airlines and engineers that remain in the industry have moved on from those aircraft types, and there’s a niche for those services to be provided to the operators who are having to find offshore solutions for their heavy maintenance,” he said.

Marshall also highlighted the lack of adequate hangar space in Australia. “There were a few larger aircraft hangers available to us around the country that have now been leased to larger entities,” he explained. “It’s understandable that Qantas and Virgin Australia are looking after their operations, but it does provide challenges for third-party maintenance providers and the operators in this part of the world.”

Marshall identified partnerships as a possible solution to this and other challenges going forward. “We’re looking at trying to find joint venturing solutions around facilities, labor hire or qualified staff and the training of those staff, which is also a challenge because some of those leading suppliers no longer are supported by the Part 147s or Civil Aviation Safety Authority (CASA)-approved courses,” he said.

Plugging Gaps

Gaps in maintenance capabilities and technology adoption in Australia’s MRO industry were another recurring theme at MRO Australasia, as many say the country is several years behind other regions.

Asta Zirlyte, CEO of Brisbane-based Heston MRO—which focuses on commercial base and line maintenance and operates out of all major Australian airports—said the company has actively focused on new technologies as well as capability for aircraft like the Airbus A330neo to keep a competitive edge.

Unless Australia acts immediately to increase collaboration to drive both capability and technology advances in the MRO sector, Zirlyte argued, it will struggle to be competitive in the long term. “We need to have a look at automated processes and areas such as robotic solutions and 3D printing—this would go some way to reducing requirements,” she said.

Zirlyte cited a need for more joint ventures and increased cooperation with OEMs to further develop Australia’s aftermarket landscape. Specifically, she called for engine-on-wing services, ramping up “lighter” maintenance projects, interior services and components, particularly to service the region’s smaller operators, which she believes are underserved due to a lack of experienced mechanics in the industry.

Another panel echoed Zirlyte’s calls for more technological collaboration. Lloyd Armstrong, project manager at Queensland-based aircraft painting specialist Flying Colours Aviation, said as the company finally reaches pre-COVID-19 levels, there is a clear gap where technology can help it catch up.

“While we lag behind, there’s a good opportunity for us to look at the rest of the world, see what works and what doesn’t work and pick and choose what technology we can bring in to help us accelerate that,” he said.

Armstrong said Flying Colours, which paints narrowbody aircraft and helicopters, is looking to add widebody painting capabilities and believes technology-driven efficiencies will be key to achieving this. He added that the company has pinpointed several technologies that are commercialized and reliable, with a tangible impact on quality, efficiency, safety and sustainability, and sourcing these technologies will help the Australasian region plug industry gaps. “This starts with airlines, regulators and MROs,” he added.

Ryan McMahon, national remotely piloted aircraft systems training manager at Aviation Australia, said aviation’s highly regulated environment and high stakes around safety, innovation and people can present a challenging business case for some companies. But long term, he believes the culture of innovating may be changing for the better, due in part to the country’s CASA regulator.

“We have an option to try to build these things independently and compete, or we can actually align some core objectives and create some standards,” McMahon said.