Podcast: Unpacking The Buoyant Middle East Aftermarket

The packed MRO Middle East and AIME just wrapped up after a couple of bustling days. Aviation Week editors discuss some of the highlights, including widebodies, interiors and engines.

Lee Ann Shay:

Welcome to the MRO Podcast, being recorded in Dubai where we just wrapped up our MRO Middle East event. I'm Lee Ann Shay, executive editor for MRO and Business Aviation for Aviation Week, and I'm here with my colleagues James Pozzi, our MRO editor for the EMEA region, and Dan Williams, director of Fleet Data Services. So there was a heck of a lot of news here the last two days, and I think we should just start with growth. James, aircraft orders, fleet growth—take it away.

James Pozzi:
Yeah, absolutely. I mean, one of the things that caught my attention initially was Etihad Engineering, of course UAE-based, down the road in Abu Dhabi from where we are in Dubai. They released a lot of interesting growth projections and plans, which is kind of linked to some of that fleet growth with Etihad Airways, of course, which they're no longer directly linked to, but there's still that obvious connection. I think Etihad Airways makes up about 30% of their overall work, with the rest, the 70%, being third-party clients. So yeah, Etihad Engineering, they want to double revenues by 2030. That's taken up from about 270 million at the end of 2023. That′s their baseline. That′s 540 million around there by 2030. And they're going to do this through many different streams. I mean, the labor force, for example, is going to grow from what was upward of 7,800 at the end of last year to around 13,000 over the next five years.

And that undertaking and all that work will need a lot of capacity, of course. And they are certainly doing that in abundance. They're building two new hangars in Abu Dhabi over the next few years. They've recently purchased a hangar from Etihad, which they currently lease out to Etihad Airways, but that is eventually going to be incorporated into their capacity from 2027. So based on the facility and also it's covered the drawings planning stage, but they've got plans for another hangar which has got the configuration for some widebody slots, and multiple narrowbody ones too. And obviously, these are all A380 capable as well. So they are really, really pressing ahead with their growth and just building up their capacity as such. As I mentioned, Etihad Airways are a factor in this. Their fleet is going to grow—at the moment it's around a hundred aircraft, but it's going to grow by another 80 aircraft by 2032.

And also, there's also a major cabin reconfiguration program which has added a heightened requirement of services from the engineering side. But this fleet expansion, I think we spoke last year, Saudi Arabia featured very prominently in our podcast last year from the show and some of their carriers launching Riyadh Air—that's going to bring a lot of 787s, for example, to the region and obviously narrowbody aircraft they've got as well. And obviously, the Saudis, the flag carrier, they're obviously substantially growing their fleet—not as prominent this year, those two airlines and the Saudi presence in general, of course. But there was also a look at Flyadeal, of course, a low-cost carrier, and they are really growing their fleet. So they are going from 37 aircraft to 102 in just four or five years, which includes a yet-to-be-named potential widebody aircraft, which is in the works. So yeah, all systems go, lots of fleet growth and a real drive for capacity from the MRO providers in this region. And we say it pretty much every year, but the ambition and just the building and the construction, it just doesn't let up. They are pressing ahead, and they are really—the whole region seems to be gearing up for these new aircraft and supported with maintenance sites.

Dan Williams:
No, and James, just to piggyback, growth is a great segue. I mean, the show itself we think is going to be one of the biggest that we've had there at MRO Middle East. So we've got growth in the show, seeing growth in the MRO market. He talked about the fleets, and I totally agree with that. The 2025 commercial fleet and MRO forecast, we've got about 2000 aircraft we think will be delivered into the Middle Eastern region over the coming decade to 2034. 1300 of those aircraft are already on order. There's a huge order book for Middle East operators, and there will be more to come, like James alluded to, some widebody orders potentially also coming this way as well. You look in terms of the regions, the Middle East is an important area for the Boeing 777X. Obviously, this program's had its teething troubles more so than some others, and they've got over 250 collectively on order for the region.

It's such an important aircraft and market that go hand in hand. It's the natural successor to the A380 for example for Emirates because it has got such huge capacity, and that's not without its issues. The 777X—Guy Norris very recently wrote about the resumption of more flights and other aircraft coming back to flight testing after the engine link issues, pushing possible entry into service. But we already pushed back the 777X forecast delivery into 2026. The longer this goes on, it may push it to 2027, maybe certification in 2026 and deliveries may be starting in 2027. I don't think anybody will be surprised if that happened, especially considering we've just lost four months since the engine link issue happened. So growth is a very good term for this area, for this region. Both new build, both aftermarket. We looked at the cargo forecast for the region, and James, you did a passenger-to-freighter panel, which is really quite interesting how there's issues with passenger-to-freighter conversions because there's just no passenger aircraft to convert because they can make more money leasing out a 20-year-old 737 Next Gen aircraft than they can convert it and operating it for a few years as a freighter.

So there's lots of growth to come, but it still isn't without its challenges. We do hear the similar issues everywhere we go. I won't say the SC word, the ending in a "ding" because everybody says supply chain. There you go, said it. But it seems as though we're still looking positive. The outlook's positive, it isn't without its hurdles as we've been saying for most of these shows for the past five years now almost.

Lee Ann Shay:
Absolutely. So there's so many things I want to follow up on. Widebodies—this region operates a lot of widebodies. You mentioned the 777X, and in several of our podcasts, we talk about the shortage of maintenance slots, but particularly on the widebodies. The widebodies have come back, it's a hot market, but those widebody slots, according to many MROs, they're just sold out. I was talking with Fraser Currie, who's the CEO of Joramco, and he said that their narrowbody slots are sold out through the end of 2026, but the widebody slots are sold out for two years. And so especially as you keep some of the older aircraft, even like some of the older early A340s for operators who are flying those aircraft, if you're going to keep them for a little bit longer and if they're going to go into another C-check, you better be booking those slots now. But there is a new widebody MRO that is set to launch here in Dubai, I believe in the third quarter—Tim Aerospace out at Dubai South in the aerospace hub. So I thought that was kind of interesting.

Dan Williams:
Yeah, I think widebody maintenance is inherently tricky just because of the sheer square footage that you need to cover. Widebodies take up a lot of space, so therefore you need a lot of building to put the aircraft in. So you are totally correct though, we are pushing aircraft on even more than was, I think Pascal from Vallair, and I'm going to probably butcher the quote, but it wasn't far off on the passenger-to-freighter conversion panel, was like, what happens to the A330, the A330 during Covid was, and I quote, "a dead horse," and you're like, can it come back with resilience? Because right now, having an aircraft that you can fly people on and keep up with some demand, it's just what's needed, and you then have to then put it back through more maintenance, and there's less tear-downs, and it becomes less supply stock for passenger-to-freighter conversions.

So it's amazing how the widebody shift during the early days of Covid—I remember we did a podcast or a webinar during Covid, and we talked about the 777X, and you're like, is it too much of an aircraft? Like it was too much of an aircraft for back then. Emirates was saying that it is a great aircraft, it was just not great for the Covid period. However, right now, if the 777X was certified, I'm sure that Boeing will be trying to throw as many out the door as they could. It's just they keep having to get over these new hurdles.

Lee Ann Shay:
GE Aerospace announced that it's investing  $10 million over the course of two years. Some of those investments started in 2024, they′ll finish up in 2025, but that $10 million is going into their engine shops in Doha and Dubai. Most of the tooling, capacity, training money is going to support the CFM LEAP engines. But some of it is earmarked for the GE9X, which again is going back to the 777X.

James Pozzi:
Yeah, absolutely. And engine MRO is featured very prominently this week, and obviously not just the widebody engine MRO, which it's interesting we mentioned the A330 before because one MRO provider earlier told me how a really strong flow of PW4000 engines is keeping them really busy. And that's very interesting because again, that's a program that's certainly had been written off before, and there's relatively few MRO providers for that, which has played a role probably in that too. But I found that very interesting on the engine side. But related to Dubai, of course, where we are, very significant announcements this week—so IAE MRO, they always specialize in gas turbines, and I think the LM2500, the LM6000 for example, and they're based in Dubai, they are venturing into commercial MRO and they're going to become a full overhaul facility. And I think, I'm pretty sure they're the only full overhaul facility in Dubai.

Of course, there's Etihad down in Abu Dhabi, but for Dubai, and that'll focus on CFM56-7B engines to start with before ramping up for the LEAP-1A and 1B. They're going to have testing capability too, which is valuable because I've heard a lot in the last few years about a lack of test capacity in certain regions, and from the Middle East would be included in that. Certainly in neighboring places like Africa, there's a big lack of engine test capability. So that will be established first in 2027. And then full MRO services by 2028. That'll be at the Dubai World Trade Center, very near Dubai South. There's that ecosystem there of companies, a really strong supply chain as well. But yes, that will be a very interesting venture. It's set up by a man called Larry Howie, and he's a British man who's been out in the Emirates for 35 years.

He's chairman and CEO, they're going to ramp up their workforce, but not in the way you'd think. So he said what would maybe be like a 500-person operation will be a 250-person operation as an example. They're going to really tap into robotics. He said there's going to be heavy investment in that AI, which has come up a lot over the last few days. I remember we hear a lot about AI every show now, it's very prominent of course, but we've really got a few use cases about how some companies are going to use it. But yeah, he thinks that could aid them and as a result have maybe a slightly lower workforce for an operation like this, a full overhaul shop. But yeah, significant for the region, I think especially. And also for not just CFM56, but the LEAP network, of course, the open network, which we'll see significant additions to that over the next, I think I'd say two, maybe three years. There'll be new shops coming online as we've seen in the last year, and that won't stop.

Lee Ann Shay:
Okay, Dan, you're going to be disappointed. I'm not going to say the SC word, but I think we at least have to mention parts. This region hasn't been as big of a consumer of PMA parts, but in the current environment, I sure heard a lot of acronyms the last two days. Everything from PMA to USM to DOA to DER. So parts alternatives, lots of new repair developments. It's happening.

Dan Williams:
Yeah, I've been speaking to people and for example, Emirates, but traditionally would only buy OEM parts. However, over time, they've had to mold their model and look for other ways, be it USM, especially for A380s because they're not being produced anymore. So there comes some support, but there comes a point, it's only a limited amount of support, especially for a relatively small collective fleet of A380s globally, not just Emirates are the biggest user of them. However, globally there's not that many. So they are looking at potentially using PMA parts, and we're seeing some, in some cases PMA parts used to account for these numbers are very loose, 2% of parts. However, that number's moved up to nearer double figures. Now we've seen a shift, and there are certain parts of PMA that are kind of industry accepted. There are certain parts of PMA that will probably not be industry accepted.

So for example, engine PMA, there's still some inherent, I don't want to say distrust of engine PMA, but obviously it all depends if your engine's leased or your aircraft's leased, and there's many hoops to jump through. But it does sound like people like Emirates had a strategy on the OEM parts and are now shopping around for parts because there's the only ways in some cases that they can get them. So we're seeing strategy shifts in parts. So it is quite interesting as an outsider looking in, and that's the advantage that we guys have because we are not affiliated with any of these. We just, I'd say, have a little look and make some connections. And it's interesting to see how people are shifting.

James Pozzi:
And that's interesting. That's now in the Middle East. I remember last year a couple of events we did in Asia, and of course MRO Australasia at the end of the year, they're prominent airlines. So similar that they are more open now and actually looking for PMA parts. Qantas Australia is one that comes to mind instantly. So...

Lee Ann Shay:
I want to talk about interiors too. So we've got at least to have a little discussion of that because there was a lot of really interesting information I think the last couple of days. And granted, MRO Middle East is only two days, but we sure packed a lot in. I think it's interesting from the gamut. Those older aircraft that are remaining in service longer, they're going in for maintenance checks, is driving cabin refurbs and connectivity options, including some Starlink new providers of installation. So you've got those older aircraft that are getting another cabin refurb. But then on the flip side, you've got business aviation, which had a fairly big presence the last two days, especially on the interiors. I was talking to AMAC Aerospace, and they're doing an A350 for a private aviation customer. So you've got these large widebody aircraft that are in commercial use that are also being designated and fitted out for private use.

Dan Williams:
And then to go back to your point about operating older aircraft, some of our colleagues flew from Heathrow to here on a BA 777. Now BA 777s because their engines are more amenable to this environment than the 787 and A350. But as a result of that, BA have had to invest, and they put new business class suites on those 777s, and you see it, people are having to look around more of, if we're going to operate these aircraft longer, we need to update, renovate, or reintegrate cabin systems and interiors. And it was part of the aim. The aircraft interior is part of the show. It is interesting. There is a lot of cash in it, but then I'm going to go the flip side. Interiors are also still an issue for new build aircraft. You still have, for example, Lufthansa A350s without their first-class suites because they're still not certified, and they're still a little bit overweight. And so interiors is a hot topic across both new build aircraft and the older generation aircraft.

Lee Ann Shay:
Exactly. And for Airbus, you can now buy, especially on the private side, a green aircraft, but then they're also selling it with an interior, and then they go to one of their MRO providers to do that. But then again, you have to, I said that they're encouraging Airbus. They said Airbus is encouraging buyers to, when they buy the aircraft, start booking that slot just again because of capacity. But James, which airline was it that said that seats were not as big a deal for them?

James Pozzi:
Sorry, that was Flyadeal. So airframe issues haven't been a big deal for them, but certainly in the engine availability and the supply industry, buyer-furnished equipment, so things like seats, galleys, et cetera, that has been an issue. And Steve Greenway, who is the CEO of Flyadeal, he believes these issues will continue for the next three to five years. He said he doesn't think they're going to go away. Obviously, I mentioned them at the beginning of that airline because they're looking to significantly grow their fleet. But yeah, there are problems there.

Lee Ann Shay:
Dan and James, thank you so much for joining me on this podcast from Dubai. And one last request. If you're listening in Apple Podcasts, please consider leaving us a star rating or writing a review. Thank you, and have a fabulous day.