Podcast: What's Trending At Aero-Engines Europe?

Aviation Week's MRO team in Amsterdam report what they are hearing from executives at this year's Aero-Engines Europe conference. Listen in to hear from editors Lindsay Bjerregaard and James Pozzi who are joined by Dan Williams, director of fleet data services.

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Transcript:

James Pozzi:                 Welcome to the MRO Podcast. I'm James Pozzi, MRO editor for the [inaudible 00:00:19] Region, and today we are talking engines. Here from our Aero-Engines Europe event in Amsterdam where we had in excess of 650 people join us for the event today. Joining me are my Aviation Week colleagues, Lindsay Bjerregaard, who is managing editor, MRO, and Dan Williams, director of Fleet Data Services. Thanks for joining us today. So we're at the end of day one of Aero-Engines Europe in Amsterdam. Lindsay, starting with yourself, what were some of the main topics that caught your attention today?

Lindsay Bjerregaard:     Thanks, James. This is actually my first Aero-Engines event. I've not attended any of these before, so this has been an interesting learning experience for me. One of the things that seemed to come up quite a bit was a lot of talk about capacity issues in the industry. So, a panelist from SR Technics stress that the industry needs to add more engine repair capacity. One airline mentioned that they're having trouble finding slots for small repair issues, because larger shops are more focused on bigger, more profitable work scopes.

                                   So, this could potentially be an opportunity for smaller third-party shops to specialize and generate new business. But, that's something that came up a bunch. Also, another thing that came up quite a bit was the perceived OEM monopoly on the market exacerbating some of these issues. However, there were also some differing opinions about OEM starting to recognize the capacity constraints and looking at that as a partnership opportunity approaching companies to help develop more repair capability. And I'm not going to steal the thunder, because I know Dan is going to talk about this, but as with almost every conference we have, workforce and supply chain issues came up constantly. And so, I think, I'll save that and let Dan explain a little bit about that as well.

Dan Williams:               Thanks for setting me up there, Lindsay. Yeah, it's quite funny that Ton from Air France-KLM, who are our hosts here in Amsterdam, had the keynote speech, and within the first few moments Ton had mentioned supply chains five times. And I made a reference to it during my presentation that we will hear supply chain quite a lot. And it came as no surprise that we did hear it quite a lot. I almost felt like I wanted a bell and every time I hear the word "Supply chain," I could ding it. That's what I really want. Maybe I should do that for another show. So, that's where we're at with that. And we're in this... These podcasts that we've been doing at these various shows, sometimes they can... I'm not saying they can feel a little samey, this one has some slightly different feel to it, a different view, because obviously we're at Aero-Engines Europe, so there's more of a European angle.

                                   So, some things that we talk about, sustainability and a few other things are a little bit more prominent than in other parts of the world. But, we feel like, or perception is that we feel like some of the dust has finally settled within the market where we are right now, especially in terms of MRO, especially in terms of engine MRO, where we now understand the issues. I think it's taken us a little bit of time to understand these things. We know there are workforce issues. I actually think the workforce issue is not a number of workforce per se, it's the experience in the workforce. And I've been seeing that for the past few shows. I think the other thing is attracting the next generation of workers. You look around this room, and it might sound a little bit rude, but there's a lot of baby boomers and there's lots of Gen Xs' in this room.

                                   The baby boomers and the Gen Xs in this room have a slightly different work ethic than... I'm technically a generic millennial apparently. But some of the Gen Zs' are coming into the workspace now, in terms of engine MRO, they don't want to go and work at 3:00 AM in the morning in not a dirty hangar, because these places are very well-kept, but doing dirty jobs. They want to be at home making TikToks and earning money that way or an Insta life and things like that. So, I think, we need to appeal to the next generation. Also, aviation is not as sexy as it once was. You can go and work for SpaceX. So, there's a constant issue in terms of workforce and predominately experience. Again, supply chain, supply chain, supply chain, it's impacting whether you are an MRO, it's impacting whether you are an OEM, it's impacting whether you build new stuff, it's impacting everything. So, thank you for setting me up there, Lindsay with-

Lindsay Bjerregaard:     Of course.

Dan Williams:               I am going to get a bell for next time.

Lindsay Bjerregaard:     Sure. Going to your point about workforce, they also mentioned during the keynote, one of the speakers from KLM Engine Services had mentioned that same point about making aviation interesting for the next generation. And he specifically said younger people, they don't want to stay in the same job for the rest of their lives. So how do you convince them that they should stay at the same company? So yeah, it is a very interesting thing. And like you said, workforce comes up a lot, but it's interesting to hear it from their perspective as well.

James Pozzi:                 And I thought sustainability was interesting as well, because one of the keynote speakers from AF KLM said that his kids grill him on that side. So, that factor has certainly come in for the Gen Z workforce, the sustainability issue as well. And that will factor into their thinking in terms of where they work, what they do for a career as well. And that's something that aviation is having to tackle as well, I've discovered.

                                   What about technology as well? We've heard a bit today about AI and I guess this ties in nicely with talking about future workforces, because they certainly have grown up more with technology in their lives than any other generation to date, of course. So, how is technology factoring and what's been mentioned at Aero-Engines so far in terms of AI for example?

Lindsay Bjerregaard:     So, full disclosure, we are recording this at the end of day one, and there's actually going to be a panel about this at the end of day two. So, be sure to follow up with Aviation Week's coverage. We will certainly be writing more about that. But, AI definitely came up in some of the panels. There was talk about both its possibilities and its limitations. So James, during one of your panels today, there seem to be concurring opinions that it could be helpful for things like inventory management in particular when it comes to engines.

                                   We will be talking about tomorrow some applications for things like engine borescope inspections and that sort of thing. But, I thought it was interesting, the last panel of the day with lessors, one lessor in particular was skeptical about how intelligent artificial intelligence can actually be. And he said what it's doing right now is really just being better at doing statistical analysis. So, I will be curious to see what the perspectives are tomorrow and what kind of audience questions we get in because AI is a hot topic these days with everything in MRO, and I have to imagine there's going to be a lot of interest in it.

James Pozzi:                 Yeah, it's certainly going to become a lot more predictive as well, I think, in terms of shop visit planning, identifying when not to remove an engine from an aircraft too late. And that seems to be factored into a lot of [inaudible 00:07:18]. And I noticed as well, obviously a lot of technology companies with big resources have the means to invest in these long-term and expensive projects. But, it seems that know independent MROs for example as well, a few today were saying that AI's on their radar and they're looking at how to best utilize it to aid the workforce, not to replace the workforce. So yeah, it seems to be that's definitely a development over the last year or two. And I don't know if you both agree that AI is becoming more part of the conversation at events like these.

Dan Williams:               Yeah. AI is such a catch-all umbrella term.

James Pozzi:                 Yeah.

Dan Williams:               I am, as I've already mentioned, a geriatric millennial. So, AI is something that is not beyond my concept, but obviously it's not something I grew up with. So, machine learning can certainly help some of these things to... Certainly for inventory management. We are going to have to work better on pooling parts or working together as a team to collectively... And obviously Air France-KLM, they're a massive group, they can work together. We need to find some of those other parts that do it.

                                   And so, using machine learning, yes, help with predictive maintenance, help keep an engine on a wing and maybe do a repair there rather than leaving it too much and having to drag the whole engine off when we're already capacity constrained with available slots, et cetera, et cetera. Again, these are similar running themes. So, there is a way to go, AI to your point James, is yes, it's not to replace the workforce, it is there to supplement the workforce, and possibly give the current workforce that boost, that leg up, in terms of not necessarily experience but taking one item off their plate that they can apply to make their lives easier and our jobs easier and flow more.

James Pozzi:                 Absolutely. Yeah, sure. I'll open this up to both of you. What else kind of caught your attention there? Is there anything else that you really noticed from the conference?

Dan Williams:               Okay, I'll go. So, this is now my fourth Aero-Engines Europe. First one was a Stavanger just after COVID. I think it was a quasi-hybrid event where there was about a hundred and... I don't know just under 200 people in the room, there was maybe another 100 people or 150 people who were joining virtually. And then you go from that and you go to here in this event, and James, as you said, 650 people give or take, in the room, it shows how important engines are to the industry. Because obviously, you can have have a tube with wings on it, but a tube with wings on it will not go anywhere unless you have engines. And right now the engine related companies be they MROs, be they Lessors, be they OEMs, but for slightly different reasons, have the ability to use this time to recoup some cash, let's say, that they lost through COVID. So, it just shows how important and how quickly the whole thing can come, the aviation industry can come to a standstill with no engines.

James Pozzi:                 Was it 60 to 70% of airline maintenance spending, that was cited in one of the panels, it comes from engine MRO costs?

Dan Williams:               It's something crazy like that. Of which 60 to 70% of that engine overhaul cost is pure materials cost.

James Pozzi:                 Yeah.

Dan Williams:               So, yes, you can get your engine overhauled in different parts of the world where the labor cost is different. But, overall in terms of a general overhaul cost of an engine, yes it will have a different amount if you get it overhauled in Europe versus let's say parts of Asia. But, the grand scheme of things, it is quasi negligible in terms of labor rate when the actual 60 to 70% of what you need is all material-based anyway.

James Pozzi:                 Yeah, absolutely. Just one point I wanted to make actually as well, I'm very interested to see the development of newly developed repairs on certainly new engine types like the LEAP and the GTF, but also doing that on established more mature engine types is also not ruled out by a panel, which I thought were very interesting, comprised of Lufthansa Technik, Iberia Maintenance, Barnes Aerospace, and StandardAero. And they had some interesting insights about where they're looking. Certainly all companies by the sounds of it, and this has been reflected at other panels that I've actually moderated this year on engine events, where there is a need for further repair development in the market. It does take time. It can be quite a slow process when working with OEMs on this. But, it's certainly on the radar of all the MROs. For example, StandardAero is very focused on the LEAP at the moment in the narrow body space.

                                   So, it's going to continue to develop a work closely with the OEM of course. They're quite aligned with the OEMs anyway, StandardAero. But, they're going to keep developing the LEAP capabilities there. Iberia Maintenance as well is also looking at repairs. As is Lufthansa, Technik. Lufthansa Technik said it's going look at engines old and new, because there's a real consensus that balanced and diversified MRO portfolios in the engine segment are important. There are a lot of revenue opportunities and drivers from different engine types, wide bodies and narrow bodies, old and new as well. So, diversification is something that people are really going for. And, of course, obviously another mention, and Dan, I'm sure you'll like this, the supply chain.

Dan Williams:               Ding.

James Pozzi:                 That's been so heavily impacted, I don't even understate this, over the last few years, and MROs are looking for more control of their turnaround times.

                                   They are still by and large way too long, especially on newer engine types. We've heard some interesting numbers shared today on that. So, yeah. So, I think, there will be seeing more repair development over the next few years, and also more, I think Lindsay earlier mentioned, capacity as well. I think more capacity in the parts repair segment specifically was singled out. And I found this very interesting. Lufthansa Technik of course has highlighted plans this year to open a new component repair segment in southwest Europe. They've listed as the location so far, the region where they'll do that. And that'll focus on engine parts repairs. So, a lot of... Sorry, all of the companies in the panel earlier looking at repair developments, they did say capacity is a huge pressing issue. And they will look to get more of that, whether it's through investing in human capital, always an ongoing priority.

                                   You always need people to make this work long-term. You cannot do anything without people, that's a given. New hangars and new capabilities too. So, I think, there could be some really exciting investments made over the next few years. And there is so much growth in this industry, there's so much work there, and so much money to be spent in this engine segment.

                                   But again, I don't want to state the obvious, but meeting that is the real challenge and how the market ramps up that capability and that readiness for the next five, 10 years with all these new engines come into the fleet and the global fleet generally expands and grows and grows. So, an exciting time and a challenging one, and that's surely it's going to be a very, very interesting few years that goes without saying, I think.

                                   Thank you for joining me today, Dan and Lindsay, and talking about Aero-Engines Europe, and some of the trends we've seen here today. And thank you for listening. Don't miss the next episode by subscribing to the MRO Podcast wherever you listen to podcasts. And one last request, if you're listening in Apple Podcasts and want to support this podcast, please leave us a star rating or write a review. Thanks.