In the past, total outsourcing was the default mode of doing business for Asia-Pacific's LCCs, especially smaller airlines, but some say that model is being replaced.
“The market has shifted,” says Brian Hogan, a principal with XSQ Consulting who worked at Philippines-based Cebu Pacific when it established its first joint venture, Aviation Partnership (Philippines) Corp. for line maintenance, with Siaec. “All these organizations should do their own line maintenance themselves and then make a decision on the C checks or the heavy checks, depending on their critical mass, or whether or not they can make an MRO profitable.”
Sticking to the essential core-business approach, some carriers continue to send all of their maintenance to third-party providers. TigerAir, for example, outsources both its line and base maintenance, says Chief Operating Officer Ho Yuen Sang—and he does not anticipate adding in-house capabilities. “Our MRO provider has the capability and capacity to undertake the additional maintenance work for the growing fleet.”
But Ho notes that the increased numbers of aircraft operated by TigerAir and its peers certainly will have an impact on the region's MROs. “[The] higher volume of work could translate to higher productivity and lower unit cost of maintenance,” he says. This would benefit airlines like his that depend on the total-outsourcing strategy.
Cebu Pacific continues the joint-venture approach that Hogan helped establish. The airline added a second joint venture with Siaec, a base maintenance facility at Clark International Airport in the Philippines, although Cebu Pacific also has partnered with Vaeco in Vietnam for its ATR aircraft; with Haeco in Hong Kong for its A330s; and with General Electric, Rolls-Royce and SR Technics for engine maintenance.
The joint-venture arrangement continues to make sense for the airline, says Chief Executive Adviser Gary Kingshott, because “the scale of Cebu Pacific's maintenance profile requires a large proportion of an MRO's total capacity, and so a joint-venture arrangement with an accredited organization willing to invest remains a viable strategy for Cebu Pacific.”
The region's largest LCCs, AirAsia and Jetstar Asia, tackle line maintenance in-house or through shareholding partners. AirAsia has received 127 of the 211 A320s and 264 A320neos it has on order and it has grown accustomed to adding a minimum of 24 new aircraft annually. Performing its own line maintenance is a matter of reputation as well as economy of scale.
“Wherever we go, wherever our new [air operator's certificates]—AirAsia India or AirAsia Malaysia, Thailand, Indonesia—we have our own team carry out all of the line maintenance requirements,” says group engineering head Anaz Ahmad Tajuddin. “We would rather have that in-house. Then we have full control, because the AirAsia brand is important to us. We need to have full control of the brand, especially in line maintenance, where daily activities more or less interface with the customers.”
AirAsia sends the bulk of its base maintenance work to a neighbor, Sepang Aircraft Engineering (SAE), a company part-owned by EADS, but it also patronizes Siaec, Garuda Indonesia and Thai Airways, Tajuddin says.