360-Deg. Support Drives Two Big MRO Acquisitions

By Lee Ann Tegtmeier
Source: Aviation Week & Space Technology
November 11, 2013

Two major announcements—both of which Aviation Week reported early—rocked the MRO community late last month.

While Hong Kong Aircraft Engineering Co. (Haeco)'s planned purchase of Timco Aviation Services might seem quite different than Lufthansa Technik's purchase of a 15% stake in AeroTurbine, they have one big thing in common—life-cycle support.

Haeco's acquisition of Timco for $388 million, which is expected to close in the first quarter of 2014, gives Haeco an entree into the North American MRO market and provides interiors-manufacturing and expanded line-maintenance capabilities. This is a key element, given the engineering focus that Haeco has placed on interiors and cabin quality over the last several years, in particular for Cathay Pacific, which, like Haeco, is part of the Swire Pacific Group.

Timco CEO Kevin Carter says, “This exciting and unique opportunity offers our customers access to a broader and deeper platform of products and services while better enabling us to seize on current global growth opportunities related to interiors engineering and manufacturing.” By purchasing Timco, which is controlled by investment vehicles managed by Owl Creek Asset Management, Haeco says the combined businesses will “accelerate the development of technical capabilities,” and services that cover the range of life-cycle support—including design, certification, manufacturing, fitting, retrofitting and component maintenance.

By marrying Timco's seats and interiors-manufacturing capability with Haeco's deep engineering expertise—and Timco's regional and major airline maintenance—you've got a life-cycle approach.

The only piece that doesn't fit is Timco's military MRO business.

The life-cycle play in AeroTurbine/Lufthansa investment is very clear. LHT buys about $2 billion of parts annually, and International Lease Financing Corp., AeroTurbine's parent company, has a pipeline of about 250 aircraft that need to be monetized at any point in time—and AeroTurbine is there to connect the large supply and demand.

With the increased teardowns today, “there's a significant explosion of material available,” says Michael King, AeroTurbine CEO, and his company has a consistent pipeline of material that it can offer on a programmatic basis.

And considering about 70% of an engine overhaul's bill is devoted to parts, having an advanced view of what material will be available for that overhaul—18-24 months ahead of time—helps price future bids and better manage assets.


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