Ten years ago, Israel Aircraft Industries decided to reorganize its operations and separate commercial and military maintenance repair and overhaul (MRO) activities between Lahav (military) and Bedek (commercial) divisions, in an attempt to focus its activities in the MRO and military modernization markets.
"This shift was a dramatic move for our division," says David Arzi, general manager of Bedek Aviation Group. "We had to let go about half of the $200 million sales of military projects we had prepared for, and shift from a company that was 80% military to a different type of business, primarily domestic maintenance activities. It looked as though someone decided to close the company sooner than later.”
Bedek — Global Player
Bedek is now operating on five continents. The U.S. market represents the largest volume of its operations, with over $250 million annual sales. European business turns over around $100 million. From $50 million orders in 1995, the company anticipates a $1.5 billion backlog in commercial orders by mid-year, spanning a five- to 15-year period.
China represents both an attractive market and source of high quality and competitive workforce. Bedek does around $50 million worth of business per year in China, providing MRO services to many local airlines, primarily maintenance and service of engines, accessories and APUs. The company plans to outsource considerable work there. For example, all B767 cargo conversion kits will be made in China as part of a subcontracting deal with Shenyang Aviation Co. Bedek already subcontracts 737 conversion kits to India under contract with Hindustan Aeronautics Limited. China will also provide some of the 747SF kits.
Closing down was no option for Bedek. Instead, the company was determined to transform into one of the world's leading MRO providers. A decade later, with annual sales of commercial MRO totaling of $480 million, passenger and freight carriers ranked Bedek number one MRO provider in the first independent survey conducted by Overhaul and Maintenance magazine.
"We received excellent feedback after our selection. The survey was thorough and professional and is perceived as objective and authoritative among airline executives," Arzi told Show News. "Making this turnaround wasn't easy. We started with identifying market trends and the most attractive growth markets. Early in the program we decided to focus on the U.S. and Europe as two major markets, but identified the Chinese market potential, which was still in its infancy.”
Bedek realized that its pool of skilled manpower, including technicians and engineers, was offering distinct advantages compared with competing MRO services, enabling the company to enter more complex conversion programs. Committing to “full service programs” — assuming full responsibility for the airline's maintenance and technical logistics activities — became Bedek's prime objective.
"Our strategy proved right, and on time,” notes Arzi. “It positioned Bedek within a few years among the MRO market leaders, responding to the growth of low-fare airlines and MRO outsourcing trends."
In the conversion business, Bedek decided to focus on cargo, a fast-growing market (6% to 7% average compared with 4 to 5% growth in passenger aviation). The world cargo fleet is expected to grow significantly, absorbing Boeing 747-400 and 767 aircraft that will retire from passenger fleets and be converted into cargo airplanes. According to Arzi, Bedek is preparing for this demand with the completion of Type Certification for the 747-400SF cargo conversion.
"By March 2006 we expect to complete the 747-400 cargo conversion STC and start production. Further approvals for the Boeing 737-400 and 767-300 are planned for 2007 and 2008. We expect that significant numbers of Boeing 767-300s will retire from passenger fleets as the Boeing 787 and Airbus A350 enter service," he told Show News.
The company plans to operate seven simultaneous conversions “slots” in Israel and abroad. All slots are already sold out through 2009 for the conversion of at least 40 aircraft. Launch customer is Guggenheim Aviation Partners/Air China, scheduled to receive Bedek's first converted 747-400SF in 2006.
Bedek is currently entering into maintenance of advanced engines, including heavy maintenance of the CFM56-7 and PW4000, Arzi says. Having expanded its maintenance and support services to offer power-by-the-hour maintenance services to the latest generation of aircraft, including the Boeing 777, and the most advanced engines from CFM, plus support for landing gear, avionics, APUs and accessories, Bedek is looking for further lucrative markets in this category. —Tamir Eshel
