Asian focus for Air NZ's booming engineering arm

By Graeme Kennedy

Friday 25th June 2004

Air New Zealand Engineering Services is expanding its multimillion- dollar third-party maintenance, repair and overhaul business, with a focus on Asia and its new fleet of Airbus A320 twinjets.

ANZES opened a Beijing office last year to build on the mainly engine business it has gained since entering the market in 1999 and is offering MRO work on the A320 airframe and its V2500 engines.

Both products expand the company's portfolio which has traditionally specialised in maintenance of Boeing 767s, 747s and 737s and ATR42 and -72 aircraft. ANZES has invested more than $50 million in tooling and equipment to handle the new type.

Its Christchurch engine centre, run as a joint venture with Pratt & Whitney, has been expanded to handle the A320's V2500 power-plant. The centre and ANZES each generate about $250 million in annual revenues for Air New Zealand.

ANZES general manager Trevor Hughes said the A320 provided another fleet type to offer competitive engineering capabilities in the Asia-Pacific region where many carriers were using the aircraft.

Hughes said that while MRO work mainly for Virgin Blue, Qantas and its low-cost subsidiary Jet Connect and engine overhauls for many other airline, military and industrial customers had been the company's bread and butter, higher-value engineering services were now getting a stronger focus.

"We are looking for opportunities for growth out of engineering services, which includes design, modification and installation, as well as third-party MRO," Hughes said.

"We have signed a small contract with Boeing related to 7E7 maintenance management we have developed capabilities in these areas and Boeing is aware of that."

Engineering services include designing and installing modifications such as flight-deck software, external antennas and cabin refits similar to the upgrades on seven Air New Zealand 747s to begin in May next year.

ANZES is diversifying its engineering work as the MRO sector becomes more competitive with lower-priced Asian companies and, closer to home, Qantas and Virgin Blue building local facilities to meet increasing demand from the many low-cost startups already flying, preparing for launch or under development throughout the region.

Centre for Asia-Pacific Aviation managing director Peter Harbison said growth in the low-cost sector would be enormous with dozens of new carriers in the next five years.

While Hughes said global MRO business was worth about $US35 billion, Hong Kong analysts Frost and Sullivan said Asia-Pacific revenues of $US5.2 billion in 2002 could reach $US7.3 billion by 2011.

"Current market trends show that airline operators are increasingly looking for comprehensive solutions which include scheduled heavy maintenance and engine checks over a fixed number of years for all possible types of maintenance and repair from nose to tail," the firm said.

"Increasing deregulation has helped attract numerous private operators who give priority to selling seats and prefer to outsource almost all other operations."

Hughes is pushing ANZES' excellence as a selling tool for Asian and other carriers, pointing out that the company last year won the region's airline MRO of the year award.

ANZES early this year offered Asian low-cost start-ups a total support package billed as a one-stop shop for a full range of individually tailored engineering management requirements.

And the company continues to market its flight crew training services throughout the region.

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