July 13, 2017 - No. 056 In This Issue China Airlines Hopes To Strengthen MRO with Boeing Pact Incremental Improvements Driving Major MRO IT Changes DHL scoops Cathay Pacific MRO logistics deal Icelandair May Leverage 757 MRO Expertise Long-Term, CEO Says Increased Hiring, Wages Pressure U.S. MRO Costs Delta TechOps Lands $750 Million ATSG Contract Aerospace guru explains why SpaceX reuses rockets - and it's not to save money Applying Blockchain to MRO China Airlines Hopes To Strengthen MRO with Boeing Pact China Airlines expects its recent memorandum of understanding (MoU) with Boeing to explore opportunities in aircraft MRO will boost its engineering and maintenance prospects in the Asia- Pacific, but continuing political tension between Taiwan and China will keep the region's biggest market out of reach for the Taiwanese flag carrier. Neverthless, the airline hopes the deal-still in its planning stages-will help boost profit margins beyond the meager .45 percent China Airlines (CAL) registered last year in the face of stiffening competition from mainland Chinese carriers and falling yields. A CAL spokesperson told AIN that the capabilities of the airline's engineering and maintenance organization include airframe maintenance, engine maintenance and repair of aircraft components. Current CALmaintenance capabilities cover all aircraft types it operates. The Taiwanese flag carrier flies the Boeing 777-300ER, 737-800 and 747-400F, while it remains in the process of retiring 747- 400s delivered before 2004. "Part of the partnership includes the expansion of capabilities for cabin and fuselage modifications for passenger aircraft," she said. "Closer collaboration will expand this to include collaborative development as well as the joint assessment of new technologies and business solutions." Boeing also hopes that CAL can qualify as an approved Boeing Global Fleet Care supplier and aid its qualification as a potential Boeing Converted Freighter (BCF) facility. Based at Taoyuan Airport near Taipei, CAL's engineering arm consists of 2,500 employees who service more than 100 passenger aircraft and freighters operated by the China Airlines Group and more than 40 domestic and foreign customers. The Boeing MoU is similar to another signed with Airbus earlier this January. Taiwan's minister of transport and communications, Tan Ho Chen, said at an Airbus A350 delivery event in October 2016 that he hopes Taoyuan can become an aviation hub like Hamburg with technological transfers from Airbus. Now, with another MoU with the "Taiwan-friendly" U.S. airframer, his plans appear one step closer to fruition. https://www.ainonline.com/aviation-news/air-transport/2017-07-11/china-airlines-hopes- strengthen-mro-boeing-pact Back to Top Incremental Improvements Driving Major MRO IT Changes MRO providers are seeking better ways to manage data and add functionality to their core operations using digital tools, from mobile devices to dedicated apps, but they are not necessarily seeking sweeping IT-system revamps. Many software companies are shifting to truly modular offerings that allow customers to phase in functionality and avoid often risky enterprise-wide upgrades. The common ground has both MRO and software providers making progress in an area known for results that do not meet expectations. "I think [MRO providers] are looking for an alternative to the failed implementations they've had over the years," says Espen Olsen, director of business development of Aerospace & Defense at IFS. The story is familiar to many in the airline world. Enterprise resource planning (ERP) systems, which trace their roots to a 1960s partnership between IBM and heavy-equipment manufacturer Case, came to the forefront in the 1990s. Airlines, like most large organizations, fed data-often from paper-into mainframe computers. ERPs introduced several key functions, including process management and data-sharing. But they also brought challenges, especially when applied to complex, fluid processes such as managing heavy airframe maintenance checks. While core business-process aspects-accounting, human resources and the like-are tailor-made for a single system, managing an MRO operation has proven less so, as it is more complex. And as companies seek more capabilities-such as enabling a technician to quickly determine whether a needed part is available without leaving his station on the hangar floor-they are turning to specific, yet integrable, options. "We see more and more companies going down the same route," Olsen says. "Previously, it was one ERP system that could do everything. They're realizing that is not the case now." A fall 2016 Aviation Week/International Air Transport Association (IATA) survey of MRO providers- both within and outside of airlines-paints the landscape clearly. Nearly half of respondents said they plan to enhance existing software systems in the next five years, compared to 20% that are looking at complete upgrades. Within the group seeking marginal improvements, the most popular enhancements included long- sought-after steps such as maintenance planning, e-signatures and document management. But mobile capability was mixed right in, and another emerging core functionality, data analytics, topped the wish list. Customers' desire to exchange data and leverage it collaboratively was the primary driver behind Swiss AviationSoftware Ltd.'s (Swiss-AS) latest offering. The Lufthansa Group subsidiary, which has grown from about 60 customers a decade ago to more than 160 today, counts a mix of operators and MRO providers among its clients, including several fellow Lufthansa Group organizations. When the group decided it wanted to share some data in its modular Swiss-AS AMOS software system, the company moved to develop a concept it had been considering for a while. The formal launch came in early June. "The idea of AMOScentral existed for quite a time at Swiss-AS," says Ronald Schaeuffele, Swiss-AS CEO. "The concept matured by the obvious trend in the aviation maintenance market to collaborate and share data. In addition, we received requests from the AMOS community, which reflected the desire to ease cooperation within airline groups and even beyond." The concept sounds simple: a module that can become a data gateway between any two AMOS customers. It does not store data, but manages transfers between "subscribers" and "providers," each of which defines what access will be granted. Ensuring that data can be passed back and forth through a single gateway, and is useful at each end, can be more challenging than it sounds. "The first phase of the development and rollout of AMOScentral will be to focus on data harmonization, since our showcase is the harmonization and exchange of AMOS data objects between AMOS customers within the Lufthansa Group," Schaeuffele says. "We can team up to use expertise and synergies while developing AMOScentral and bringing it to market." Creating a gateway between AMOS users will do more than link common software packages in different companies, as AMOS itself is an integrator. EasyJet, which installed AMOS in 2010, has more than a half-dozen other task-specific systems connected to the software package, ranging from its digital records management tool to a direct link with AJ Walter, the airline's primary component maintenance and spare-parts logistics provider. AMOScentral will enhance this connectivity, EasyJet says. Among the planned connections are point-to-point interfaces such as Spec 2000, cloud providers such as Amazon Web Services, and industry-specific feeds such as pricing information from vendors and parts-procurement platforms. AMOS is working on AMOScentral's "basic functionalities" and plans to roll them out gradually "over the next couple of years," the company says. "AMOScentral will be an addition to the existing AMOS suite," like, AMOSmobile, for example, Schaeuffele says. "However, at this stage the pricing model is not yet defined." IFS, which expanded its aerospace presence by purchasing MRO software provider Mxi earlier this year, is seeing a range of demand in the marketplace. In more mature markets, such as North America and Europe, demand for full-spectrum systems is tempered a bit as airlines grapple with the best way to upgrade legacy systems, Olsen says. In the Middle East, the appetite for adding new technology is frequently bigger, often leading to quicker adoptions. The Asia-Pacific region presents additional opportunity as well, as operators expand rapidly to meet growing demand. The emerging importance of data analytics is adding a level of complexity to IT provisioning. Within airlines, one of the nagging data-management challenges is old and often incompatible internal legacy IT systems. American Airlines will have about 50 systems within its technical operations unit even after the US Airways integration is complete. Becky McCarty, the airline's manager of data management for Tech Ops, emphasizes that inability of one system to talk to another does not have to stop an analytics push in its tracks. American is focusing on moving unstructured data into its data warehouse. From there, it can be fed back out to individual, department-level systems, even if those systems cannot talk to each other. The airline also has created a data-validation team to help manage requests to share information within the company. The team, which includes representatives from each tech ops department, is the new "first stop" for internal customers that want access to a particular data set, McCarty says. The move has several benefits among them: boosting collaboration among departments, both within and outside of tech ops, and-more important-freeing up the IT staff to focus on more advanced and complex projects. Underpinning all of this will be new policies shaped for the new world order of real-time data acquisition and broader distribution. The airline's current policies focus on data storage, not how it can be distributed. The new protocols will apply to data "at a subject level, not just an application level," she explains. McCarty says that while some of American's efforts focus on easing the IT burden, the internal tech experts will continue to play a central role in the carrier's data strategy, "This is about partnering with IT, not going around IT," she says. The analytics push is helping software providers and their customers unearth new ways to use existing data. IFS last fall rolled out a tail-planning tool designed to help airlines match aircraft to specific routes based on myriad factors, ranging from maintenance schedules to destination-specific limits. The product grew out of work that the software provider did for Emirates Engineering as part of setting up a General Electric GE90 engine overhaul shop in Dubai. Emirates chose several IFS offerings, including its Complex Assembly MRO tool, to help manage major aspects of the shop's operation. When Emirates asked if part of the engine overhaul modeling optimization could be applied to its airframes, IFS went to work. The result: the new tail-planning offering. "We were reusing what we already had, but configuring it in a different way," Olsen says. The software and data "wasn't intended to be used that way, but through discussions with Emirates, we applied what they had to what they needed." The push to augment existing systems extends far beyond administrative and back-office management functions. MRO providers are acutely aware that empowering their most important assets-their hands-on technicians-will play a major role in driving efficiency gains. Among the most promising technology is augmented reality (AR). Consultancy ICF equates AR's potential in the MRO space as equivalent to additive manufacturing's effect on parts production. Air France Industries-KLM Engineering & Maintenance is among the maintenance providers dabbling in AI. The MRO provider rolled out a virtual training tool for the 787. Working with Air France Group sister company HOP! Training by Icare, which developed a similar system for the Bombardier CRJ family, the system both allows trainees to familiarize themselves with the aircraft and run through what-if scenarios. Another emerging trend is leveraging technologies such as automated bots-think virtual chat assistants-and voice-recognition to simplify, or even eliminate, the user interface (UI). Ramco Systems has created about a dozen bots targeting aviation-specific scenarios such as an aircraft- on-ground situation. A bot connected to a parts-distribution system can handle multiple requests simultaneously, unlike a human who must rely on phone calls or email. "The bottom line is, everyone loves to chat. This lends itself as a huge [incentive] for enterprise to adopt this platform for change," says R.H. Chalapathy, Ramco Aviation's head of product strategy. "Conversation is the new UI. A bot blends in with the user's natural environment instead of forcing the user to enter a new world." http://www.mro-network.com/software/incremental-improvements-driving-major-mro-it-changes Back to Top DHL scoops Cathay Pacific MRO logistics deal DHL Supply Chain has commenced management of all aircraft maintenance, repair and overhaul logistics activities for Cathay Pacific and Cathay Dragon in the airlines' home base at Hong Kong International Airport (HKIA), part of a 10-year contract signed earlier this year. The contract will see DHL Supply Chain take overall responsibility for the storage, warehousing and domestic transportation of 80,000 specific aviation part types, components and equipment used to maintain Cathay Pacific and Cathay Dragon's combined fleet of 180 aircraft to the highest safety and operational standards. DHL Supply Chain will also work with incumbent aircraft maintenance provider HAECO to provide additional services including parts inspection and airside operations. Cathay Pacific director, engineering, Neil Glenn, said: "Operational efficiency and quality are imperative to Cathay Pacific. Aircraft maintenance and repairs require constant precision and care, which is supported by the efficient storage, handling and on-demand provisioning of vast numbers of spare parts. "The arrangement that we now have in place allows all three parties to concentrate on their specific core capabilities, namely: airline management (Cathay Pacific), aircraft maintenance (HAECO) and now, DHL will be responsible for the maintenance, repair and overhaul (MRO) supply chain management." A core team of 120 staff operate on a 24x7x365 basis, managing more than 90,000 sq ft of warehousing space, processing 1m units of spares transaction per annum, round-the-clock transport delivery, and reporting and governance procedures. Operations commenced after approval was obtained from the Hong Kong Civil Aviation Department and nearly four months of intensive onboarding and training involving DHL Supply Chain, Cathay Pacific and HAECO. DHL Supply Chain will begin introducing process improvements and implement new supply chain systems within the initial phase of the contract. "DHL Supply Chain has invested heavily in MRObuilding up its capabilities to service the aviation industry's exacting safety and compliance needs. With Hong Kong taking the lead, we are looking at extending this capability in the Greater China region, particularly mainland China and Taiwan," said Yin Zou, chief executive, DHL Supply Chain Greater China. http://www.aircargonews.net/news/airlines/single-view/news/dhl-scoops-cathay-pacific-mro- logistics-deal.html Back to Top Icelandair May Leverage 757 MRO Expertise Long-Term, CEO Says New hangar capacity and shifting fleet dynamics at Icelandair could lead to the airline becoming a specialist in Boeing 757 maintenance even after it phases out the venerable narrowbody, the carrier's top executive says. Speaking at the Aviation Suppliers Association annual conference in Reston, Va. July 10, Icelandair CEO Birkir Holm Gudnason said that the carrier's expertise in the 757 could be leveraged as part of its long-term third-party MRO services strategy even after it retires the fleet type. "We could become like Fokker Services for the 757 in the future, even though we might not be operating it," he says. "That's one of the options we are looking at in the future." The 757 remains the backbone of Icelandair's 30-aircraft fleet and will be for the foreseeable future. The carrier operates 26 of the Boeing narrowbodies, including one 757-300. It also flies four 767- 300s. But a major fleet expansion gets underway next year, when the first of 16 firm-order 737 Maxs arrive. The carrier, which operated 11 aircraft a decade ago, also hold eight options for Boeing's newest narrowbody. The new aircraft will be used for a combination of growth and fleet- replacement. Icelandair's growth led it to add a second maintenance hangar at its Keflavik International Airport base. Slated to open late this year, the hangar will help Icelandair pull back some heavy maintenance that has been going to third-party providers due to capacity constraints. The carrier's plan is to use the new hangar for major checks and large projects, such as cabin modifications. The current hangar, built in 1992, will be used for lighter work and unscheduled checks. The new capacity, coupled with a local effort to ensure Icelandair will have a steady flow of technical services employees, will support the carrier's goal of doing "most" of its MRO work in- house, Gudnason said. As the fleet is modernized and its internal MRO demand decline thanks to new-aircraft maintenance honeymoons and a general reduction in MRO needs that newer models tend to bring, the airline will seek ways to keep its hangars full and employees busy. Focusing on the 757--much like Fokker Services built an aftermarket business that started by supporting the legacy Fokker turborprop and jet fleets--could be part of the strategy. "We have a lot of expertise in Iceland on the 757," Gudnason says. http://www.mro-network.com/airlines/icelandair-may-leverage-757-mro-expertise-long-term-ceo- says Back to Top Increased Hiring, Wages Pressure U.S. MRO Costs Maintenance cost per flight hour edged up in 2016 for most U. S. airlines. As a group, the three network airlines, American, Delta and United, paid $1,032 per flight hour for their mixed fleets, up 1.7% from 2015. American and United paid the most, $1,175 and $1,000 per flight hour, respectively. Delta paid the least, $905 per flight hour, and actually nicked 0.8% off its prior-year rate. The three biggest low-cost carriers, Southwest, Jetblue and Frontier, paid $708 as a group to maintain their less-expensive narrowbody fleets. That was 1.5% higher than in 2016. Southwest incurred $720 in flight-hour MRO costs, up 2.2% from 2015, and Jetblue $850, a stiffer 5.6% jump. For the entire U.S. fleet, including Alaska, Hawaiian, Spirit and Allegiant, MRO cost per flight hour were $700, virtually the same as in 2016. This relative stability likely reflects a shift in the overall fleet mix toward LCCs and younger aircraft. But individual airlines remain under pressure to control their maintenance costs, and one major reason is the need to hire more techs at higher wages for a growing airline business. The Labor Department estimates that U.S. avionics technicians rose only slightly, from 17,150 in 2015 to 17,330 in 2016. Yet their average annual wages, excluding benefits, increased from $58,460 to $61,390, or 5%, in one year. For aircraft mechanics, the headcount rose more strongly, from 116,830 in 2015 to 128,570 in 2016, more than 10%. And that big increase was only achieved by increasing average wages from $58,850 to $61,190, or 4%. At a time when most U.S. blue-collar wages have been stagnant or growing only slowly, these one- year rises are striking. And the latest data from the Labor Department suggests that wage pressures are continuing. The Producer Price Index for aircraft parts rose only 0.4% from May 2016 to May 2017, and PPI engine part prices increased only 0.2% over the same period. Yet the PPI for aircraft repairs per transaction increased 2.7% in these 12 months. That would imply employee compensation rates rose another 4-6% in the year to May 2017. http://www.mro-network.com/maintenance-repair-overhaul/increased-hiring-wages-pressure-us- mro-costs Back to Top Delta TechOps Lands $750 Million ATSG Contract Delta TechOps, the maintenance division of Delta Air Lines, has signed a new 12-year agreement worth $750 million to service CF6-80A and CF6-80C2 engines operated by the airline subsidiaries of Air Transport Services Group (ATSG). The GE Aviation-manufactured turbofan engine, among the most mature in operation today, is used to power ATSG's fleet of Boeing 767 aircraft. Carriers covered as part of the contract include ATSG-owned cargo specialists ABX Air, Air Transport International and Cargo Aircraft Management. The latest contract extends a partnership between Atlanta-based Delta TechnOps and ATSG which goes back more than 20 years. "Our vast experience operating and supporting the world's largest B767 fleet makes us a perfect fit to support ATSG and their growing fleet, said Jack Arehart, president of MRO Services at Delta TechOps. "ATSG has been a great customer and we look forward to continuing to support them for many years to come." http://www.mro-network.com/maintenance-repair-overhaul/delta-techops-lands-750-million-atsg- contract Back to Top Aerospace guru explains why SpaceX reuses rockets - and it's not to save money SpaceX's reusable rocket technology has been hailed as the future of space travel, and even the Russians have admitted that the company seems to be on to something, but when it comes to return on investment, one of SpaceX's founding team members says that launching the same first stages multiple times isn't actually where the company sees the boost to its bottom line. Jim Cantrell is the CEO of Vector Space Systems. He's worked for NASA's Jet Propulsion Lab and was a founding member of both SpaceX and the Google Lunar X Prize-winning Moon Express. When it comes to the space industry, he's the kind of guy who you should listen to, and in a recent response to a Quora question about exactly how much money SpaceX is saving by reusing its Falcon rocket, Cantrell revealed the real reason (he believes) the company has pursued reusable hardware so vigorously isn't actually to save money, but to increase the number of launches the company is able to perform. "Reusability allows a marked increase in flight rates," Cantrell explained. "Reverse engineered financial models of SpaceX show that to reach a good strong positive cash flow, they need more than the traditional 10-12 launches per year that sized rocket has demonstrated. Reusability should easily double the amount of flights possible from a mere production and logistics standpoint." As far as the discounts being offered to clients whose devices and cargo is being launch on "flight- proven" rockets, "I am thinking that very few, if any, of the SpaceX Falcon 9 first stages are going to be re-used for more than 3 or so flights," Cantrell said. "SpaceX will therefore not break even on the reusability portion of the equation." http://bgr.com/2017/07/11/spacex-news-reusable-rocket-discount/ Back to Top Applying Blockchain to MRO Bitcoins have been accepted by a small number for airlines for several years, but it is perhaps the technology underpinning the crypto-currency that will do more to re-shape aviation. Retaining visibility over aviation's complex supply chains, especially across maintenance events, is a complex task well-suited to Blockchain, the principal director of Accenture's aerospace and defence practice has told The Engineer, a U.K.-based technology site. Blockchain is essentially a shared ledger that offers users a complete, time-stamped record of the transactions and processes within it. Each time-stamped event forms a block in the chain, which is almost virtually impossible to retroactively alter. "Maintenance, repair and overhaul organisations obviously update the configuration of an engine during an overhaul. If they don't have visibility to the current configuration of what needs to be done, they can't schedule their capacity effectively," said Craig Gottlieb. Applied to aviation, the Blockchain would operate within a secure business network and be visible to authorised participants. One advantage of this private network would be much faster updates to the shared ledger than occur after Bitcoin transactions. Others also share Gottlieb's optimism about Blockchain. Last month Glenn Reis, senior account partner for IBM's aerospace and defence practice, told MRO Network about his company's enthusiasm for the technology, alongside others such as machine learning and the Internet of Things "We believe that this capability has great promise within the complex aerospace supply chains process and offers substantial reductions in transaction times, overhead costs of intermediaries, and creates end-to-end transparency of all constituents within a secure community network," he said. http://www.mro-network.com/technology/applying-blockchain-mro Curt Lewis