MRO: a more holistic approach
Rod Bailes-Brown, business development manager at IFS Defence, looks at the impact an integrated approach to Maintenance, Repair and Overhaul (MRO) can have on boosting airline profits.
Recent research into how airlines spend each passenger's airfare has revealed that there is very little room for profit, once relatively fixed costs of taxes, salaries and fuel amongst other factors are taken into account. But maintenance is one area in particular where technology can be used to optimise operations and help boost profits.
The civil aviation market is one of intense competition and pressure, with rising fixed costs, low margins of profit, and increasing demand from consumers with more choice than ever before. As the Wall Street Journal recently revealed, 99% of the revenue received per flight by airlines is needed simply to break even on the high costs incurred in operation and maintenance.
The largest cost to airlines is fuel, followed by salaries, taking 29% and 20% of revenue respectively. The costs related to maintenance typically make up 11% of revenue.
MRO – ensuring an integrated approach
One area where airlines can meet regulatory and safety requirements at the same time as reducing their overall expenditure is through optimising maintenance operations. And the statistics show that investment in MRO is on the rise – global MRO expenditure was up 5.7% in 2012, and is expected to rise further at a rate of 3.3% annually until 2022 (TeamSAI).
Maintenance involves quotation handling, maintenance planning and execution, configuration management, supply chain logistics, cost tracking and invoicing. If companies adopt a more integrated approach to maintenance, one that integrates across the enterprise, then they can start to see lower operational and inventory costs as well as efficient workforce management, financials, HR and of course, increased business intelligence.
By ensuring a more holistic approach to maintenance operations, it's possible to achieve increased value from IT investments. And the sums indicate that if operators can reduce their maintenance costs by just 10%, they could double their profits.
Bottom line benefits of reducing maintenance costs
Many operators currently and historically use point solutions that have emerged from specific initiatives – for example one solution for managing aircraft fleet Line Maintenance, another for Heavy Maintenance (such as engine MRO), a further vendor solution for Technical Publications management, and yet another vendor solution for an end-to-end Supply Chain and the close contractual engagement with key suppliers.
Enterprise solutions do not need to mean a complex, monolithic approach. Modern enterprise-wide solutions are available that have a specifically developed capability for the civil aviation market that can be implemented within a single strategy.
Such solutions are modular, meaning that they can be implemented at an appropriate pace of business change, aligned with airline development, expansion and operational plans, as well as ensuring integration with legacy solutions without the disruption previously seen with monolithic ERP systems. Also, in order to get the most out of an efficiency drive for maintenance, these solutions are tightly integrated alongside horizontal business operations such as HR and finance to provide a complete and manageable end to end solution.
In such scenarios, complexity is reduced thereby reducing any inefficiency and delivering significant productivity gains. Consolidation can expect to reduce TCO, and many will benefit from cross-industry investment that reduces risk to airlines downstream. This can deliver reductions in operational costs through end-to-end process efficiency with overall maintenance processes significantly streamlined with associated efficiency benefits.
Additional benefits include a single and importantly end-to-end robust mobile strategy and architectural platform so delivering data availability immediately across the enterprise – critical in a fast moving civil aviation environment.
A case in point
These ‘new generation’ solutions are already being taken up by leading international airlines which have recognised the significance of maintenance efficiency to overall profit. If we take the key area of Engine MRO, the IFS MRO solution is in use by GA Telesis (previously Finnair Technical Services) and Alitalia Maintenance Systems.
Emirates, one of the world's fastest growing international airlines with one of the youngest fleets in the industry, chose an holistic solution to manage its new 90,000 square metre engine overhaul facility in Dubai. In addition to the robust engine MRO capability it also delivers Corporate Performance Management to ensure strategy is driven into business operations.
Adopting an holistic approach that integrates across the enterprise – from quotation handling, maintenance planning and execution, to configuration management, supply chain and logistics, cost tracking and invoicing – results in lower operational and inventory costs as well as efficient workforce management, financials, HR and of course, increased business intelligence. This will provide airlines with a real business differentiator going forward – driving in that 10% maintenance improvement directly linked to airline profit bottom line.