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Aviation News The Americas, a "considerable" market for AFI KLM E&M

The Americas, a "considerable" market for AFI KLM E&M

Interview by Romain Guillot in Orlando, Florida
11 MAY 2017 | 1566 words
The Americas, a
Le Journal de l'Aviation - all rights reserved
Interview with Fabrice Defrance, Senior Vice President Commercial at AFI KLM E&M

Le Journal de l'Aviation met Fabrice Defrance, Senior Vice President Commercial for Air France-KLM group's maintenance division, at MRO Americas Conference & Exhibition which was held in Orlando (Florida) two weeks ago. This provided us with the opportunity to take a look at AKI KLM E&M's American activity. Interview.

Why such a presence at this major MRO event in the United States?

We come to MRO Americas each year as we are developing significantly on the North and South American continents, with our Air France Industries KLM E&M brand, but also with our different local sites, such as Barfield, which repairs a lot of equipment for airlines such as American Airlines, JetBlue and also for Delta and United as well as for the LATAM group in South America. Our activity portfolio mainly contains "Components" services on the continent, with a high growth rate and a highly significant development capacity, not just in terms of volume but also in terms of diversification.

We are taking up a major position on new types of aircraft. We are taking about A350s, but also A320neos, 787s or 737MAXs, which are our main targets since they correspond to the new technologies which are being put in place by aircraft manufacturers and equipment providers. These planes have technology that we want to get to grips with in our workshops as our policy is not just to service all operators with the elements they need at the right time; we also want to command the whole repair chain, developing production capacities in our Paris, Amsterdam and Miami workshops, including for new technologies. This helps us control TAT, the turnaround time, for equipment or engines, to help us control costs, because when you get the TAT wrong, or when you trust a sub-contractor who just ignores it, the consequence is that for you to service your customer you have to provide them with exchanges and dip into your stock. You can do this for a while, but if it becomes part of your operational processes your costs take a hit and obviously your profitability collapses. Of course, as we want to protect our margins, we need to control the whole service chain, especially the equipment and engine repair TAT.

This is why we are investing in equipment for the new Airbus and Boeing aircrafts and in Embraer's new E-Jets, and also in engines such as the GEnx. Our Amsterdam workshops and our CRMA subsidiary are starting to carry out all the repairs necessary on this type of engine, including for GE Aviation, AFI KLM E&M's first customer on the GEnx. General Electric is sending us engines for repair, but also engine elements such as combustion chambers for CRMA. Finally, let's not forget the major support we have been providing to Air Canada for the GE90s on its 777 fleets since 2010.

What we're doing on the American continent isn't really different from what we're doing in Europe, the Middle East or Asia. We are positioning ourselves in a market where new aircraft and new engines are appearing. The advantage of the North American market is that there is a huge aircraft upgrade market. You just need to look at the main airports in America to see that there are still a lot of old types of plane which will simply need to be replaced by new generation aircraft. The growth potential on MRO activities for new generation equipment and engines is colossal there.

And this comes at the same time as Latin American fleets are growing significantly?

Absolutely, in Mexico, but also in Colombia, in the whole Southern Cone, including Brazil. There are a lot of new aircraft arriving as a lot of orders have been made over the last five years, slightly ahead of what's happening in North America. This means that it's vital for us to be there and to continue to promote the services we provide from Amsterdam or Paris, but also Miami as we are producing more and more in America.

Does this mean that your Miami's activities will be expanding over the next few years?

Yes absolutely, it will develop and keep up with this movement in technology. When we took over AMG a few years ago, a company which has now merged with Barfield, the technologies were heavily based on that period's planes: the MD80, the 727 and the 737 Classic. Today, their leaders are the A320 and the 767 and they are following the movement with us.

The more contracts we win, particularly by the hour flight contracts from North and South American operators on latest generation planes, the more we will be driven to develop these new repair capacities at Barfield. This has a host of advantages: closeness to customers of course, but also the possibility of avoiding exchange rate variations as our income is in dollars and our costs will be too. We will continue to develop in Miami, with the advantage of being the centre of gravity between North America and South America to a certain extent, while remaining a short hop from Central America and Mexico. This is where the development potential is.

Has AFI KLM E&M been affected by the economic crisis in Brazil?

Yes, of course. LATAM for example is a very important customer for us for equipment. GOL is also a major new customer for AFI KLM E&M for engines. We have also just announced a contract which has been implemented since the end of last year on CFM56-7B jet engines, an activity which we are sharing with Delta TechOps. This covers a significant number of services: as the company is a domestic low-cost operator, the planes carry out a lot of flights and the time/cycle ration is low, so there are major demands on the engines and the ages of the planes lead us to think that there will be a lot of engines taken out over the coming years. When we see the number of engines we have received in Amsterdam since January, we've got a huge workload ahead of us. We are also committed to carrying out these shop visits within the shortest TAT as we need to support the airline so that its operations don't suffer from the high engine removal rate forecast. In other words, we need to be able to manage spare availability with their help.

Our Brazilian activities are very important for us as the major crisis they have been experiencing over the last two-three years has made them the first victims of it, as we then are since many contracts are by flight hours. When there aren't any flight hours, of course you don't have any costs, but you don't have any income either.

The LEAP engine recently came into service in North America. Are you also positioning yourselves in this market?

Obviously, the LEAP is part of our development plan. We don't know when we'll have the capacity to repair it, but it shouldn't be too long. Many operators or A320neos with LEAPs or 737 MAX customers are starting to contact us and ask us when we'll have this capacity. Of course, we'll have this repair capacity soon, both on the LEAP-1A and on the LEAP-1B.

You've currently got at Aeromexico Triple Seven in your AFI KLM E&M hangars. What are your links with the Mexican airline?

The 777 hasn't arrived yet. It'll be coming to CDG over the next few weeks. Aeromexico is a long-standing customer, and a partner of SkyTeam. It is a major customer for us, even if our relationship isn't as strong as the relationship between Aeromexico and Delta TechOps, due to their geographic location. Nevertheless, we've already handled a certain number of their planes in Paris and Amsterdam. We service APUs for them, and we have also serviced GE90s. It's a customer who regularly entrusts us with maintenance tasks.

Are you also interested in the two large low-cost airlines which are currently growing in Mexico?

We go to see them regularly. They're not customers yet, but there's no reason why things won't work with them as we are taking up an increasingly significant share in the low-cost airline maintenance market. Five or ten years ago we'd have found it unthinkable or fantasy for Air France Industries KLM E&M to be able to provide quality services at the prices this type of operator wants to pay. Since then, we've signed contracts with JetBlue and with IndiGo and we've just signed a huge contract with AirAsia, and one last month with Cebu in the Philippines. We are also talking with European low-cost airlines. So, there's no reason that we can't get something going with the Mexican airlines. We are increasingly well-positioned in terms of competitiveness for this type of airline, which are often very demanding as they fly a lot. Availability is a key factor but they also want the lowest by-hour flight prices possible to be able to offer attractive ticket prices. Our recent successes around the world lead us to think that we can provide low-cost operators with these services across the whole American continent, as we do for JetBlue.
Romain Guillot
Chief editor
Cofounder of Journal de l'Aviation and Alertavia

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