Making MRO Environmentally

Progressive

1. Introduction

The Boeing Company and its partners, Shanghai Airlines and the Shanghai Airport Authority, recently broke ground on a new maintenance, repair and overhaul (MRO) facility in Shanghai at the Pudong airport. This joint venture, Boeing Shanghai Aviation Services Co. Ltd., (BSAS) is Boeing’s first such facility in China. 

The company expects that it will capture the increasing demand for MRO work, both as a result of the growth in aviation in China and also as a provider of quality maintenance for a range of Boeing aircraft worldwide. For example, six Chinese carriers—Air China, China Eastern Airlines, China Southern Airlines, Hainan Airlines, Shanghai Airlines and Xiamen Airlines—have ordered the new 787 aircraft, and the worldwide 777 fleet will soon be requiring maintenance. 

As General Manager of Boeing Shanghai Aviation Services, Richard Spellman is well aware of the challenges ahead. One of the challenges he faces is implementing Boeing’s commitment to building an MRO business in China that minimizes the carbon footprint of MRO operations and that is sensitive to environmental concerns of the country. There is little baseline understanding of the aviation MRO footprint today. Mr. Spellman realizes that this task will be an ongoing and evolving process as new technologies develop and processes change. But he needs to act today. 

Mr. Spellman is issuing a challenge to university students in China to develop a concept and operational plan for environmentally progressive MRO operations for Boeing in China. Mr. Spellman knows that it is not as simple as substituting one environmentally benign substance for another that is hazardous to the environment. “Environmental values must be fully incorporated into our MRO business here in China as a company value, as well as a business opportunity and global imperative,” says Mr. James Brunke, Vice President for Global Maintenance Repair and Overhaul services at Boeing. 

Finally, in developing your concept, remember to view environmental improvements and strategies as an opportunity, rather than a cost and a constraint! 

2. Boeing in China

Boeing and China have a history of more than 90 years. In 1916, the first engineer hired by Boeing to design the Model C bi-wing airplane was Beijing-born Wong Tsu. In recent history, Boeing has established a longstanding relationship with a number of Chinese airlines, the Chinese aviation industry, the Civil Aviation Administration of China (CAAC) and the Chinese government. Today there are more than 4,500 Boeing airplanes flying throughout the world with parts and assemblies built in China. 

China plays a large role in the manufacture of all of Boeing’s existing commercial airplane models—the 737, 747, 767, and 777. For the new 787 Dreamliner airplane, Chinese suppliers will build the rudder, wing-to-body fairing panels, leading edge panels for the vertical fin, and other composite parts. Today, Boeing and Boeing suppliers have active supplier contracts with China’s aviation industry valued at well over $2.5B US. 

The Boeing Company is a global enterprise, the world leader in aerospace manufacturing, and a partner in China’s aviation industry. Boeing continues to increase its presence, investment, and multifaceted commitment to China. Boeing is committed to helping ensure safe, advanced commercial aviation in China, and Boeing looks forward to expanding cooperation and partnership. Boeing is also committed to reducing the impact of aviation on China’s environment, especially the impact of its MRO operations.

Boeing has significant investment in China. There are many types of investments such as procurement, equity, facilities, joint ventures, alliances and training. Boeing equity investment in China is considerable and Boeing procurement from China is significantly greater than other aviation companies. A quick view of Boeing presence in China is provided in the figure below. A listing the various investments is provided on the Boeing web site at www.boeing.com/company office/aboutus/boechina.html

3. Market for MRO Services in China

The global MRO market today is worth approximately $48US billion. Approximately two-thirds of the MRO market is split between North America and Western Europe. Over the next 20 years, the center for gravity of the world’s airline fleet will tilt toward the Asia-Pacific region. According to Boeing, more than one-third of the value of all new airplanes delivered between now and 2026 will be accounted for by Asia-Pacific. 

China represents a large portion of this growth. According to Boeing’s Current Market Outlook 2007, China’s air traffic volume will grow at an average rate of 7.3% annually over the next two decades. Over the last six years, the Chinese airline fleet has doubled from 560 to 1,150 airplanes. Boeing expects that the Chinese domestic market for air traffic will grow nearly fivefold by 2026 to become slightly larger than today’s North American market.

The market for MRO aviation services in China can be expected to grow as China’s fleet grows. The U.S. plane maker estimates that the jet overhaul market will grow 10 percent annually. Not only will MRO services be demanded by the China-based aircraft, but also by other non-Chinese airlines across the globe that choose to have their airframes serviced in China. 

"Working together, we are taking the first of many steps toward offering our airline customers the services that will help them safely and efficiently expand, while keeping pace with the tremendous growth in commercial aviation that we see in China over the next 20 years," Scott Carson, president and CEO of Boeing Commercial Airplanes, said at the groundbreaking ceremony for the new facility.

4. Boeing’s New MRO Facility at Pudong

Boeing Shanghai Aviation Services will provide airplane modifications and maintenance, sale and repair of aviation equipment, and related engineering and technical services.

The BSAS facility is being constructed in two phases. Phase one includes a double-bay hangar, support shops, as well as fire, power and waste-treatment systems. Phase two extends the facility with another double-bay hangar, parts warehouse, engine shop, and ground-service equipment maintenance shop. When Phase Two is completed in 2010, Boeing Shanghai will have a four-bay hangar capable of housing four widebody aircraft, providing aircraft modification, maintenance, repair and overhaul services to help build Shanghai Pudong International Airport into an international aviation hub. 

Ground was broken for the new Shanghai facility in October 2006. The first of Boeing Shanghai's hangars, due to be launched in April 2009, is already under construction at Pudong Airport and will be able to handle two large-sized 747 or two 777 airplanes. Phase Two will start being built at the end of 2007 and will be able to handle four 747s or four 777s airplanes together when completed in 2010. 

BSAS’s primary MRO activities at the new Shanghai Pudong facility will be heavy and line airframe maintenance, as well as modifications for the 747 and 777 aircraft, and passenger-to-freighter conversions. The company has just completed its first MRO service for UBS Airlines and it is also working on a cooperation study with Shenzhen Airlines. It has signed lease contracts with Shanghai Airlines for a hangar bay for its aircraft maintenance while its own hangars are under construction.

"We are looking at all airlines in China as our potential customers," said Timothy Premselaar, chief executive officer of BSAS. "The growth is so big, it won't take long to have more than we can handle." 

5. Typical MRO Operations

Keeping aircraft in excellent condition requires many types of maintenance activities. These areas require different skill sets and services, and not all MRO organizations perform them all. MRO services are generally provided by the airlines, by original equipment manufacturers (OEMs) like Boeing, and independent enterprises. Some independent organizations specialize in one or two MRO services.

Airlines must perform both scheduled and unscheduled maintenance. Scheduled maintenance is performed periodically depending on flight hours to maintain the inherent safety and reliability levels of the aircraft. However, sometimes unscheduled maintenance must be performed to restore the safety and reliability of an aircraft that has experienced deterioration or failure of capability. Both types of required maintenance can be broken down into the following four activities. Line maintenance is typically done on in-service aircraft while the other three types of maintenance are done on out-of-service aircraft:

1) Line maintenance involves the trouble-shooting and repair of maintenance problems that can be performed without taking the aircraft out of service, and includes minor and major aircraft checks. Line maintenance is usually performed at a certified MRO location, often at the airport. Tasks may include the A checks described below, as well as any less-than-A checks such as daily checks or 48-hour checks. 

2) Component maintenance includes repairs to major aircraft components, such as brakes and wheels, that are critical to the airworthiness of the aircraft. Component maintenance is typically performed in a hangar at an approved MRO location.

3) Engine maintenance involves the dismantling, inspecting, assembling and testing of aircraft engines. Engine maintenance is typically performed at a certified engine overhaul shop. 

4) Heavy maintenance includes major items such as structural modifications, landing gear repair, engine changes and regular calendar checks. Heavy maintenance is typically performed at a specialized facility away from the airport.

The above aircraft maintenance tasks are also categorized by maintenance check levels as follows:

a) Walk around (or “less-than-A”) inspection. This entails a visual inspection of the aircraft exterior in order to check for leaks, worn tires, and other damage.

b) A Check. Every three to five days, the aircraft’s landing gear, control surfaces, fluid levels, oxygen systems, lighting, and auxiliary power systems are checked at the airport gate.

c) B Check. Every eight months, internal control systems, hydraulic systems, and cabin and cockpit emergency equipment, as well as A-level check items, are inspected.

d) C Check. Every 12 to 17 months, the aircraft is opened for inspection of wear, corrosion and cracks. C checks typically take place in a maintenance hangar, often at an airline’s hub airport.

e) D Check. Every four or 5 years, depending on flight hours, an aircraft is completely disassembled, inspected, and re-assembled at a specialized facility. A D check takes 30 days to complete.

Each of the above maintenance tasks has a well-defined process and expected performance time. Usually these processes go smoothly but they can be disrupted by various events such as the finding of non-routine maintenance problems during routine maintenance checks, as well as the lack of suitable parts. Chasing parts is a particular problem, especially with non-routine maintenance problems. Meeting the flight schedule is a high priority and when spare parts are not available it is sometime necessary to borrow that part from another aircraft being serviced at the same time, often leading a delay in returning the second aircraft to service. 

To avoid “borrowing” parts, it is important to implement inventory controls that assure both availability and quality of parts. The ordering, storing, controlling and handling of materials such as repair and spare parts is critical to the smooth functioning of an MRO facility. The number of parts required, when to order them, and where to position them affect the efficiency with which maintenance tasks are able to be performed and, in turn, impact the footprint of the overall operations.

A typical “C” check might proceed as follows. In preparation for arrival of the aircraft, the hangar area is cleaned and any needed equipment such as scaffolding is brought to the work area. The required parts are identified and located nearby so they can be delivered just-in-time. After the aircraft is washed, it is towed to the work area where it is parked so that visual inspections can begin. After inspection, the required work items are determined and mechanics are assigned to allow for efficient completion of the tasks around the aircraft. If additional parts are needed that were not included in the original list, they are requested. A quality control inspector monitors the quality of the parts and work. When all tasks are completed, the aircraft is moved out of the hangar and the space is cleaned for the next assignment.

Maintenance activities that will be performed at the BSAS facility at Pudong Airport include line and heavy airframe maintenance, such as “C” checks, as well as modifications for the 747 and 777 aircraft, and passenger-to-freighter conversions. 

6. The MRO Supply Chain

The MRO supply chain has been improving over the last 10 years, but it needs to become even more efficient and, in turn, reduce its environmental footprint. The large number of parts that must be held in inventory to support a worldwide fleet lies at the heart of much of this inefficiency. A 1996 study by The Canaan Group estimated that the world’s fleet of 12,000 aircraft was supported by $44US billion worth of parts. While the value of inventory has remained static since then, the number of aircraft in the world’s fleet has risen to 17,000. In other words, according to AeroStrategy, an aviation consulting group, each aircraft in 1996 was supported by $3.6US million in inventory compared with $2.5US million in 2007. This is a considerable reduction in the inventory “footprint” due largely to increased reliability of the aircraft. 

Like any other supply chain, inventory is held to provide a buffer against late deliveries from a supplier, long order cycle times, expedited air freight costs for last minute shipping, and so forth. Other industries have adopted lean principles to reduce inventories and supply chain costs. The automotive industry, including manufacturers like Toyota, has implemented the principle of co-location where suppliers cluster around manufacturers in order to reduce transportation time and costs. 

Some industries have adopted a common global infrastructure and distribute parts globally as needed. The growing trend of outsourcing MRO represents a similar opportunity to move towards a common infrastructure and MRO supply chain in which the service provider for many airlines provides central management of parts and gives an individual airline visibility into a larger pool of available parts. And new technologies like RFID promise further reductions in inventory and cost while increasing availability through visibility.

As an MRO provider, The Boeing Company has very successfully leveraged information technology to manage its MRO supply chain, especially through its flagship services offering Integrated Materials Management (IMM). IMM transfers the responsibility for managing spare MRO parts to Boeing and its logistics partners. The airlines pay for parts only when they are delivered for installation on an aircraft. Also, in 2006 Boeing acquired Aviall, the largest independent provider of aviation parts and services, to support its growing MRO business. 

Currently, The Boeing Company sources parts worldwide for its MRO supply chain, including China. Boeing has been buying parts from China since 1979 and will continue to buy components from Chinese suppliers, according to Rob Laird, vice-president of China sales for Boeing Commercial Airplanes. "China is part of our global supplier network. These are business decisions made based on cost, quality and the capability of the supplier," said Laird. An illustration of the parts and components sourced in China was shown earlier in this document. 

Today, Boeing is actually the largest foreign customer of the China aerospace industry. Boeing purchases about one billion dollars worth of hardware, and has active contracts in place for about $2.5 billion. According to John Bruns, vice president China operations of Boeing, “The 737 is probably the best example of where we do the most work in China—they build the whole tail section, the vertical fin and the horizontal stabilizer, and then all the doors for the airplane.”

7. Summary

Building environmentally progressive MRO operations will take commitment and stewardship on the part of the aviation industry. Boeing is committed to leading this effort. Many aviation and aerospace companies have incorporated ISO 14001 into their management structures. A substantial fraction of the environmental impact of a product is determined during the design phase, but there are many other opportunities to adopt environmentally progressive practices in caring for that aircraft throughout its lifetime—from process improvements that eliminate waste to enhanced recycling efforts and the minimization of products that have negative impacts on the environments. The MRO supply chain, especially, represents a multi-faceted opportunity to reduce the environmental footprint of aviation today.

Another thought….Air Transport World reports that over the next 15-20 years as many as 400 commercial aircraft will reach their end-of-life. Just like the electronics industry recently, the aviation industry will face the growing question of what to do with all these old seats, last generation electronics, and broken wings.