MRO Project

Over the years, there has been a high demand for the establishment of an Ultra-modern Aircraft Maintenance, Repair and Overhaul (MRO) facility in Ghana to serve the whole of the West African Sub Region. This brief may serve as a business feasibility that may help to summarize the research methodologies and methods that will be applied when the Maintenance Repair Overhaul (MRO) project is being executed. This brief may help introduce MRO and the different types of maintenance checks (checks A-D) in aircraft maintenance that is really needed to serve the West African Sub Region. Furthermore, the mission and objectives of this work are explained. The second section however, introduces the different types of research methodologies (qualitative, quantitative and triangulation) and justifies the best methodology to execute the project. In the last section, two research methods are introduced (the Blue Ocean Strategy and SWOT analysis) because they will be applied in this feasibility.

The Concept

Ghana Aircraft Maintenance Center is a business concept based upon the ‘not so obvious’, but documented, need for a commercial aircraft maintenance facility to be based in Ghana.

There is no professional commercial maintenance facility anywhere in West Africa. The closest professional facilities are in Addis Ababa, owned by Ethiopian Airlines, France, Morocco and South Africa. It is cost prohibitive to ferry aircraft there and it is also difficult to schedule work over there.

• To launch, equip, and fund, a certificated repair station for one (1) year will cost approximately …… USD.
• That amount may be ‘disbursed’ in increments of a stipulated amount monthly – it need not be funded ‘up front’ in one lump sum.
• The maintenance station will begin to generate revenue in the first Month.
• The first month revenue will not offset the negative flow, however, it will generate ‘profit on earnings’ immediately.
• The most recent projections for business growth in Ghana is ……. annual revenues in five (5) years
• The maintenance station is the business model to become the parent company of an international airline (Pan Afrique Airlines).
• With the maintenance station owning all the ‘operational assets,’ the airline can concentrate on marketing, service, yield management and branding.

I believe a large, international airline and aviation maintenance company, with annual revenues in excess of $220M within 5 years, can be organized and launched in Ghana for less than …….. and become profitable in 15 months.

The purpose of this is to prepare a business plan for the establishment of an aircraft Maintenance, Repair and Overhaul (MRO) facility in Ghana whilst analyzing the current maintenance system in the country. According to Hessburg (1999), maintenance is the action that sustains or restores the aircraft’s airworthiness and performance. He further indicated that an aircraft is bound to deteriorate with time, when this happens, some corrective actions should be carried out which involves servicing, adjusting or any form of maintenance to restore the airplane back to its original state.

Certain factors must be considered before a Maintenance, Repair, and Overhaul facility can be established in such a region. Some of the factors are: environment for the location of the facility, the available man power and facilities, to top it all up, the licensing requirements for MRO. All this factors will be analyzed later in this brief.

We shall be a company that will focus on repairing and servicing at least, all slim-bodied aircrafts. The company will also concentrate on providing high quality services to airlines both in Ghana and its neighboring countries (West Africa). The current high demand will favour establishing this facility and will also boost Ghana’s economy because there is currently no complete MRO facility that carries out all maintenance checks (A, B, C, and D) in the country and the region as a whole.

Aircraft Maintenance Checks: Kinnison (2004) described all aircraft maintenance checks as follows: A Check is performed every 100-300 hours of flight depending on the aircraft type; it is carried out by using an inspection manual or task cards. B Check is usually carried out after an A Check that is, they are similar in nature but performed every 4-6 months. C Check on the other hand is carried out only once a year (12 – 18 months) depending on the aircraft model. It is more detailed and more complex than the ‘A’ and ‘B’ checks because almost the whole aircraft is inspected. It takes about two weeks (4 – 14 days) to complete this task depending on the airplane. Furthermore, D Check also referred to as heavy maintenance check, which is so far the most demanding type of check compared to other types. In this check, the whole aircraft is taken apart and thoroughly inspected. Due to its expensive nature, airlines often carry it out every five years, more or less. All these services (checks) will be provided by a team of experts, in compliance with the norms and standards already laid down by the Ghana Civil Aviation Authority (GCAA) and thus will reduce the amount airlines such as Passion Air, Unity Air, Arik Air, Aero Contractors, etc spend on repairs because their aircrafts are serviced abroad.

Although it can be quite daunting to establish an aircraft maintenance facility in such a region, however, with the right plans and considerations, the supposed company will emerge as a world class company with its impeccable customer service. South Africa, France and Morocco has been providing services for private jet owners in Ghana, Nigeria, etc as well as commercial airlines. As reported by Peter (2012), there are about 200 private jets in Nigeria alone considering this, the proposed facility will be operated using the latest technologies in aviation to ensure low marketing and servicing costs thus providing a good customer service and job opportunities for the unemployed.

WHY GHANA? The real fact of the case is, Ghana has the most stable and grown economy in the sub region. Its Political stability and economic growth is incomparable within the West African Sub Region. Moreover, Ghana Civil Aviation Authority controls the aviation sector in the sub region and has the utmost facilities.

The proposed MRO facility’s key objectives are:

To gain grounds as a reputable and qualified MRO linking Ghana with its neighboring countries. By getting a reliable company, West African countries such as Nigeria, Benin and Togo will service their aircrafts with us.

To deliver airworthy aircrafts in time to customers with accordance to the Directorate of Airworthiness Standard rules and regulations (NCAA, 2012).

To provide full time employment for aspiring young engineering graduates in Ghana and the Sub Region. This will be achieved by sending them for training and obtaining the licenses required with accordance to GCAA and ICAO’s licensing requirements.

To develop partnership with commercial airlines and private jet owners thereby enabling the proposed company expand and grow within the first two years of operations.

To ensure all safety requirements in the working environment are met by the GCAA. Safety is the number one priority in any organisation; adhering to the safety rules will mitigate work hazards.

To constantly improve maintenance and update maintenance facilities. This objective concerns the frequent training of staff members.

To generate yearly revenue by the end of the second year of operations.

The main keys to success are:

Use of good marketing strategies that would identify the company as a fast growing one; well trained professionals, fair pricing, concentrating on safety and good customer service will form good backbone of the marketing strategy.

Adhering to ICAO and Ghana Civil Aviation Authority’s laid down rules and regulations on aircraft maintenance.

Employing highly skilled and professional management team.

Being flexible would enable the company to adapt to any change of market conditions.

The general principle that guides research is the research approach; it involves studying the research topic and the issues that needs to be dealt with before choosing a research methodology (Kumar, 2005). Hence, when thinking about research methodologies, differences between qualitative and quantitative or the combination of both (triangulation) must be understood (Rees, 2013). Although the two research methodologies have almost the same research processes, they are differentiated in terms of the method used in data processing, the mode of collecting data and analysis and the style of communicating the results (Kumar, 2005).

1.1 Quantitative research method is used to generate statistics by collecting data through surveys, audits or experiments (Rees, 2013). It is analytical in nature; mainly used to quantify the extent of variation in a situation, phenomenon or issue, it also involves drawing of inferences and conclusions (Kumar 2005). Kumar (2005) further added that figures and measurements are mainly concentrated on in this research process in order to compare two different occurrences and show the statistical connection between them.

1.2 Qualitative research on the other hand is explanatory and narrative in nature, it is mainly used to describe variation in a situation, issue or phenomenon, it goes deep into issues; opinions from the experts involved are required (Kumar, 2005). In addition, this research understands, describes and investigates (individuals) or groups of people (Kumar, 2005).

1.3 Triangulation also referred to as ‘mixed method’ is the combination of qualitative and quantitative research in order to cancel the weaknesses in the two methods (Guthrie, 2010, p.45). Researchers consider triangulation as the best method for carrying out a research; the advantage of one is the disadvantage of the other and vice versa (Rees, 2013). Having said that, the research method that best suits this business plan is triangulation because establishing an aircraft maintenance facility requires a lot of survey and data collection.

The most important part of business planning is obtaining a Buy-In, without this, it is very difficult to develop and successfully implement a business plan; a buy-in is a documented and verified agreement between SA and the stake holders (ACRP, 2012, p.21). Thus, a buy-in will be obtained from the policy makers in Ghana i.e. Ghana Civil Aviation Authority to give our company the ‘green light’ to establish the facility. Once this is obtained, triangulation research will be used to gather all the required data/information for this purpose.

Expert judgement will be sought i.e. organisations already in the aircraft maintenance business will be consulted for opinions. Their opinions will be sought for in quantitative and qualitative manner in order to compare the results obtained. In the quantitative method, structured questionnaire will be used; opinions on establishing the facility at the airport or far away from the airport will be sought for in form of rating it from the scale of 1-10 to get a quantitative data. In the qualitative method, an unstructured interview on the choice of location will be conducted; this however will not be rated but rather in a form of a regular conversation between the interviewer and the interviewee.

The capital i.e. the amount required to start this business will be calculated using cost benefit analysis technique. Cost Benefit Analysis is mainly used in calculating the capital of a project and to predict its expected profit (Mishan and Quah, 2007). The required man-power and equipment will be considered here. Once the CBA is calculated, it will be compared with companies such as, Boeing and Airbus that are already in the MRO business. The figures/results obtained will be tabled using Microsoft excel in order to interpret and validate the findings. In addition to this, the CBA technique will also be used to estimate the profit and loss of establishing the facility at the airport or far away from the airport; this will be analysed by considering the monetary costs involved in them. The two results will then be compared and tabled using Microsoft excel.

Opinion polls on the choice of location of the MRO facility will be carried out; major airlines companies and private jet owners in at least, Ghana and Nigeria will be interviewed about their location preference between Accra, Kumasi and Tamale. Moreover, further interviews will be carried out to know the total number of aircrafts they have then an estimate of the average number of airplanes in at least, Ghana and Nigeria will be drawn.

Research Methods

Research Methods are tools used in gathering data such as interviews or questionnaires (Rees, 2013). The following methods The BOS and SWOT analysis will be applied when establishing the MRO.

Blue Ocean Strategy

According to Chan and Mauborgne (2005), Blue Ocean companies build a new business where none existed that is, tapping the untapped market space hence making competition irrelevant because there is no competition. They further said that most companies are either trying to reduce their price to get more customers or trying to increase their value or product feature, however, with the Blue Ocean Strategy, companies work simultaneously on their price and value/product feature in an untapped market space as shown earlier. In contrast, Red Ocean companies compete in an existing market space; they shift demand by modifying product features/attributes there by giving customers more products for a low price which results into reductions of profit and thus because there is competition the ocean is turned red (Chan and Mauborgne, 2005). In this feasibility, West Africa is the untapped market because there is currently no (complete) MRO facility in any of the countries.

According to the pioneers of Blue Ocean Strategy, Chan and Mauborgne (2005), BOS is not about risk taking or avoidance, but about minimizing all risks in a business. They also provided some principle that addresses six different risks associated with the formulation and execution of BOS, which are:

3.1.1 Formulation

Search risk: To come up with the right ideas, an organisation must look outside the market boundary then apply the ideas to make the business work out.

Planning risk: BOS uses visual tools to enable business focus on a one page picture. It enables organisations to know the level of their competitors, the level they are and thus minimising the planning risk.

Scale risk: This keeps a business within its scale to reach beyond existing demand and hence, not going after two things at the same time.

Business model risk: Having a business idea that failed is not the end of the world. There is a strategic sequence that addresses it in BOS. However, they must be followed in the right order.

3.1.2 Execution

Organizational risk: Having a good strategy but not having the resources. It could be management or political issues. Blue Ocean uses tools to systematically address the hurdles.

Management risk: A business could crash as a result of poor management.

Some of the tools for the formulation and execution of BOS are: The strategy canvas, four actions framework, Pioneer-Migrator-Settlers map and three tiers of non-customers (Chan and Mauborgne, 2005).

3.2 Application Of Bos In This Project

Applying the Blue Ocean Strategy in this feasibility requires some of the BOS tools. As laid down by Chan and Mauborgne (2005) these tools will be used in executing and formulating this business. They are:

Strategy Canvas: This is an action frame work for creating a captivating Blue Ocean Strategy (Business plan). It is a useful tool to predict and solve problems in an organisation. This tool will be used to analyse the current state of aircraft maintenance in Ghana as shown in figure 3.1

High

Medium

Low

1 2 3 4 5

Maintenance cost servicing abroad foreign expatriate Customer service Employment

Figure 3.1 Strategy Canvas (Chan and Mauborgne, 2005)

= Current condition of aircraft maintenance

= Proposed Future condition

Once the MRO facility is established in Ghana, the cost of aircrafts maintenance will be reduced, this will entice commercial airlines and hence all aircrafts will be serviced in Ghana, furthermore, foreign expatriate will be reduced thus job opportunities will be provided for Ghanaian graduates. Lastly, good customer services will be provided. With all these in place, BOS will be achieved in this feasibility.

Four actions framework involves four main steps in formulating and executing a BOS. The four steps are:

Reduce: factors to be reduced below industry’s standard are considered. Employment opportunities will be provided for Ghanaian graduates in company thus reducing the use of foreign expatriate.

Eliminate: factors that are not well considered by Ghanaian Aviation industry will be eliminated. Once the MRO is established in Ghana, the cost of maintenance will be reduced in other to prevent airlines from servicing their aircrafts abroad. This will attract private jet owners and commercial airlines. Thus eliminating maintenance of aircrafts abroad as shown in the figure above.

Raise: factors that will be improved in the Ghanaian Aviation Industry will be considered; good customer services and employment opportunities will be provided by our company as shown in the figure 3.1 above.

Create: a complete MRO facility that carries out all maintenance checks (A, B, C and D) will be inaugurated. Currently, West Africa do not have a complete maintenance facility; establishing one that offers complete maintenance is the main goal of this feasibility.

Three tiers of non-customers are customers that are not currently involved in the industry. They are divided into 3 categories:

Tier 1 non-customers: they are customers who are on the edge of the market waiting to be persuaded. They are always looking for better options because they are never satisfied. Considering the level of aircraft maintenance in the country, launching a new facility in Ghana that provides good customer services will attract private jet owners as well as commercial airlines waiting to be persuaded thus they are satisfied.

Tier 2 non-customers: they are not willing to join a market thus always choosing against it. Offering aircraft servicing at a low cost will attract non-customers such as private jet owners and commercial airlines.

Tier 3 non-customers: they are customers that have never been explored before. Establishing this facility in Ghana will be a means of exploring tier 3 non-customers.

SWOT analysis is a planning tool mainly used in business planning to make decisions and determine the Strengths, Weaknesses, Opportunities and Threats involved in it (Pahl and Richter, 2007). In addition, it provides helpful information in matching an organisation’s resources and its capabilities to the environment in which it will operate (Pahl and Richter, 2007). The SWOT matrix obtained compares the results of the opportunities and threats (external analysis) and strengths and weakness (internal analysis) to define the business strategy; hence, SWOT analysis is an important tool for strategy selection and formulation (Pahl and Richter, 2007). The four components are (Fine, 2009; ACRP, 2012, p.31):

Strengths: internal items that will give the establishment of the MRO an advantage over other MRO facilities. These strengths will be leveraged, built on and preserved. They are:

Good location of the MRO facility within the country

Focused marketing plan

Outstanding assets (airport amenities)

Abundant information resources

Establishment of a renowned business name

First-rate systems and policies

High quality facilities and services at exceptional rates

Weaknesses: these are internal items or characteristics that are intensely lacking or items that needs to be improved that may hinder the execution of the project. The possible weaknesses will be addressed and fixed. Possible weaknesses are:

Inferior location of the facility within the country

Lack of marketing plans

Inadequate assets

Poor financial

Lack of Information resources

Deferred maintenance

Inadequate resources/assets

Poor facilities and services

Opportunities: these are elements (external factors) that may help achieve the vision and mission of the MRO facility. Changes within the Ghanaian Aviation sector and the environment will be studied to identify the available opportunities. The opportunities will be capitalised on. Establishment of the maintenance facility will provide the following opportunities:

Full time employment opportunities for young Engineers

Increased growth of Ghanaian economy

Expansion of the aviation sector

Partnership development with local and foreign airlines

Amenities/Infrastructure development

Threats: these are external factors/items that may threaten the realisation of the vision and mission of the MRO facility. Changes within the Ghanaian Aviation sector and the environment will be studied to identify threats. Threats identified will be eliminated. Possible threats are:

• Insufficient or lack of funding
• Market demand
• Competition
• Weather (Temperature)

The second installment in the MRO series is going to be a deep dive into business models used, support infrastructure for each, investments and venture capital acquired for start-ups and growth, and how each level of MRO can scale up. Also, we will explore the ever present pitfalls which claim so many casualties in the aviation market.

Now that we have dug into the different types of MROs, we can dive deeper into what they do, how each different subset fills a specific niche or void, types of equipment and infrastructure necessary, how a developer might go about raising capital, and essentially how to make a profit in the industry.

Aviation is a slow-and-steady market, seldom (if ever) punctuated by erratic behavior. It has grown slowly but steadily over the years, and looks to grow at a modest 2.8% annually over the next two decades.

This is a double-edged sword for MROs and potential startups. On the one hand, if your business is established, the work can be remarkably steady. On the other hand, it is a terribly slow market to enter as a startup, especially a startup which requires extensive equipment and inventory of parts and supplies.

The other variable for a startup is the lack of new airports being built. The most recent international airport constructed in the U.S. was Denver International which opened in 1995. Due to the terribly high cost of construction and enormous amount of regulatory guidance which must be adhered to, as well as urban sprawl, it is very rarely advantageous to build a new airport vice renovating existing infrastructure. This stovepipes much in the way of growth for new MROs.

In view of this, the Ghana Civil Aviation Authority has proposed the newly built Tamale International Airport for the MRO services in Ghana and to serve the entire Sub Region.

Commercial airline-owner MROs

Commercial airlines are generally in the position to put out large outlays of cash for their own infrastructure. Much of this is because they have strict timelines which must be adhered to in generating maintenance for their aircraft. Any time a third party is introduced into the equation, a weakened link is also introduced. This is not to say that private-party MROs are an inherently weak link, but instead that they introduce a potential liability in terms of a facility which the airline cannot directly control the pace and rhythm in.

It is for this reason that major airlines spend the money to construct their own massive MRO facilities because they control the entire tempo of operations. When time is money (and there are few industries where time means more than the airlines), it pays to conduct heavy maintenance in-house.

Why conduct it in-house when it costs so much to run heavy MRO depots? Because the airlines get to choose the location, often collocating depots with their hubs; it just makes business sense. The airline can then work their maintenance cycles to fly the aircraft directly to a hub with passengers and move it directly from the gate and into the maintenance hangar.

Major airlines are steadily expanding their MRO facilities to take on bigger pieces of the maintenance puzzle, particularly engine overhaul maintenance. If the MRO facility can conduct engine overhauls in-house, it vastly streamlines the maintenance process, and can save millions of dollars in the process in freight alone, not to mention time.

Regional airlines and air taxi services

Regional airlines and air taxi services are not necessarily hampered by maintenance and overhaul, but they cannot follow the same business model as major airlines. This is not necessarily in regards to cost, as real property can often be had relatively cheaply at small industrial air parks and regional airports. It is instead due to the nature of regional airlines.

Regional airlines do not rely on the major hub model to operate; it is the absence of this model on which regionals and air taxis thrive. The aircraft which regional airlines operate are designed to operate in much smaller and less robust locations.

Regional airlines do not fit any specific mould in their business plans because each airline approaches their business model differently depending on areas serviced. Some regional airlines do fly into hub airports in geographic regions relatively highly populated with aircraft technicians and mechanics so it may pay dividends to set up an MRO in said location.

On the other hand, as qualified aircraft maintenance techs are not in any sort of surplus (and that number continues to shrink), a regional hauler may end up contracting MRO work to privately owned MRO facilities as it is not advantageous to try and establish a facility in an area where the required personnel are not already a presence. Aircraft maintenance is a niche skill set and there do not tend to be abundant supplies of qualified and certified techs in all locations.

Aircraft mechanics generally go to where the work exists, not vice versa. It is very costly for a regional airline to set up an MRO outside of an area where there is not already a pool of potential employees, or a trade school set up to produce aircraft mechanics.

In-house corporate flight departments

We will not spend much time on this sort of operation because their MRO business model is not detached from the business model of the company at large.

Corporate flight departments are generally located in as close to proximity to the clientele being serviced as possible. Furthermore, outside of heavy corporate jets, most corporate aircraft require very little, if any, additional space for heavy maintenance as for general and line maintenance. They require no large scaffolding, large hangars, heavy power supplies, or any of the specialized heavy equipment used for commercial jets.

Also, major corporate jet manufacturers offer maintenance programs with on-call mobile maintainers which are paid for as a fixed-rate program, essentially negating the needs for built up MRO framework.

Independent repair stations & FBOs

While making up a much smaller market segment of the MRO market than those of the major airlines, independent stations fill a vacuum in the market. They build their client base often in niches, and very often catering to general aviation aircraft and small commercial operations other than air carriers.

From rebuilding magnetos to installing interiors, independent repair stations offer services which offer no financial incentive for larger, airline owned and contracted MROs to provide.

Rebuilding piston engines and light turbine engines is a prime example. There are many commercial applications which require piston engines to be overhauled, as well as small turbines, but large overhaul facilities have no interest in them because they are not applicable to air carrier operations. However, this is still a service which will always need to be performed in support of light commercial and general aviation. Independent repair centers (which, for this purpose FBOs are being lumped into) are not poised to explode with exponential growth, particularly as general aviation numbers are essentially static with negligible growth.

However, as long as general aviation and Part 135 commercial activity exists, small independent repair stations and FBOs will have steady business. Since the economy as a whole is what drives these segments of aviation (people will continue to fly airlines regardless of what the economy does), as long as it slumps, it will be nearly impossible for start-ups to enter in these segments. When the economy booms, though, people who dream of flying start flying, which will engage FBOs and independent repair stations, and open up the potential for expansion and new services.

The business models vary widely in regard to aviation MROs, based upon the business supported. Airlines position MRO services to coincide with hub locations as much as possible to maximize efficiency. Military MROs are megaplexes which are designed for a very specific role, and while they do not generate revenue, they do provide much support for surrounding areas in high employment figures. There are too many components under the umbrella to give full complement to, but this is a snapshot into the most prolific businesses and what drives each separate one.

Conclusion

In this report, the mission and objectives of establishing an aircraft maintenance facility in Ghana were explained. The BOS strategy will be applied and thus the principles associated with the formulation and execution of the strategy was explained. Furthermore, the application of the strategy was justified. In addition, the strengths, weaknesses, opportunities and threats of this feasibility (project) were analysed.