MRO Supply Chain, Cost Impacts Result From Russian Ukraine Invasion

MRO location in Europe
MROs in Central and Eastern Europe cite rising inflation as the biggest impact of the Russian invasion of Ukraine.
Credit: Lotams

Supply Chain, Labor Challenges Being Felt in the Region

Global supply chain challenges affecting aviation across most of the world were scrutinized at Aviation Week’s BEER 2022 (Baltics and Eastern European Region), held June 15-16 in Istanbul. With many airlines shrinking their operations over the past 2.5 years, this has meant reductions in staff across all areas of operation, including maintenance and engineering departments.

Serife Akin, vice president of procurement at Turkish carrier Pegasus Airlines, says the industry was not ready for a pandemic when the COVID-19 outbreak came in early 2020. Having first predicted the pandemic would be over in just a matter of weeks, the realization soon occurred that it would be a long-term health emergency.

Over time, Pegasus had to develop new ways of operating while also factoring in revenue losses resulting from the airline’s sharp drop in passenger numbers. This included extending existing maintenance contracts and resorting to partial payments of agreements. “This meant strong communication with all of our suppliers,” Akin says.

But as the pandemic has continued for more than 2.5 years, and with the market yet to return to pre-pandemic levels, the new environment has led to strains on airline operations even as passenger levels gradually pick up. Hungary-headquartered Wizz Air, which bucked a trend by expanding its operations during the crisis, has felt the effects of this, according to Julia Brix, head of technical services at the low-cost carrier. “We are seeing this right in front of us—without people in aviation, you cannot do anything,” she says.

Brix says Wizz Air has introduced concepts such as flexible working to keep staff with the airline, but she admits this has been made more difficult by challenges in the supply chain, such as material shortages and labor deficits.

Turnaround times for parts also have increased over the past few years, in addition to lengthy delays in OEM delivery of new aircraft. Luc Morvan, chief representative for lease services at MTU Maintenance’s Singapore office, says companies have downsized their teams over the past two years, affecting the supply from not just parts manufacturers but also in the aftermarket segment.

“You can wait sometimes six months to one year to get even a $150 part,” he says. Demand, however, remains robust, resulting in pricing fluctuations for specific parts, he notes.

Employee working on Boeing 737-800
Turkish Technic expects to be back to pre-COVID-19 revenue levels by year-end. Credit: Turkish Technic

Russia's Invasion of Ukraine Has Led to Inflation Impact

MRO providers in Central and Eastern Europe are seeing minimal customer impact from the Russia-Ukraine war, but they have concerns related to steep inflation rates that are influencing gas prices and labor rates across the continent.

Risto Maeots, CEO of Estonia-based Magnetic MRO, said at MRO BEER that there have not been many customer changes since the outbreak of the war on Feb. 24. “We didn’t do airframe maintenance for Russian operators; therefore, this part of the business wasn’t impacted,” he said.

Maeots highlighted two of Magnetic MRO’s business units that saw more of an effect. “It was predominantly assets—some assets were leased to Russia, so we also had to take some painful write-offs. . . . Also, we had component trading, which impacted us. But from a results point of view, we’re talking about single digits, percentage-wise.” Instead, the company looked to the West to compensate for any shortfalls, opening up new office locations in the U.S. while also reopening its previously closed Kuala Lumpur office in Malaysia.

Other MRO providers in the region have not seen any impact to maintenance agreements at all. These include Poland-based MRO LOT Aircraft Maintenance Services (Lotams). “Since February, we haven’t noticed any direct impact of the war in Ukraine on our business, because we have no customers from Ukraine or Russia, and our employees are not from those countries,” Lotams President Aleksandra Juda says.

However, Juda said she had concerns at the start of the conflict over the status of long- and short-term contracts, given that the conflict started only 250 mi. from the company’s Warsaw facility. A knock-on effect has been related to price increases in the gas and energy markets, which Juda conceded has impacted the Lotams business.

“We pay more than 200% more for gas than we did last year—even from the beginning of this year. So it’s a serious problem, and it’s hard to say if it will be more so by the end of the year,” she says. Juda also notes that the second challenge from the conflict is that several companies from Ukraine and Russia extended their activities to Poland even before the war.

The impact of this is also being felt in Slovakia, where Austrian Technik Bratislava, a regional aircraft repair specialist based in that country, has taken a longer-term approach to preplan its costs. “We forwarded our consumption for the next three years, so we’re quite safe, but we don’t know what happens if the supplies are simply stopped,” Managing Director Wolfgang Henle says of gas supply.


Post-Pandemic, Region’s Airlines Push Digital

Greater utilization of data and installation of electronic flight bags are some of the initiatives implemented by airlines over the past two years as they look to drive greater efficiencies across their maintenance divisions.

Speaking on an MRO BEER panel about airline strategies, LOT Polish Airlines Technical Director Krzysztof Krolak said the carrier looks at the efficiency of each internal process as the first step before it goes to the outside.

The second step, he said, lies in data utilization. He points to the digitalization work of Hungarian airline Wizz Air as a model example. “How can we get the data on time? It’s all about providing digitalization. . . . We are building up to that,” he said.

Krolak said the carrier is kicking off a project to digitally connect the airline with maintenance providers. This involves working on tablets and applications to anticipate defects and make plans before LOT-operated aircraft land.

The MRO recently introduced electronic flight bags to its operation. “This improved a lot of things, and we need to keep moving on,” he adds.

“The response of today and tomorrow is technology, and specifically digitalization,” says Tahsin Istanbullu, executive vice president-technical at Turkish carrier Pegasus Airlines. He adds that the carrier is also developing its own technical logbook capabilities.

Another aim is to make the maintenance of Pegasus’ fleet, which numbers more than 80 Airbus and Boeing narrowbody aircraft, as predictable as possible by using data technology. The carrier is using platforms such as Lufthansa Technik’s Aviatar system and Airbus’ Skywise, which Istanbullu says is a “useful, data-driven initiative.”

He adds: “The future is definitely in technology and digitalization, and the more you make problems such as ground times predictable, the more you’ll have your efficiency.”

James Pozzi

As Aviation Week's MRO Editor EMEA, James Pozzi covers the latest industry news from the European region and beyond. He also writes in-depth features on the commercial aftermarket for Inside MRO.