MRO Provider in Middle East

Interview with Bashir Abdel Hadi, CEO of JorAMco

 Bahrain is the latest middle eastern country to put down a marker in the third party MRO marketplace, a move that could increase pressure on the main 2/3 MRO providers- ADAT and JorAMco.  What is your overall assessment of this sector and how would you describe the dynamics?

Aviation in the middle east is a sector facing steady growth.  Despite the economic downturn aviation still continues to expand.  MRO business was established years ago in the area and as MRO services become more expensive in Europe we believe the opportunity in the middle east is expanded to attract business from the north and the west.  JorAMco, for example, has 30% of its business from the local market, 30% from Europe, and 40% from the rest of the region.

How do you compete with other competitors in the market?

I think there are business opportunities for us all.  As long as we maintain our quality, cost, and flexibility we will continue to attract business to the region.  I am a believe in regional strength as opposed to a nationalistic approach and if the middle east becomes well known for MRO then we will all benefit.  In the region, Jordan is rich with labor and human resources and this also makes us unique.

At the Singapore Air Show in early Feburary the executive director of Mobadala said they were working to acquire a third MRO company by early 2011.  As an industry insider what are the potential risks?  What would this do to the market?

With this strategy, Mobadala is going global but this is an expected step.  Expansion beyond the region must be carefully enacted.  The integrated of globally acquired companies need to be handled carefully otherwise it may cause a negative load on the operation.

Do you see yourself as a target for takeover?

Eventually there is only one place for two models: global or niche.  So far we have maintained our position as a niche operator, providing specialized services, focusing on certain sectors and regions.  It is possible that we will be targeted in the future for takeover.

Does this concern you?

It all depends on who is the partner but in general I see it as positive.

A strategy of adding capabilities such as composite repairs and investing in technologies has helped JorAMco triple turnover sine 2005 and taken the company on the path to become a world class company.  How did you perform during the past ten months of this year and what is the outlook for next year?

2009 was difficult on everybody and we had our share of difficulties.  Many airlines and airplanes were grounded due to the economic downturn and airlines were postponing maintenance not directly related to maintenance of the airline.  2010 is picking up but it is still not great like 2007-2008 though we see positive indications all over.

What are some contracts you have won this year?  What are some of your main clients?

We did win some good contracts – Jet Airways in India for their A330s, we did some overflow work for AirItalia, new contracts of Kuwait Airways.  Kuwait Airways is one of our main clients and we do a good amount of work for them.

What segment do you believe will be the future driver of revenue?  What is your strategy as you move forward?

Most of our work has been focused on airframe because it is a labor intensive business.  Our strength is the low cost of the labor force because we can afford to give competitive high quality products.  Our focus will remain in the niche sector.  In the future we plan to develop our component capabilities with line replaceable units.  We are also looking at three other areas: 1) to strengthen our product through continuous improvement programs, 2)  in-house growth, mainly in the components MRO business through better utilization of resources, and 3) growth abroad through geographic expansion and inorganic expansion through acquisition.

Who are you targeting at the moment for acquisition?

We are looking for a specialized company that works with certain aircraft components that we feel we would be able to enhance both businesses with major synergies.  We would like to look at companies that could provide services where we currently outsource so we can expand both their business and ours in return.  For this particular endeavor we are going to look to target Europe. As for airframe geographic expansion, we would like the location to be 3-5 hours from Jordan so we can duplicate JorAMco on a smaller scale where there is a regulatory framework we can easily work with.  

What is your major challenge?

The main thing is that during economic downturns there is always excess capacity.  Different companies react differently to economic pressures and many of them are ready to sell at loss and I am afraid that MRO business, with pressure from the airlines, economy, and shareholders are sometimes forced to turn the business into a commodity and turn into a low margin business.  Thus, expansion and improvement in the future will negatively be impacted.  There should always be a margin to allow the business to flourish and develop.  More and more I am seeing businesses being sold and dumping prices and this is of worry.  JorAMco is still doing well despite current conditions but this is a worry for the long term development of this business.

How does your communication strategy reflect your desire to expand abroad?

We have always sent the message that we are a niche operator in the middle east providing high quality services at competitive prices.  We have a presence at many air shows and we are close to the industry.  In this business we do not need to be close to mass media as much as we do with industry.

What is your final message about Jordan and your industry?

Jordan has a great future and the model that could be duplicated in many other industries is the availability of motivated, young labor.  With the right training this labor force could provide a major edge for Jordan.  At JorAMco we developed an academy approved by the UKCAA with AST College (Perth College, in Scotland) and by the end of the four year program they are well prepared with qualifications, skills, and knowledge to make a difference in the industry.  My personal passion is to develop young people who might not have otherwise had the opportunity.