Singapore Air Show

Sanad Triples in Size in Two Years

 - February 12, 2014, 3:45 AM

Sanad Aero Solutions Gmbh (Booth D11) has seen assets under management grow three-fold in two years, as its work with a growing number of airlines around the world gains traction. Sanad was launched in early 2010 to act as an enabler to an integrated product offering within the Mubadala MRO network, which includes SR Technics and Abu Dhabi Aircraft Technologies (ADAT). Sanad’s assets cover a broad spectrum of spare engines and rotable components supporting modern and common commercial aircraft fleets.

“The company is supporting a growing number of industry-leading airlines in four of its target markets including Asia, MENA, Europe and the Americas,” Troy Lambeth, Sanad CEO, told AIN. “Since the last Singapore Airshow in 2012, Sanad has more than tripled in size with assets under management now in excess of $750 million.”

The business case has been well received by the market and Sanad’s leasing activities have played a key role in driving over $4 billion of related long-term MRO contracts to the network, Lambeth said. “Our integrated approach continues to evolve and has expanded to new product offerings including the network’s integrated component services product on the Boeing 787. In the background, Sanad is continuing to look at other customer needs that are not being met, or not met well, by the market.”

Lambeth said that on the engine side, Sanad had a growing mix of GE and Rolls-Royce spare engines, for both widebody and narrowbody aircraft. “On the component side, we have inventories supporting the A320, A330, A340, Boeing 737, 777, 787, and [Embraer] E-Jets, in support of various customer programs. “Rotable” is simply the industry term for “repairable.”

Sanad’s focus has been on spare engine and component leasing agreements, including sale and leaseback, but also for initial or expansion provisioning where Sanad is the buyer. This enables an airline to avoid buying these spares for new or expanding fleets, as Sanad can do that for them. Sanad claims to have more than 1,000 aircraft under integrated component services (ICS) programs globally.

“Our integrated approach allows airlines to choose from a broad spectrum of services and products including spares (via Sanad), repair and overhaul (via our MRO network) and a long list of technical services (planning, line maintenance, and other elements),” said Lambeth. “Customers also have the ability to eliminate performance risk… where they enjoy service-level guarantees. Through our growing network size, customers [can] enjoy greater scale and optimization benefits.”

Lambeth said the incidence of Islamic finance in spares and MRO is increasing. “We’re seeing a growing number of transactions via Islamic finance instruments and that’s a trend we expect to continue. It is a net positive for the industry, as it looks for new and efficient sources of capital to fund orderbooks and growth. There are a growing number of examples where Islamic finance is being used for assets, mostly aircraft so far, but we are starting to see some examples of spare engine transactions, and spare components could utilize the same types of structures that have been created along the way.

“As far as using Islamic finance to finance the Middle East’s MRO industry, we’re seeing related structures for assets so–especially on the MRO side–that could extend to hangars, test cells, tooling–hard assets [in general]. So far, we haven’t seen the instrument specially applied to MRO cash flow financing. I am not sure it’s been tested yet, but suspect that might be a bit in front of us yet,” Lambeth said.

All of the engine OEMs provide spares solutions to the market, U.S. or otherwise, he said; and Sanad is seeing an increasing number of component OEMs starting to provide spares solutions to the market as well, with a number of independent engine leasing companies, such as ELFC and Willis, becoming very active in the market as well.

“On the component side, it is harder to find dedicated independent solutions although manufacturers and independent MROs are offering solutions, some in dedicated product offerings and others in one-off transactions. Again, for newer fleet types (the 787 is a great example), we are seeing the component OEMs starting to offer spares solutions in their aftermarket product offerings as well.”

Although he doesn’t say so explicitly, Lambeth clearly sees a target of $1 billion in inventory as drawing closer. “Customers are increasingly expecting to see spares solutions in their MRO RFPs/RFQs and we expect that trend will continue as we move forward. This region has everyone’s attention given the record growth we are experiencing, but the expansion of services to include spares is a global trend and it will continue.”