Christian Bergner, 德国Krauss航空技术有限公司
Release Date: 2009-01-23
As far as the BBAA goes, there's a strong emphasis on the new Berlin Brandenburg International (BBI) Airport being completed in approximately two years, correct?This airport construction is the largest infrastructure activity in all of Germany at the moment, for the last three years and the next coming years. Actually, it is supposed to open in the beginning of 2011 and will replace the three existing Berlin-area airports. This has been delayed a few times, but this is now the definite opening date.
When Berlin is referred to as the 'cradle of aviation', some might think it's a generous term. This is a very big claim. In any way, does this historic status reflect the current capabilities of the aviation industry here in the Berlin Brandenburg area?
The 'cradle of aviation' refers to the famous pioneer Otto Lilienthal, who made his first flights several kilometers from here where we are sitting right now in Berlin. He was the first aircraft manufacturer who commercially sold his aircraft, which he sold to France, the United States, and Russia. He was also the first to attempt serial production. He looked at his flying apparatus like a sporting activity, but he also saw that the people of the world should use this technology of flight to create eternal peace. Well, he couldn't be more wrong, as we know today.
As for the new Berlin airport, we see that the aircraft industry in this area has a job count of around 4,500 at the moment, though this number used to be much larger. The aviation industry used to be bigger, but of course, after the Second World War the industry was dismantled through the Potsdam Treaty of July, 1945. After the reunification of Germany in 1989, there were a lot of activities to bring back some of the industry, and those 4,500 jobs that we have today actually represent the results of these activities. The new airport should bring our total job activity to 40,000, including jobs at the airport, in aviation, in manufacturing, and also secondary jobs related to airport services. Especially considering a very high unemployment rate here which reaches 20% in same areas around Berlin, this is a very important infrastructure project.
Will the people who are unemployed have the right skills to fill all of those new positions?
Of course this is not the case today, but there are massive activities from the government side, from the employment authority, to install programs to enable those people who are unemployed and don't yet have the right qualification to obtain this qualification. This is actually a coordinated exercise between the government and the industry, because the industry is in need of qualified personnel and the government's interest is to reduce the unemployment rate. So they team up and install programs even today.
Are these federal efforts?
Those are federal efforts actually, but through the structure of the Federal Republic of Germany, they are broken down into local actions. The employment agency has both national and local organizations. It is really a very coordinated effort by industry and government agencies to improve the qualification structure and therefore to offer jobs to local people.
Is this how the local industry here plans to achieve its aim of breaking into the top three regions in Germany for aviation related activities?
Yes; if you look at the German aerospace industry historically, before the reunification, there were two aerospace centers. One is the big center around Munich with EADS (the former MBB), Eurocopter, and of course, MTU Aero Engines. The other center is mainly focused around the Airbus facilities in the Bremen/Hamburg region. As you mentioned correctly, this Berlin Brandenburg area is now determined to be the third center. In size it will still be smaller than the other two, but it will still gain importance. Right now we are already the third center, but are still growing actively.
The international community understands that Munich has more military activity and Hamburg has Airbus. What defines the competencies of the Berlin Brandenburg area?
It is the view of the BBAA that Berlin Brandenburg should be the gateway to Eastern Europe and the Russian aviation industry. Historically, Berlin has had a lot of links to Eastern Europe, with many aircraft from Eastern Europe operating in Berlin. Also, the new airport aims to become a hub to Asia. The question will be, 'Why do we need a third hub in Germany when we already have two?' Well, most of the international connections to North and South America are dealt with very well through Frankfurt and Munich. This is why we really should aim our sights on the Far East, where we might be able to create some kind of unique situation or advantage.
There's reference to the 'Big Three' when we talk about major companies in the area. The engine competencies are clear but what other areas are emerging?
As you mentioned, we are very strong in the engine business, in new engine design and production as well as maintenance, repair, and overhaul (MRO). The other area that we're clearly heading in is composites, and with that we have a number of small, but very interesting, companies in the area. This is the light aircraft market, but we wish to develop them further to be suppliers of composite parts to major active companies, like Airbus and Boeing. Composites are something that are very well reflected in our universities and engineering schools.
Are these composites you're referring to for use in engines or aerostructures?
There is some work in engines, but the majority is for airframes. We have several local universities and institutes dealing with composites and light weigh structures in the aerospace area. Just to name a few, there is the Technical University of Cottbus, the Technical University of Berlin, the University of Applied Sciences in Wildau, and also in Teltow (a small city near Berlin), we have a 'Fraunhofer' Institute for Composites. These institutions are very active in the industry and they have already well established contacts with the major airframe manufacturers.
Usually there's a big step to be made between theories and applied materials. The Spanish and UK-based industries take pride in their efforts to bring new-age composites to life. Just how far along are Berlin-area efforts in the commercialization process? Do any local companies have available technologies that might enjoy further international success?
There are two local SMEs that I would like to highlight. One is Stemme, which is a small company east of Berlin, and the other is Aquila. Both companies are active in the light aircraft industry. Right now, they are further developing the capabilities to actually participate in major aircraft programs. At the moment Stemme is actually technologically the most able German company in composite materials and aircraft design.
Dietmar Schrick of BDLI outlined two areas where he felt that the German industry would be particularly strong in the next several years within the context of the restructuring of the global industry:- cabin interiors and aerostructures. Do you agree?
I agree with both of them of course, because Berlin Brandenburg sees itself as a key part of the overall German aerospace industry. The engine-related business is going to be the second focus for this Berlin Brandenburg area. Also, airport related services - safety and security of the airport and passengers' services ?will include a very sophisticated approach designed to ease the stress and complexity of a passenger's life at an airport. The Berlin Brandenburg International Airport shouldn't be a test bed, but a showcase for those technologies. We all know that the security check can be a pain in the neck at modern airports. It's very time consuming and annoying for passengers. A hot debate lately surrounds those scanners at airports that are not respecting the privacy of passengers. This area can be developed further in order to satisfy the need for privacy of the passenger, while smoothing the security check and ensuring a very high level of safety (without annoying the passenger and consuming his time). There will be lots of progress in security technologies. We also know that the gate change, walking from one gate to another, can be very complicated. Sometimes it's obvious in looking at the way airports are designed that they were not designed from scratch but rather as a small airport which was expanded at a later point in time with additional terminals. Our new airport will be the prototype for an airport that is very well organized, in terms of visual passenger communication of clarity for passengers as well as minimizing distances to allow for the shortest possible travel times within the airport. We have quite a few companies in the IT area dealing with those projects, and though not directly aerospace related, this is important in terms of business.
With regard to China, is it likely that Lufthansa will be your main ally in fully utilizing this new resource or is there already an effort in place to attract greater interest from Asian carriers?
Right now, even before the new airport has opened, the airport authority here is very active in trying to develop this airport as a hub to Asia. For example, since the beginning of September 2008, we've had regular non-stop service to Beijing on Hainan Airlines. This capital to capital connection hasn't existed for decades. This is actually working very well and there should be more flights to come. As I mentioned, with the United States and South America, there's probably no need to be in competition with Frankfurt or Munich, but for Eastern Europe and Asia, there is already some strong interest from Asia to have Berlin as a direct connection. Of course you always have competition to the traditional hub and spoke system, but if you look at the numbers of business travelers and tourists from Asia, you will notice that Berlin is among the top destinations in both Germany and the whole of Europe. New routes need to be developed to meet this great demand.
And MRO services will follow. Krauss Aviation Technologies made an early entry into China, almost as though the company had predicted the future of Berlin as a hub to Asia well in advance. What was really the driving fore behind Krauss' early move east?
That can be explained pretty simply. The specific MRO service that Krauss offers, which is piece, part repair of aircraft engines, APUs, landing gears, airframe parts, and so on, is basically a service that directly attaches to the companies that do overhaul of complete products. Our typical customers in Europe - Rolls Royce, Lufthansa Technik, Snecma Services, and MTU Maintenance - overhaul complete products, like aircraft engines, landing gears, and so on. We attach to this service as a piece, part, and repair service, in order to reduce costs by avoiding the use of new parts. This is a pretty established business model in Europe, and we have just filled that gap in the German industry. We also have customers in France, the U.K., Italy, the Netherlands, the Czech Republic, and most other parts of Europe.
We noticed a couple of years ago that most of our major customers were entering joint ventures in Asian operations, mostly in China but also in Singapore, like Rolls Royce. In discussions with them, we realized in order to participate on their overall global growth (as in the past), we needed to move eastbound. This move turned out to be correct, because our major customers did exactly that. Our strategy was pretty simple; it was follow the customers. Of course we had done our research on overall market trends and conditions first. Globally, roughly USD 100 billion is spent annually on MRO services annually. This investment eclipses the USD 75 billion spent on the purchase of new aircraft. Asia as a whole generates about 21% of MRO demand worldwide. Within that, 2005 spending in China was USD 1.3 billion, a value which is growing steadily at a 5-7% rate. The Chinese MRO market is the strongest and fasted growing in all of Asia. At the same time, competition is pretty limited here at the moment due to participation of a limited number of service providers and a level of development which is nowhere near that found in the European MRO market. The market is there, it's growing fast, there's limited competition, and also our main customers are going there.
Is this more a prediction of further development of the Chinese market for MRO services than a current reality?
In the beginning, it is always a strategic investment and return on investment is a long-term issue. Normally, in MRO, the return of initial investment is expected within six to eight years. This 'rule of thumb' is followed by most providers. But we expect to turn a profit in China within five years. Having opened our Chinese facility only in March 2004, we are still at the beginning of the curve, but we are going to see the first positive result within the next year.
There are very different projections for MRO growth in Asia. Some of them are doomsday scenarios, saying all of these MRO extension plans are going to be stopped immediately. Then there others saying it's a good market opportunity and it doesn't matter if there's excess capacity in the West for MROs, because the trend is that growth is moving toward Asia. What do you think here? Could growth even include wide body aircrafts which could be flown to China for MRO?
That is a very good question to ask and a very difficult question to answer. As you mentioned, it's pretty unclear as to which direction it's going to take. I think there are a couple of chances and risks involved. The first risk is that the number of passenger miles flown is decreasing worldwide. This is directly linked to MRO spending. But there are several different parameters influencing the whole equation. First of all, a financial crisis (like this one) and high fuel prices might result in a tendency to out phase older aircraft and replace them with new aircraft which are more fuel efficient and have lower maintenance costs. This would be both good and bad news. Of course the bad news is that the retired older aircraft require more maintenance, so a lot of MRO business will be lost. The good news is that newer aircraft have more complex systems, and even though they normally have a longer lifetime, when maintenance bills do occur, the MRO bill is much higher.
Will a portion of MRO activity migrate from the West to Asia? Here we also have two effects. First of all, the pressure on the airline operators to reduce cost is going to increase in the future. It increased already with the introduction of Low Cost airlines amongst other financial burdens and will only continue to rise. Thus, the pressure to reduce costs also continues to rise and the motivation to go to Asia for maintenance will only increase. On the other hand, the more the Asian aerospace industry is developed, the more effort they have on human resources qualification, and the more they drive up their technological abilities, the higher the labor-cost will be in this industry at the end of the day. In China, we already have seen labor rates in the large capitals like Beijing and Shanghai increase by 30-50% in the last couple of years. If that continues, Eastern Europe will soon be able to compete with China on price. While this negative trend was probably not part of the strategy of most companies a couple of years ago, it has become a factor that works against relocation to China. In summary, you're going to have chances for MRO work in the West, in China, as well as Asia in general. There's some portion of the maintenance work that cannot be relocated, because it's not very economical to fly an aircraft to Asia if it's operating mainly in Europe, but the heavy maintenance checks, like C checks and sometimes D checks, are very labor intensive and therefore will be subject to relocations.
Looking at component maintenance, like fuel pumps, hydraulic pumps, and so on, the Chinese market was only worth USD 320 million in 2006. About 60% of component and engine maintenance is currently sent abroad from China to places like the United States and Europe. It is for this precise reason that China is so eager to install as many joint ventures for engine overhaul as possible. The presence of the likes of MTU and Lufthansa ?and of coarse Krauss - keeps MRO work in the country. A greater portion of work that is currently being performed in Europe will stay in Asia, where it was created, in the long run. Yes, we will see more relocation from West to East, not only for cost reasons, but to meet the local need for maintenance services. So China is possibly the best MRO market in the world in terms of growth potential.
Five years from now, how important will the Chinese market be to Krauss?
Today, we are at the beginning of making this joint venture profitable, and in five years it's certainly going to be an important part of our business here. We are expecting that the Chinese side of our business to contribute as much as one third to our bottom line in the long run.
Do you have a final message for the readers of International Business Daily?
From the BBAA perspective, I would encourage every investing company from the P.R. China to look at this Berlin Brandenburg area. We have a lot of companies here that have already invested in China, but we also have a lot of companies that are prepared to cooperate with investors from China on business here in Germany. We see that investment will go in both directions. German companies in the Berlin Brandenburg area are going to invest in the P.R. China for sure. We are also expecting to have the investors from China come here, because I think there are some interesting opportunities, especially around the new airport, for the Chinese aviation industry to participate. As the Minister of Commerce of Germany recently stated, Germany is very open for those investments and will make sure that those investments go very smoothly. From Krauss, we certainly want to develop the joint venture that we have in China and see a lot of opportunities, in the MRO business especially, to create further services and business revenue together with Chinese partners in the industry.
| Company: | 德国Krauss航空技术有限公司 |
| Position: | Treasurer |
| Country: | 德国 |