The global economic slowdown looks likely to accelerate the steady shift in the aircraft maintenance, repair and overhaul industry to developing Asian countries.

More immediately, the region's MRO shops are also better placed to cope with the slowdown than are North American and European operators, although they will not be able to completely avoid foreign price competition from hard-pressed Western MRO providers if and when the market sags.

Asian industry executives tell Aviation Week & Space Technology that the crisis isn't affecting business volumes so far - and they wouldn't expect it to, since the MRO market enjoys a long lag between the onset of a downturn and a contraction in maintenance volumes. But there are signs of the industry battening down the hatches to prepare for the oncoming storm.

Ameco Beijing General Manager and CEO Andreas Meisel, for example, says that while his company is committed to new facilities that have been built or are under contract, "we will be much more careful in hiring more staff. We are already under budget for labor numbers for 2008."

One senior Western executive recently posted to Asia says he is more worried than colleagues who have worked in the Asian industry for many years and are accustomed to seemingly reliable high growth rates.

"I have not been spoiled by year after year of double-digit growth in business volumes in Asia," he says. "I am personally a bit more concerned. We have had 10 years of double-digit growth. I don't know whether we will now have 10 years of single-digit growth."

And, like other senior managers, he stresses that point: "I really don't know."

So far, the storm is not much more than a stiff breeze for the Asian MRO industry. Asian airlines are suffering from weaker than expected traffic - especially in China, where an unusual combination of events has hammered air travel this year - but carriers have generally not cut schedules enough to affect their maintenance providers.

Three factors suggest that Asian MRO operators will suffer less than their Western competitors even as the slowdown takes hold. One is that the financial crisis is simply not as severe in Asia - so far, at least - and its economic forecasts have not been so dramatically downgraded. MRO executives point to a second factor: Asian airlines, typically enjoying much faster growth rates than seen in other regions, have more scope to react to unexpectedly weak demand by deferring their very large aircraft orders rather than by grounding old aircraft. Since new aircraft generate less business for the MRO shops, big delivery deferrals should not make too much difference to immediate Asian demand for maintenance.

Not every airline will be able to manage its position deftly with deferrals, however. The Assn. of Asia Pacific Airlines warns that some will not survive the crisis.

Also, the Asian MRO shops' insulation from Western airline woes is limited to the market for narrowbodies, which usually must be worked on locally. The Asian operators are heavily involved in overhauls of North America and European wide-body aircraft, some of which may be grounded - or sent to MRO shops elsewhere that find themselves with overcapacity.

"If there is excess capacity in Europe or the U.S., then there will be downward pressure on prices in Asia," says a senior sales executive from one of the world's largest maintenance providers, who adds that his company hasn't felt any pressure so far in Asia.

Engine overhauling is also a more international market, far less sealed off geographically than narrow-body heavy maintenance. But there’s a rising trend to overhaul Asian engines in Asia, where local facilities enjoy shorter transport times and naturally closer relationships with customers.

Asian MRO operators have one more advantage in facing the crisis. Just as the rapidly growing airlines can defer aircraft, the rapidly growing MRO industry can defer expansion plans.

"If the market slows down, then new players can think twice before going ahead with a new plant, but the existing players will still be there," says the manager of a major engine overhaul operation in Asia.

Another executive, Meisel at Ameco, adds that existing players planning expansion can also defer their investments. Unlike airlines, MRO operators enjoy a long lag between a change in the economic outlook and a change in the volume of their business. They have more time in which to adjust capital commitments and workforce levels.

One market to watch will be that for CFM56 engine overhauls in China, where capacity is set to rise about sixfold in the next five years if the stated plans of four operators are realized.

Only one of them seems to be irrevocably committed: Newcomer Pratt & Whitney has started building its plant at Shanghai. Established Chinese operators MTU Maintenance Zhuhai and Sichuan Snecma may be able to defer or scale down their proposed expansions. Singapore Technologies Aerospace, which would like to be the fourth player in this market, hasn't broken ground on its proposed shop at Xiamen.

There's growth planned in the airframe sector, too. Taikoo Sichuan Aircraft Engineering Services Co. Ltd., a joint venture including Hong Kong's Haeco and Sichuan Airlines Group, is due to begin operations in the first half of 2010. When complete, the Chengdu facility will be able to handle four A340s and A320s at the same time. But it's being built in stages, not all at once.

Bernhard Krueger-Sprengel, chief executive officer of Luftýýhansa Technik Philippines, does not think it will be necessary to cancel expansion plans. "I don't think there will be overcapacity," he says. "For Asia, I am optimistic, but for other areas I would not take that view."

Whatever planned capacity is deferred, executives agree that a slowdown that is less severe in Asia than elsewhere can only promote the long-term rise of Asia as a major region for aircraft maintenance.

If the slowdown is most severe in developed Western countries, "investors in MRO facilities in the U.S. and Europe must be restrictive. Anyone with a global MRO network would have to look at directing investment away from North America and Europe," says one plant manager in Asia.

While companies might hesitate to expand in Asia as quickly as they had planned, for a while they would be more likely not to expand in Western countries at all. One executive in Asia points out that the MRO industry in the West could even shrink for a while, since managers facing overcapacity in North America and Europe will be reluctant to upgrade an aging plant.

Krueger-Sprengel thinks Asia will gain absolutely as well as relatively. Cost pressures will force more Western airlines to reconsider their reluctance to send work to Asia. And once they do begin getting aircraft and engines overhauled in Asia, they won't see a reason to stop the practice as the economy improves.

He says his business will seek to improve flexibility in response to the crisis. More jobs are likely to appear at short notice, he says, especially from lessors that have seized aircraft from bankrupt airlines.

He also expects the speedy work to become less important than it was during good economic times. Airlines will instead put more emphasis on avoiding unnecessary costs.