Major Asian MRO Groups Retain Focus On Growth

Credit: GAMECO

Some of the leading Asia-Pacific MRO organizations are pushing ahead with expansion plans despite the fact that their revenues have been dealt a significant blow over the past 18 months by the COVID-19 pandemic.

GAMECO remains on course to finish a large hangar construction project in Guangzhou by the end of 2021, said the company’s CEO Norbert Marx during Aviation Week’s MRO Asia Pacific event. “We could have stopped it [due to COVID-19], but we didn’t do that,” Marx said.

GAMECO has continued work on new facilities for its component business and composite repairs. These are expected to be ready in the first half of 2022. “We slowed down hiring a bit, but we didn’t slow down with strategic projects,” Marx said.

SIA Engineering Co. (SIAEC) is also “not slowing down” with its development plans, said Foo Kean Shuh, the company’s SVP for corporate planning, fleet management and commercial. This year SIAEC has opened a new facility for engine services, and it is in discussions to expand its component services operation.

Business has been “patchy” since early 2020, Foo said. “But on the whole, we’re looking to expand because we believe that this is a near-term blip and we’re looking [at] and planning for the future.”

HAECO, meanwhile, has slowed down some of its facility development, but in certain cases this has been because of external factors, said HAECO Group CEO Frank Walschot. For example, one of the group’s major initiatives is moving its Xiamen, China operation to a massive facility located at a new airport, but HAECO’s plans have been set back by delays to the airport project.

The group views the current crisis as temporary, “therefore we will continue to expand and we strongly believe MRO in Asia will be a growth business going forward,” Walschot said.

ST Engineering was planning for capacity expansion before the pandemic, particularly for airframe maintenance, said Tan Eng Shu, head of MRO and commercial aerospace. Projects in Asia, Australia and the U.S. are going ahead, as the company is expecting passenger aircraft demand to rebound after the current crisis, Tan said. ST Engineering believes airframe work will almost fully recover by the end of 2023.

Most of the executives reported a mixed picture in terms of current business conditions, with some areas performing better than others.

Walschot said HAECO’s line maintenance demand dropped by 70-80% “almost overnight” after the pandemic began in early 2020, with the remaining activity mainly for cargo aircraft. Airframe heavy maintenance dropped down to about 50% of 2019 levels for a few months, but then climbed back to 80% by the end of 2020 and is now up to around 95%.

The trend was quite different for HAECO’s engine business. In 2020 engine maintenance was actually up above 2019 levels, due in large part to a backlog of Rolls-Royce engine work, Walschot said. But this year engine maintenance has declined and stabilized at about 15% below 2019 levels.

GAMECO’s overall business dropped about 17% in 2020, and this year it is forecast to be down by just 10-12% versus 2019, said Marx. International line maintenance has declined by around 75%, although domestic line maintenance recovered last year.

In 2021 GAMECO’s line maintenance demand has been “a rollercoaster–we have some good months and some bad months,”  Marx said. For example, August was low, but September “looks better.” Changes in travel restrictions in China are a major factor in these swings, he said.

Heavy maintenance also declined early in the pandemic, and GAMECO initially compensated by bringing forward airframe work for its primary customer China Southern, Marx said. Now the heavy maintenance and landing gear work has stabilized.

For ST Engineering, airframe maintenance “was hit pretty hard” last year, said Tan. But towards the end of 2020 the company started to see some recovery in this area thanks mainly to freighter conversions. Like other MRO companies, ST Engineering has seen much of the lost revenue in passenger aircraft work offset by increasing demand for cargo conversions.

This means ST Engineering’s airframe maintenance has recovered to 90-95% of 2019 levels, Tan said. Meanwhile, engine and component work is still down by 30-40%.

SIAEC’s business has differed from market to market, Foo said. Demand in the U.S. has held up well because domestic networks there have recovered, but the company’s operations have slowed down more in Singapore and the Philippines due to international restrictions. “So it depends on the location, but we are starting to see a slow pickup” overall, said Foo.

Adrian Schofield

Adrian is a senior air transport editor for Aviation Week, based in New Zealand. He covers commercial aviation in the Asia-Pacific region.