Podcast: Unlocking Asia-Pacific's MRO Potential

Editors share insights from Aviation Week's MRO Asia-Pacific 2024 event in Singapore, focusing on capacity, technology and talent.

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Transcript:

Lee Ann Shay:

Welcome to this MRO Podcast. I'm Lee Ann Shay, Aviation Week's executive editor for MRO and business aviation. And I'm here in Singapore at MRO Asia-Pacific. I'm here with my colleagues, James Pozzi, who is the MRO editor for EMEA. Hello, James.

James Pozzi:

Hi, Lee Ann.

Lee Ann Shay:

And we're here with Chuanren Chen, who is the Southeast Asia and China editor for ATW. Hi, Chuanren.

Chen Chuanren:

Welcome to Singapore. Hi.

Lee Ann Shay:

Thank you. Okay, it's been a really packed, fun-filled days, what are some of the insights you're hearing. James?

James Pozzi:

So I had an interesting discussion yesterday with my panel on the capacity issue. Now, capacity is not a new problem for the Asia-Pacific region. Where we are in Singapore, for example, an absolute hive of MRO activity, but it is very landlocked. And Singapore's been very clever in terms of where they build this extra capacity. Seletar is a good example of that, the aerospace park of course. And there's some interesting things going on at Changi, which I'll mention a bit later.

But yeah, my panel yesterday had leaders from some of the region's biggest MROs on it, Asia Digital Engineering, for example, ST Engineering, of course Singapore-based, and that is causing a headache. These companies are building new hangars, there's a mass building plan for a lot of these companies looking to add the capacity. ST Engineering I think are looking to add four hangars in total in Singapore for wide-body and narrow-body. And, of course, they've added capacity outside of Singapore in the US in their ventures over there. So there is a need for it. The market is, of course, crying out for it in most regions of the world.

Now, Asia Digital Engineering, of course, I think this week, Lee Ann, you are going to Kuala Lumpur to see their new hangar that they're opening there. A huge hangar, I think is it 14 lines of maintenance at the base?

Lee Ann Shay:

14 bays, yep.

James Pozzi:

14 bays of maintenance. So that really brings home the need for it. Of course, it's okay to build hangars or lease them and set that all up, that can be done pretty relatively over a straightforward timeline. But of course, the challenges around that are things like the operational side, being efficient by investing in technology, which this region has been very good at. And it's definitely taken prominence in company strategies in digital tools, predictive maintenance planning, for example.

But one of the main important things I think is manpower of course and workforce. As someone said recently at a conference I was at, and it kind of pretty blunt, without people you can't do anything. And that was seen by my panel as maybe the key factor or certainly the top one or two to solving the capacity over the long term and meeting this huge demand that's in this region. There is so much demand, so much growth, so much potential. But the capacity issue does need to be alleviated in order to do that over the next decade and longer.

Just another thing as well I think's worth mentioning. The ambitions of particular or individual countries in this region. Of course, Asia-Pacific has its big MRO locations, as I mentioned, Singapore for example, but there's no shortage of ambition from other countries as well across the region.

So the panel you moderated, Lee Ann, this week, I thought there were some really interesting insights. So Australia, amazingly, are still a long, long way away from where we are, but they are part of Asia-Pacific. The state of Queensland is trying to really steal a march on the other states to become a real MRO hub. They've got a 10-year roadmap, they call it, to look at that.

So yesterday, Michele Bauer, who is deputy director general of state development in the Department of State Development and Infrastructure, it's a long title, at the Queensland government, she outlined some of their plans in the panel. They want to add or attract more investment over that period into the state of Queensland, there's MRO, even things like niche manufacturing, they want to just grow that.

But that's a common theme. The Philippines as well, their representative, Enrique Antonio Esquivel, from their government, they are looking to grow outside of Manila. Manila's very landlocked. There's about 100 miles away is the Clark Air Base, which has its own civil aviation complex. It's an international and domestic passenger airport. And there's MROs already there, but they're looking to attract more. And they think, for example, Lufthansa Technik Philippines, who have their facility in Manila could go down to Clark or up to Clark, I think it's north of Manila, to get more capacity for things like A380 MRO services, which they really specialize in in the Philippines.

And of course, just worth mentioning as well, Malaysia, big population, they've obviously got quite a good domestic MRO setup, that's focusing on two airports in the Selangor district. So there's Kuala Lumpur International, the newer airport, and then there's Subang Airport, which was the former international airport before the new one was built. But Subang is, I guess, undergoing a bit of a renaissance with that.

So they're going to cater for 10 million passengers over the next 10 years. And that project is going to start next year. And they really want to build their MRO infrastructure to support that, attract MROs, attract that investment and get people in areas such as, I don't know, component support, for example, not just in the repair, but also the manufacturing given the part shortages you've cited.

So really, really interesting stuff. And that's just a few of the countries. But you look at even Vietnam, Korea, Japan, for example, they are all looking to build MRO infrastructure, attract more investment from outside of their countries, and just build that up because simply, to put it bluntly, demand is very, very strong in this region. And that is not going to slow down.

Lee Ann Shay:

Thank you, James, you just covered a lot of different things that we could dissect in so many different ways. But Chuanren, before we do that, you talked to a lot of airlines the last couple of days, what are some of the things you're hearing?

Chen Chuanren:

Yeah, hi, thanks, Lee Ann. Yes, you're right. I think the days and the weeks before MRO Asia-Pacific, there have been a few high level I would say airline incident stories. You have Malaysia Airlines, a few major turn backs and diversions. And the CEO of Malaysia Airlines, he had called out unreliable rotables as one of the key reasons why these issues are happening. He was saying 28% of his spares are all rotables and they are failing randomly. So he said Malaysia Airlines quote are like sitting ducks because you do not know which parts are coming from where. And he has called out for OEMs to take ownership of the issue. And it could be a talent problem, it could be an inspection issue or the lack of experience of the labor to, again, look at this or to service these rotables.

Similarly, the lack of capacity has also affected another giant called Air Asia. They have been trying very hard to ramp up the number of aircraft out of storage. But the simply lack of slots available for MRO lines is affecting their capacity and their goal to reach a hundred percent aircraft ready.

So there's so many airlines are facing similar issues. Again, supply chain is resulting in aircraft deliveries which is also in turn forcing them to operate their legacy aircraft, legacy as in 320ceos for a longer time. And this has also forced them to rethink their retrofit plans.

You have Philippine Airlines, you have Thai Airways, and even to a certain extent you have Singapore Airlines drawing up plans to retrofit the aircraft so that they can tide out the aircraft delays that is coming in from Airbus and Boeing. Yes, so in this MRO APAC, we have been hearing a lot of conversations about retrofits, which the industry believes is going to be one of the growth areas in Asia-Pacific.

Lee Ann Shay:

And you both mentioned capacity, workforce, supply chain. And no matter where we are in the world, supply chain and workforce always comes up in conversations. But I think one twist to the conversation, at least on the workforce side that I've heard the last couple of days, is how the implementation of technology can not only help the workforce productivity, but also help retention.

And I think that's really interesting because sometimes people get threatened by technology taking jobs away. But in this case it actually could be really good because you can, like Pratt & Whitney, I was talking to Pratt & Whitney, and they are implementing this new robotic system for a procedure that takes 14 hours. And with this new system that they've developed internally that they're prototyping, it cuts it down to seven. And so instead of having four people do this job, it's one person. And that person that is left for that job now is learning this new technology, that person is happy. And then three people get deployed from this very repetitive task to more interesting work. So it's just a win-win all around. And I think there's a lot of instances there.

And artificial intelligence has come up quite a bit too. And companies have been talking about some of the initial use cases that they're doing that I think can really affect our industry from both the workforce retention and productivity standpoint. But that's a fairly new aspect of this part. But I think it's going to-

James Pozzi:

AI is certainly more at the forefront definitely. It's taken more prominence over the last, I think we've seen it over the last year or so attending all these MRO conferences. But people are really starting to put that into action already. And it's so wide-ranging in terms of the tools and various concepts and everything. So yeah, it seems like people are putting that in a prominent place.

Chen Chuanren:

But I think one of the interesting points that was brought up at the panel was that because all these operating systems are so diverse, you have different computer codes, different computer languages, and each function within the MRO company or the airline are using these codes very differently. So if you want to integrate them for a super AI efficiency system within the company, I think it's going to be a huge task. So I'm just wondering whether there should be an industry standard imposed by FAA or even IATA, that there should be a common computing language for AI perhaps in the near future. What do you think, Lee Ann?

Lee Ann Shay:

I think it's an interesting question, Chuanren. I don't know the answer, but you have to have data in a format, clean data, usable data that is structured that can play in various ways, but it also has to be able to be bifurcated just to make sure that you don't have a cybersecurity threat. So I'm not sure.

Chen Chuanren:

And I think AI do also entice the younger generation to join the MRO industry. Again, the panel talk about the retention of talents, and one of the things that they brought up is of course now that we have to engage the Gen Zs, you're not talking to Millennials anymore, but Gen Zs, whereby they have big ambitions, ambitions they have, they'll ask what's in for them, they have values. And so I think it's important for recruiters or even human resource managers to engage their hearts and minds and give them very diverse career paths.

Another conversation that came out was the fact that there are simply not enough movements within Asia-Pacific when it comes to talent. So they are mostly stuck within their geography regions, say Japan, China, or even Australia. But then again, some of these markets are facing declining birth rates and labor shortage, Korea, Japan, Hong Kong to a certain extent, Taiwan. But they do have very prohibitive labor laws that prevent the import of immigrants labor. So perhaps in the near future, these governments should look at relaxing these regulations so that they can support their aviation industry.

Lee Ann Shay:

Interesting point. One last thing I think we should bring up is, going back to one of James's earlier points, just the growth in the region. Brian Kough, our colleague, delivered the forecast yesterday and said that there's about 4,000 new aircraft that should be delivered to Asia-Pacific over the next 10 years, another 2,000 to China. So there's going to be a lot of new aircraft coming in.

But we're still in this state where some of the aircraft, the new aircraft aren't coming online as fast as airlines would like them. So the retirements, aircraft retirements are not happening. And the last three years, there's been far fewer retirements than expected, which is having a big impact on used serviceable material. So that has led to more repairs and more acceptance of PMAs. And this year it looks like there's still not going to be the forecasted number of retirements. So USM, PMA, repair development, I think this is a trend that is not going to be complete by the end of the year.

Chen Chuanren:

Yeah, I think, again, airlines are guilty of holding the aircraft back simply because they're not getting the new aircraft from the OEMs. So I guess it's a very vicious cycle that's happening within the ecosystem. I'm not sure what's going to give or what's going to change the whole cycle. But I think it's just time and wait and see, I guess.

Lee Ann Shay:

Okay. I know I said that was going to be the last topic, but I have one other one that I really ... can we discuss. The China panel yesterday I thought was really interesting. Several executives from China were talking about the importance of having MRO capability within the country to support programs.

And one of them was the Comac 919. And I think there are seven operating now, maybe it's up to nine. And GAMECO, Marc Szepan was talking about how China Southern received its first C919 last month and put it into operation very recently. But they're seeing really high reliability, good dispatch. And Air China had taken one at the same time. And I guess their dispatch reliability is pretty high too. And China Eastern was the launch customer, and I think they have seven, so I think there might be nine operating now.

Chen Chuanren:

So for China, it's a pretty interesting market because due to certain regulations by CAAC, there's another process of certification. Therefore, if you want to support a fleet within China, it is important to have its own dedicated ecosystem, say, spares, distribution, part or engine maintenance or overhaul facilities just for China. But then again, China is big enough to support that.

So I think in the end of the day, there should be some form of close bilateral agreement or relationships so that you don't get trade wars in a way which might disrupt, again, this growth in China.

Lee Ann Shay:

Good point. So something else to continue to watch.

So that is a wrap for this MRO Podcast. Chuanren and James, thank you so much. And listeners, thank you. And if you would like to support this podcast, wherever you listen to them, please leave us a star rating or a review. And thank you so much. Until the next one, signing off.