The sweeping measures taken by the Chinese central government to tackle the COVID-19 outbreak have softened the impact felt by MRO provider Guangzhou Aircraft Maintenance Engineering Company (GAMECO) but such market conditions are difficult to find elsewhere.
Speaking at Aviation Week Network’s MRO Asia-Pacific on Sept. 22, GAMECO CEO and general manager Norbert Marx said control over the pandemic and access to a large domestic market were the key recovery factors in China that have enabled GAMECO to rebound since February, when the company suffered a massive decline in revenue.
GAMECO, owned by China Southern Airlines and Hutchison China, was told by its shareholders to focus on customers and employees and “not to worry about forecasts and number crunching,” Marx said at the virtual event.
Border restrictions caused the cancellation of heavy maintenance slots, he added, but China Southern allowed GAMECO to pull business forward, giving the MRO shop the capacity to pursue domestic customers like SF Airlines, Capital Airlines and Hainan Airlines. The company puts its full-year heavy maintenance revenue forecast at 90% of normal rates.
Marx added that GAMECO has invested significantly in Airbus A380 MRO capability. With airlines announcing early retirement of the type, it will be looking at other strategies to soften the blow, although it has managed to reap some revenue from China Southern’s intense utilization of the A380 on international flights.
Similarly, the grounding of aircraft saw declining demand for component maintenance, where revenues are expected to reach 75% of normal levels for the year.
Marx said the company is looking beyond COVID-19, noting that it has invested CNY600 million ($88 million) in a 600,000 ft.² component and composite center, which will be ready by 2022.
Marx is expecting further consolidation in the MRO market as well as strategic moves from big players, such as Airbus pulling out of Thailand and Singapore. The cargo segment, especially aircraft conversions, will see growth, and Boeing recently announced it will set up a second 737 BCF line at GAMECO to be ready by early 2021.
Marx said that China’s recovery would be hard to replicate elsewhere. Countries such as Singapore and Qatar have the pandemic under control, but have no domestic market, and the opposite is the case in Europe and the U.S.
Marx added that the nature of the Chinese central government and society also meant airlines responded to the government’s request to maintain some level of air transport infrastructure, and the airlines complied as a social responsibility, even though fiscal aid from the government was smaller than markets like the U.S.
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