Opinion: Steps To Asian MRO Recovery
Patience is not necessarily one of my top virtues, but the last couple of years have definitely demanded more of it.
The same is true for managing MRO through the recovery. The Asia-Pacific region’s lagging recovery is clearly affecting aviation’s overall rebound. Despite ongoing travel restrictions in China, Hong Kong, Japan and South Korea, Asian passenger recovery is gradually increasing, which has helped boost international travel to 65% of June 2019 levels, according to the latest International Air Transport Association (IATA) figures.
While Asian airlines are trying hard to catch up, and capacity is climbing, Jeffrey Lam, president of ST Engineering’s aerospace sector, points out that China is crucial to the region’s recovery. The high volume of traffic pre-pandemic between Asian countries and China largely is still missing due to China’s zero-COVID policy. “So until China really opens up, I don’t think Asia will really recover,” Lam says.
IATA agrees, forecasting that airlines in the Asia-Pacific region, including China, will collectively post a loss of about $9 billion this year.
Although ST Engineering is a global business, and its first-half revenues were 24% higher than the same period in 2021, “we are highly exposed to Asia for the MRO business,” says Lam.
The company has been patient and proactive in supporting its business needs and those of its customers during the last couple of years. For example, its cargo conversion business is doing very well, with the next available slot not available until 2026. However, like the majority of companies, ST Engineering has to manage its supply chain differently. The MRO is much more proactive in managing vendors, materials supply and labor. “People don’t see all the hard work we do” to manage risks and keep production on time, Lam says.
ST Engineering has placed representatives at key vendors to ensure punctual deliveries. To ensure delivery, it has had to pay some vendors experiencing credit problems even before it received materials.
“We actually also put equity into a vendor to prevent it from going under, so we really had to band together” to keep the supply chain going, says Lam. The vendor, Sicamb, based in Italy, manufactures aerostructure components for ST Engineering’s passenger-to-freighter conversion business.
Lam says ST Engineering is seeing the benefit of the hard work it has done to support customers even while its own business has been challenged. Customers acknowledge the assistance and are signing contracts to lock in MRO work as they figure out flight schedules.
Patience is a virtue.
In India, meanwhile, Air India and IndiGo are becoming financially stable, other carriers are launching, and the country plans to build more than 200 regional airports (page MRO20).
And in the Philippines, Cebu Pacific is extending leases to accommodate resurging traffic (page MRO8).
I hope to see you in Singapore Sept. 20-22 at Aviation Week’s MRO Asia-Pacific Conference & Exhibition. It is another positive sign of Asia’s recovery—the first time in three years that we’ve been able to hold this event. It will be great to be back together!