Singapore Special

This year’s Singapore Airshow could be the biggest yet and, once again, gives the island nation a chance to highlight its aerospace capabilities and its strategic significance as an aviation hub, writes Andrzej Jeziorski. Despite continued economic uncertainty in key markets such as Europe and the USA, demand for new aircraft remains strong – as evidenced by the order and delivery tallies just released by manufacturers Airbus and Boeing (see pages 26-27). Asia’s relatively healthy economies and pent-up demand in China and India are now more alluring to aircraft makers than ever, and all key forecasts for the next two decades show the region as the driver of the continued growth of the global aviation industry. This is encouraging news for the organisers of this year’s Singapore Airshow – the biggest event of its kind outside of Europe.

20th Jan 2012


 Singapore Special


 Singapore Airshow set to reach new heights
 

This year’s Singapore Airshow could be the biggest yet and, once again, gives the island nation a chance to highlight its aerospace capabilities and its strategic significance as an aviation hub, writes Andrzej Jeziorski.

 

Despite continued economic uncertainty in key markets such as Europe and the USA, demand for new aircraft remains strong – as evidenced by the order and delivery tallies just released by manufacturers Airbus and Boeing (see pages 26-27).
Asia’s relatively healthy economies and pent-up demand in China and India are now more alluring to aircraft makers than ever, and all key forecasts for the next two decades show the region as the driver of the continued growth of the global aviation industry. This is encouraging news for the organisers of this year’s Singapore Airshow – the biggest event of its kind outside of Europe.
The show will be held on 14-19 February at the Changi Exhibition Centre and organiser Experia Events predicts that it could be the biggest yet.
After last year’s Paris air show in June, Experia said it had already secured deals in excess of S$3 million (US$2.35 million), alongside National Pavilion bookings from Italy and Mexico, bringing the total number of country pavilions at the show to 21, with strong interest also coming from Spain. By the end of June, 90 percent of space at the Singapore Airshow had already been booked.
Now, the organisers say, the show will feature more than 900 companies from 50 countries – compared with about 800 from 40 countries at the last event in 2010.
 

China’s presence
Particular attention will be focused on the strong support for the event coming from China’s industry. Participants from the world’s second-largest economy will include China National Aero-Technology Import and Export (CATIC), Commercial Aircraft Corporation of China (COMAC), maintenance provider Ameco Beijing and – for the first time – Beijing Youtaishuncheng Development, which will be exhibiting its unmanned systems capabilities.
Experia says the show will also shine a spotlight on Asian maintenance, repair and overhaul (MRO) capabilities, which are attracting increasing attention from around the world as operators seek to reduce costs by outsourcing their aircraft maintenance needs. According to analysts at Frost & Sullivan, the commercial MRO industry in China, which now generates revenue of more than US$2.5 billion, will experience growth of more than 6 percent over the next few years.
As well as providing a forum for global manufacturers and suppliers to come together in Asia, the Singapore show also provides the island republic with an opportunity to showcase its own industry as it strives to consolidate its position as a regional aerospace hub.
Singapore provides a base for more than 100 aerospace companies, including maintenance, repair and overhaul (MRO) specialist Singapore Technologies Aerospace (ST Aerospace) and BOC Aviation, Asia’s largest aircraft leasing company. Many global players also have regional operations there, including training specialist Boeing Training & Flight Services (formerly Alteon Training), General Electric, Honeywell and Pratt & Whitney.
The companies all benefit from Singapore’s world class international airport, skilled workforce and strong technology base, as well as its reputation for efficiency and as a business-friendly environment.
The global economic downturn stifled passenger and cargo traffic, bringing the earlier boom in commercial aircraft orders to a grinding halt. Passenger traffic has been recovering, although the stability of that recovery is uncertain as economic instability remains, and rising fuel prices have once again been hurting airline profitability.
But in the face of all this manufacturers such as Boeing and Airbus agree that the longer-term prospects remain positive – especially for Asia.
 

 Rising traffic share
Within 20 years, Asia is expected to overtake North America as a leading aviation market, increasing its global share of air traffic (measured in revenue passenger kilometres, or RPKs) from about 26 percent today to 33 percent in 2029. North America’s share, meanwhile, will shrink from about a third today to about a fifth, according to John Leahy, Airbus’s chief operating officer customers. Just a decade or so ago, the US and Canada accounted for half of all global traffic.
Annual traffic growth in Asia over the next two decades is expected to average 6 percent – more than double the growth rate in North America. Such forecasts make Singapore even more appealing as a location for aerospace companies. With airlines in the region set to refocus on expansion as traffic demand recovers after the recession then grows further, there will be an increasing need for components and MRO services locally.
According to the Singapore government’s Economic Development Board (EDB), Asia’s commercial fleet is predicted to grow to 25,000 aircraft by 2030 from 16,500 in 2010, while annual MRO revenue in the region is forecast to triple from its current level of US$22 billion.
Speaking at an event in January to mark the opening of a new control tower at Singapore’s Seletar Aerospace Park (SAP), Transport Minister Lui Tuck Yew said the island’s aerospace sector has enjoyed healthy growth, despite the volatile economy. On average, the industry has grown about 12 percent annually over the past two decades.
In 2010, Singapore’s industry achieved record output of S$7.2 billion and employed about 18,000 workers, Lui said. That represents a substantial gain on the industry’s 2005 sales total of S$5.2 billion.
“The country has been able to maximise business opportunities that come its way,” the Singapore Economic Development Board (EDB) says. “For instance, there has been a steady growth in the number of budget carriers, which drives the demand for MRO services for narrowbody carriers.”
Singapore Technologies (ST) Engineering unit ST Aerospace is one of the world’s largest MRO companies, with a global customer base including some of the world’s most advanced air forces, as well as leading airlines and freight carriers. The company provides total aviation support systems to both civil and military customers, offering extensive capabilities in engineering and development, life-cycle maintenance, materials and component supplies, refurbishment, customised modifications and upgrades. The company has hubs around the world – in the Asia-Pacific, Europe and the Americas.
 

Profit rollercoaster
The MRO services provider suffered with the rest of the global industry during the recent recession, with profit falling year on year in each of the first three quarters of 2009. Still, the year-on-year decline in profit shrank with each quarter. The first quarter of 2009 saw a dramatic 57 percent plunge, followed by a 20 percent drop in the second quarter, slowing to the third quarter’s 6 percent.
For the full year 2009, the company posted an 18 percent drop in net income to S$185.7 million, from the previous year’s figure of S$225.7 million. Revenue for the year fell 3 percent to S$1.9 billion. ST Aero said the drop in profit was a result of a slowdown in Boeing MD-11 freighter conversion work and the absence of investment income.
However, the company reported a strong recovery the following year, as 2010 profit to S$262 million, despite revenue being little changed at S$1.88 billion. Higher sales in the Aircraft Maintenance and Modification (AMM) sector of the business were offset by a slowdown in the company’s components business. The increased profit came thanks to a drop in labour and finance costs, as well as lower operating expenses.
“Barring unforeseen circumstances, revenue for the fiscal year 2011 is expected to be comparable, while profit before tax for fiscal year 2011 is expected to be higher compared to fiscal year 2010,” the company said.
In October, ST Aerospace said it had secured new maintenance contracts worth a total of S$453 million in the third quarter of 2011. Ranging from three to 18 months, the contracts for the AMM, Component Total Support and Engine Total Support businesses will be fulfilled at the company’s facilities and affiliates in the Americas, Asia-Pacific and Europe.
The AMM business group sealed new airframe contracts including base maintenance, heavy maintenance, passenger-to-freighter (PTF) conversion and interior refurbishment on various commercial and military aircraft platforms. The Component Total Support business group was awarded new contracts including maintenance-by-the-hour, avionics and mechanical component maintenance, aerostructures and landing gear repair and overhaul.
The Engine Total Support business group clinched new engine maintenance contracts, which will be carried out at ST Aerospace’s Singapore engine facility. The contracts cover on-wing maintenance, off-wing maintenance, technical management and asset management on various engines types, including: CFM International CFM56; Pratt & Whitney JT8D, F100 and F110; Rolls-Royce Allison T56; General Electric J85 and F404; Honeywell T53 and T55; and Turbomeca Makila.
 

 Aircraft redeliveries
Between July and September 2011, ST Aerospace redelivered 113 aircraft to various customers after completion of airframe maintenance and modification work. The total included four converted freighters. Additionally, the company completed a European Aviation Safety Agency-approved Supplemental Type Certificate project for cabin reconfiguration of Ural Airlines’ Airbus A320.
Besides airframe redeliveries, ST Aerospace serviced 70 engines and 13,775 components for both commercial and military customers during the third quarter of 2011.
Meanwhile, the company’s commercial pilot training arm successfully completed Singapore’s first Multi-crew Pilot Licence (MPL) programme for low-cost carrier Tiger Airways. The programme’s six cadet pilots are now employed by Tiger and have received their MPL from the Civil Aviation Authority of Singapore (CAAS).
The company continued to develop its capabilities in the quarter, with ST Aerospace’s Vision Technologies Aerospace affiliate entering into an agreement to acquire 100 percent of the shares of DRB Aviation Consultants to enhance its aircraft interior design capabilities, while ST Aerospace secured a cabin reconfiguration project for Jet Airways’ Airbus A330.
Over time, ST Aerospace has been becoming increasingly global, having opened an MRO facility in China in 2007 to add to existing capabilities in the US, Panama and Europe.
Most recently, ST Aerospace and Xiamen Aviation Industry (XAICO) unveiled their new engine maintenance, repair and overhaul (MRO) facility in Xiamen, China, operated by their joint venture company ST Aerospace Technologies (Xiamen), or STATCO.
The US$78 million facility can handle as many as 300 engines annually. It will initially provide MRO and total support for CFM56-7B and CFM56-5B engines, which power narrowbody aircraft such as Next-Generation Boeing 737s and the Airbus A320 family.
“The CFM56 engine family represents the largest installed base and potential after-market value globally, and has been a popular engine of choice for Chinese airlines,” ST Aerospace says.
At the opening ceremony in October, STATCO received Part 145 certification from the Civil Aviation Administration of China (CAAC). The company has also won approvals from the US Federal Aviation Administration (FAA) and Korea’s Ministry of Land, Transport and Maritime Affairs for the maintenance of the CFM56-7B powerplants.
 

 First engine
The first engine to be taken in by STATCO was a CFM56-7B from Xiamen Airlines, which required a full performance restoration, including the replacement of life-limited parts, engine testing and engine parts repairs.
The new facility is located on 38,620 square metres of land near Xiamen Gaoqi International Airport. STATCO features an engine shop designed to operate with a streamlined production-flow system. The shop is equipped with high-technology, automated processes and equipment, including fully automated cleaning processes and a high-speed grinder, to offer faster turnaround times. The venture also has a state-of-the-art, fully computerised engine-test facility, capable of handling up to 90,000 lb of thrust.
“Operated and managed as part of ST Aerospace’s global MRO network, STATCO will further strengthen the Group’s presence in China, providing better response and support to ST Aerospace’s global customers,” the Singapore company says. The venture complements ST Aerospace’s engine MRO facility in Singapore, which can handle up to 350 engines annually.

The Singaporean company holds an 80 percent stake in the STATCO venture, while the rest is owned by the Chinese partner. ST Aerospace already has one other joint venture in China, the airframe MRO operation Shanghai Technologies Aerospace (STARCO).
In Europe, ST Aerospace holds a majority 71.3 percent stake in the Denmark-based component-repair operation ST Aerospace Solutions (Europe), formerly called SAS Component. The Singaporean company first acquired 67 percent of SAS Component in early 2006, increasing the shareholding to 71.3 percent later that year.
The Singapore company has made overseas expansion a key element of its strategy, reinforcing its position as a leading global MRO services provider. Crucial successes have been won in the US, where the company’s ST Mobile Aerospace Engineering subsidiary carries out passenger-to-freighter conversions on behalf of customers such as FedEx, which awarded the company a seven-year contract in 2007, covering the conversion of 87 Boeing 757-200 jetliners.
In January 2011, ST Aerospace announced progress on yet another Chinese venture, when ST Aerospace (Guangzhou) Aviation Services, received business licence from the Administration of Industry and Commerce of the Guangzhou Municipality to establish an aircraft repair facility in Guangzhou, China.
This follows an initial announcement made on 20 July 2010 that ST Aerospace had concluded discussions to set up a commercial aircraft heavy maintenance facility the Chinese city. ST Aerospace (Guangzhou) a joint venture between Guangdong Airport Management Corporation (which holds a 51 percent stake) and ST Aerospace (which holds 49 percent). The venture had already received endorsement from the CAAC and approval from the Ministry of Commerce.
ST Aerospace (Guangzhou), which will have a total paid-up capital of US$99 million, will be an associated company of ST Aerospace and will be operated and managed as a part of the Singapore company’s global MRO network. It is expected to begin operations in the second half of 2013, offering services for Airbus, Boeing and McDonnell Douglas aircraft types.
 

 Domestic investment
Meanwhile, investment in the company’s domestic capacity continues. The company unveiled its newest maintenance hangar in Singapore in 2008, operated by wholly-owned subsidiary ST Aerospace Engineering (STA Engineering), at Seletar Airport. The two-bay hangar cost S$17.3 million to build and is capable of accommodating up to two, single-aisle jetliners.
Before the addition of this new hangar, the company already had seven available narrowbody aircraft maintenance bays at Seletar. ST Aerospace also has five widebody bays at its facilities at Changi Airport, and capacity for another three widebodies and four narrowbodies at its Paya Lebar site.
At the same time, the MRO provider opened a new engine test facility at its ST Aerospace Engines subsidiary in Paya Lebar, after an investment of S$20 million. According to the company, the facility is “capable of testing the next generation of commercial engines and military afterburning engines with up to 90,000lb thrust”.
The addition of the test facility allowed STA Engines to launch its CFM56-5B MRO capability, as well as preparing it to handle engines such as the General Electric GE 110, which powers Singapore’s Boeing F-15 fighters.
ST Aerospace has said it will continue to invest incrementally in its facilities at home, to meet the needs of its customers.
 

 

Asian Aviation at a glance