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Part 1 : MROs Industry in Asia Pacific

Global & Asia Pacific Aerospace & Defense Industry Outlook
2016 is looking up for the global Aerospace and Defense (A&D) industry. According to Deloitte’s 2016 Global A&D Sector Outlook, the industry is expected to return to growth with total sector revenues estimated to grow at 3 percent. This recovery follows years of declining revenue growth of 3.2 percent in 2013, 1.9 percent growth in 2014, and an expected decline of minus 0.5 percent in 2015. Over the last three years, decreased revenues in the United States (US) defense subsector had impacted the industry. However, this year’s growth is expected to be fueled by an increase in the US defense budget, a resurgence of global security threats, and growth in defense budgets of key nations around the world. In addition, relatively stable growth in global gross domestic product (GDP), lower crude oil and other commodity prices, and continued increase in passenger travel demand will contribute to the growth in production rates for next-generation commercial aircraft.
 
Asia Pacific presents countless opportunities for aerospace manufacturers, MRO companies, general aviation and aerospace players. Appetite for air travel continues to grow in the region. The two largest aircraft manufacturers, Airbus and Boeing, both projected that the global fleet size will double over the next two decades, with Asia taking over a third of the worldwide aircraft deliveries.  It is estimated that Asia Pacific’s fleet will triple to about 13,222 aircrafts by 2034. 

Aerospace MROs – Sustaining the World’s Airline Fleets
Maintenance, Repair and Overhaul providers (MROs) play an essential role in sustaining the world’s airline fleets. MRO is the blanket term for all the services relating to assuring aircraft safety and airworthiness. It is estimated that the global market is worth up to USD67 billion and likely to increase to USD100.4 billion by 2025. MRO providers exist all around the world, with the majority of the MRO revenue coming from North America (30%), Western Europe (26%) and Asia Pacific (27%). These numbers are expected to transform over the next decade as large differences in regional growth rates will lead to significant shift in MRO demand over the next decade from Asia Pacific / China / India. Naturally, Asia Pacific will need to build the necessary infrastructure to be ready to handle the volume of MRO demand from the region.

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1. MROs in Singapore seek to expand market segments
Singapore is well positioned to cater to the demand for aviation-related services in the Asia Pacific market. There are over 100 aerospace companies in Singapore, making up a quarter of the Asian MRO market. Leading players such as Singapore Technologies Aerospace (ST Aerospace) and SIA Engineering Company (SIAEC) carry out comprehensive nose-to-tail MRO services from airframe maintenance to engine overhaul to aircraft modifications and conversion. However, in the recent years, Singapore’s MROs face increasing competition from surrounding countries, such as Malaysia, Philippines and Vietnam as more MRO companies are set up in these developing countries to offer MRO services at a lower cost.
 
MROs in Singapore are responding by moving into market segments that are less price-sensitive and where they can add value. ST Aerospace, the world’s largest third-party MRO, has taken that route by expanding its passenger-to-freighter (PTF) conversion business. Besides the existing Boeing 757 and 767 PTF conversions, the company has announced the launch of the A330  and A320-family PTF conversion programmes with Airbus in 2012 and 2015 respectively.The PTF conversion business generates more airframe heavy maintenance work for the MRO because heavy checks can be done concurrently with the freighter conversion.
Another high-value area in which MROs such hope to expand is the business aviation sector, particularly maintenance and VIP configurations. In February 2016, Singapore ST Aerospace unveiled a new VIP aircraft interiors facility at the Seletar Aerospace Park. The 2,690 sqm centre is the first of its kind in the region and includes a hangar capable of holding a Boeing 757 aircraft, design studios, and workshops fitted with 3D printing technology. ST Aerospace has spent S$1.7 million on the new facility, and is set to invest a total of S$8 million over the next three years – including training and equipment costs. Other player who is involved in the VIP configurations includes Flying Colours, In-fact, Flying Colours’ has established a Bombardier Authorized Service Facility in Singapore to enhance its capabilities in performing full refurbishments of Bombardier Global and Challenger aircraft.    

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Source: 2015-2025 Global Fleet & MRO Market Forecast, Oliver Wyman

2. China becomes a major part of the Global MRO Market
The China MRO market has been a challenging, but a potentially lucrative one that any player with global ambitions cannot afford to ignore. While India’s commercial fleet is expected to grow faster than China, China still commands a more substantial share of the fleet.
Many players have been investing in China heavily for many years. Ameco Beijing had invested CNY1.5 billion (US$245.2 million) in its facility expansion program from 2005 to 2010. In 2010, Singapore-based MRO provider ST Aerospace established a joint venture with Guangdong Airport Management Corporation (GAMC) – ST Aerospace (Guangzhou) Aviation Services Company, to establish a commercial aircraft heavy maintenance facility in Guangzhou. Recently, in April 2016, Bombardier Business Aircraft and its partner Tianjin Airport Economic Area (TAEA), announced that their new maintenance facility in Tianjin, China, is 90 per cent complete. The business aviation sector in region has experienced significant growth in the past, and this partnership to offer customers Bombardier’s full strength of maintenance and support network, closer to their base of operations. Another player, Metrojet, a leading provider of business aircraft services in Asia, has entered into a joint-venture with Shanghai Junhua Property Company Limited with the aim to manage and provide business charter and management services primarily for its Chinese clients through its newly joint-venture company – Metrojet (Shanghai) Business Aviation Limited. 

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3. Big Data holds the key to predicting the future
Big Data is the buzzword in almost every industry right now. As highly connected next-generation aircraft enter the fleets of the world’s airlines in the next 20 years, MROs, OEMs, and airlines are adopting increasingly sophisticated strategies in mining the right information and using it to better drive maintenance operations, safety, efficiency and decision making.
For MROs specifically, there are many opportunities to use the data to enable everything from predictive analytics to better monitoring of usage patterns and the essential tracking and analyzing the health of equipment in real-time.
Recently, Pratt & Whitney, tech giant IBM and the Singapore Economic Development Board combined efforts to pursue how Pratt’s MRO companies can make better use of data—to track parts and inventory—when managing the volume and movement of engines through an MRO facility.

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4. The Battle for Talent Continues
The industry faces the challenge of attracting people with the right skills. The industry also lacks the marketing and PR needed to boost interest in the industry and create an enticing picture of a career in Aerospace MRO industry.
However, Asia Pacific is committed to developing talent to meet the needs of the industry. Aerospace courses and specializations offered at local technical and tertiary institutes remain highly popular.
In the long-term, MRO Companies need to focus on ensuring that they are able to secure, retain and develop the right talent to fulfill the opportunities in the market and continue to grow. To do this they must focus on understanding clearly what talent they need, what the total pool of potential candidates’ looks like, whom they are competing against for talent and what factors are most important to these potential recruits. And the challenge doesn’t stop there. Once they have recruited the needed talent they must ensure that they provide opportunities for development to keep their people motivated, engaged and committed to the organization. On an immediate basis, this challenge can only be met by upgrading recruitment and talent mapping capabilities. 

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ABOUT THE AUTHOR

Kent is the Deputy Managing Director for Morgan Philips Executive Search, specializing in Aviation, Aerospace and Defence executive search across Asia Pacific. He is a leader in his field where he maintains strong relationships with the C level executives and the Board of Directors of some of the world’s largest Aviation and Aerospace companies. Due to his strong business and market acumen across the region, Kent has provided insightful opinions and advises to the leaders in the industry.
He has been quoted by Singapore’s mainstream media ‘Straits Times’ and from the Aerospace Association of Singapore Industries regarding his views on the talents within the Aviation and Aerospace industry across Asia Pacific.
He is currently based in Singapore but travels extensively for his assignments. With his vast experiences within the industry, he has successfully helped 2 major recruitment firms in Singapore and China to setup their Aerospace practices.
Kent will be in Germany for the Berlin Airshow which will be taking place from 1st June to 4th June where he will meet several Key Appointment Holders as well as Government officers.
Feel free to connect with him to have an open discussion regarding the industry or follow him on LinkedIn.

 

Morgan Philips Executive Search – Aerospace & Defense

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