SINGAPORE Technologies Aerospace (STAe), is urgently looking at ways of reviving its subsidiary maintenance company, Singapore Aviation Services (SASCO), after suffering a large loss in the first six months of the year.
STAe made a net loss of S$49 million ($34 million) compared with a small S$12 million profit a year ago. The result was largely because of problems at SASCO, which lost nearly S$18 million, as well as a massive write-down on obsolete and excess military spares.
The maintenance company puts its poor performance down to worldwide over-capacity and low work rates. This was further aggravated by the strength of the Singapore dollar and higher operating costs for its new two-bay hangar at Changi International Airport.
Maintenance rates are now about $35-37 per man-hour, well below SASCO's estimated $43 breakeven point. The company still has to find about six weeks' work to fill capacity over the rest of this year.
"Their main problem is their lack of a captive audience," says a local financial analyst. SASCO relies totally on third-party work and faces strong competition, both locally from Singapore Airlines' engineering operation, and regionally from a growing number of new maintenance and overhaul centres.
Industry sources suggest that SASCO has approached potential new investors, including Swire Pacific's Hong Kong Aircraft Engineering. SASCO denies that it is looking for new partners, but admits that it is hoping to lower costs by expanding overseas. A proposed Chinese joint venture - Shenzhen Aircraft Maintenance and Engineering - recently collapsed after failing to win approval. Another planned joint venture on the Indonesian Island of Batam is still waiting to get off the ground.
SASCO is also pushing to broaden its capabilities beyond specialising in Boeing 747 section 41 work, to include pylon replacement and full C and D-checks. It is planning to market its capabilities jointly with STAe's US subsidiary, Mobile Aerospace Engineering, in an attempt to secure more work from North American carriers.
Source: Flight International
