Manufacturing could be the way forward for maintenance firms looking to expand
Philippine maintenance companies are preparing to add new capabilities and even expand into aircraft manufacturing in a bid to attract more business from overseas.
The Philippine aerospace industry is tiny compared with its South-East Asian neighbours and primarily serves only the domestic market. But Lufthansa Technik Philippines (LTP) and Seair are looking to expand their third-party commercial maintenance, repair and overhaul (MRO) businesses and military maintenance provider Asian Aerospace aims to expand into the commercial sector.
The Philippines is one of only a few countries in the region without any aerospace manufacturing activities. But Seair sister company Dornier Technologie Aircraft Engineering plans to open an assembly plant at Clark airfield outside Manila for its new line of amphibious aircraft, starting with the Libelle two-seat kitplane.
“This will probably be the first aircraft manufactured in the Philippines all the way through,” says Iren Dornier, grandson of aircraft designer Claudius Dornier and chairman of Seair.
Asian Aerospace chief executive Peter Rodriguez says he is interested in component manufacturing and becoming a supplier to major manufacturers, following the lead of aerospace companies in other Asian countries such as China, Indonesia, Japan, Malaysia and South Korea. Rodriguez is quick to point out the Philippines offers an ideal workforce of low cost, but experienced English-speaking employees. Asian Aerospace has been able to establish Lockheed Martin C-130 and Fokker overhaul lines after hiring over 100 Filipino mechanics, who were previously working overseas. LTP also has discovered an abundant supply of domestic mechanics and is not having the recruitment challenges of maintenance companies in other Asian countries such as China and Malaysia, where there is a growing shortage of technicians.
LTP, a joint venture between Lufthansa Technik and local company MacroAsia, operates two Airbus A330/A340 overhaul lines in Manila and last October overhauled its first Airbus A320. “The A330/A340 is the focus and the A320 is the extension,” says LTP vice-president of marketing and sales Richard Haas, adding the market in Asia for A320 overhauls is growing rapidly driven by new low-cost carriers.
LTP’s primary customer is Philippine Airlines (PAL), which operates eight A330s, four A340s and nine A320s. But LTP, which is the former PAL maintenance and engineering division, has a growing third-party business with Air Luxor, Air Mauritius, Austrian Airlines, Cathay Pacific Airways and Lufthansa as customers.
“This year we’re negotiating with all our customers for repeat business,” says Haas, adding LTP also is negotiating potential new contracts with several A320 operators including Malaysia’s AirAsia.
Cebu Pacific’s new fleet of 14 A319/A320s is also a potential long-term target for LTP if the Philippine carrier’s new line maintenance joint venture with Singapore Airlines Engineering does not expand into heavy maintenance. Cebu Pacific general manager Danilo Mojica says the Manila-based joint venture, called A+, has begun looking for third-party A320 line maintenance business, but “heavy maintenance is not in the immediate horizon”.
LTP also does light maintenance on PAL’s fleet of eight Boeing 737-300/400s, to be replaced with new A320s over the next two years, and has looked at adding capability for next-generation 737s. But Haas says LTP will not expand into 737 overhauls unless it secures a big contract from an overseas operator.
Asian Aerospace is more actively looking to establish a 737 maintenance line at its four-hangar facility at Clark and is also considering A320s. The company’s maintenance business is now limited to military and general aviation aircraft, but is pursuing potential commercial customers including AirAsia.
“It doesn’t matter what aircraft are in the hangar. It’s easy to convert military into commercial,” says director of maintenance and engineering Trevor Alfred Elms. “We’re looking at the A320 and 737.”
Asian Aerospace was established in 1996 with two hangars in Manila, where it services helicopters and small aircraft for its own VIP charter division, the Philippine air force and third-party customers. In 2003 it opened a facility at Clark after securing a contract from the US government for the overhaul of air force C-130s. The refurbishment of the first C-130 began in February 2004 with technical assistance from Lockheed and is scheduled to be delivered this week. Rodriguez says the $2 million service maintenance programme (SMP) Asian Aerospace was initially contracted for was finished on schedule in June 2004, but another $2 million in “over and above” work was required.
Work on a second air force C-130 is about to begin and Asian Aerospace anticipates refurbishing two more air force C-130s if US funding can be secured. It aims to also pursue work from overseas C-130 operators although it does not yet have programme depot maintenance (PDM) status. “We don’t have the formality of a PDM, but we have all the capability,” says Rodriguez.
One of Asian Aerospace’s Clark hangars is dedicated for C-130s, while a second is set aside for commercial aircraft. Asian Aerospace is now completing the refurbishment of an air force-operated presidential Fokker F27 in the commercial hangar and plans to begin overhauling an air force Fokker F28 later this year. Asian Aerospace is now pursuing contracts from Fokker operators overseas, including South Africa, but believes adding A320 or 737 capabilities will give it better chance to win commercial customers.
Asian Aerospace’s third Clark hangar is used for painting and the fourth is subleased to Philippine regional carrier Asian Spirit, which maintains its own fleet of Dash 7s and Let L-410s. Seair’s maintenance division also operates out of Clark and uses two hangars to overhaul Let L-410, Dornier 228 and Dornier 328 turboprops as well as general aviation aircraft. “We do third party and we’re considering now spinning off maintenance from the company to pursue more work,” Dornier says. “By spinning off the maintenance facility from Seair we’re thinking about making it a [US Federal Aviation Administration] part 145 repair station and doing other types of aircraft ... up to 737s”.
Amphibious base
Dornier also envisages Clark becoming a base for his new amphibious aircraft products. He already has designed a new version of the Libelle, a small amphibious aircraft that debuted in the 1920s.
Dornier plans to launch sales later this year of the $100,000 Libelle II, a 6.6m long, 2.1m high kitplane which will be manufactured at Clark. “We’re setting up a facility to produce these here in the Philippines,” Dornier says.
Dornier estimates initial sales of 40 Libelles annually and ultimately 150 a year with North America and Asia the biggest potential markets. The Libelle II will be marketed as an experimental seaplane trainer, but Dornier plans to later develop a certified six-seat version as part of an ambitious plan to establish a portfolio of amphibious products, including a twin-engine special mission turboprop called the ID S-24.
Dornier is now looking for partners to help foot the estimated $700 million in development costs of the 33t S-24.
“This is far away,” Dornier acknowledges. “The Libelle will definitely be airborne. The [refurbishment of the] Do-24ATT triggered a desire to go into production again. After the Do-24’s world tour we determined to go back into manufacturing and committed myself to the Libelle aircraft.”
The Do-24ATT has been on an around-the-world tour in aid of UNICEF since its refurbishment was completed at Clark in 2004. It will eventually be operated by Seair for VIP charters within the Philippines.
Dornier also looked at expanding into the military market by establishing at Clark with US company DynaLantic a training centre that was to initially house two Bell UH-1H simulators. “We had everything in place but it failed because there was not enough domestic support,” Dornier says.
The air force also says it lacks the funds to accept an Asian Aerospace/Boeing proposal to upgrade at Clark its fleet of 18 Rockwell OV-10s with new avionics and structural enhancements. The Philippine government has tried to attract large international MRO providers and manufacturers including Boeing to set up facilities at Clark since the US Air Force withdrew from the former air base in 1991. But Dornier, who became Clark’s first tenant when he established Seair in 1994, says an unstable political environment has so far scared away international companies.
LTP last year established a line maintenance facility at Clark which is now serving AirAsia and South Korea’s Asiana. But it has no plans to add an overhaul line at Clark and says there is still room to expand its four-bay facility at Manila if demand warrants.
“For the moment we’re looking at Manila as the centre,” says LTP chief executive Andreas Heizner. “But if we have an opportunity in Clark, Cebu or elsewhere we’ll step in.”
LTP was created in 2000 and began offering heavy maintenance in 2003. Heizner says the Philippine MRO industry is often overlooked because it is so young compared with other Asian countries such as China and Singapore.
“I think it’s a little bit underestimated,” says Heizner. “We have facilities here that are really state of the art, high-skilled workers and the capability to do a really great job. We’re starting to get some customer recognition. I’m really looking for more business opportunities here.”
Source: Flight International
