Singapore Technologies Aerospace (ST Aero) is moving forward with expansion of its aircraft maintenance and repair capabilities despite the financial problems plaguing many of its top customers.
President Tay Kok Khiang sees opportunities as smaller maintenance and repair organisations (MROs) fail and cash-strapped carriers increasingly look to outsourcing as a way to curb costs. Several maintenance facilities throughout the world are vacant and ST Aero is ready to add capacity if one of its many customers is interested in outsourcing more maintenance work.
"We always keep our eye open on what is available in the market," Khiang said in an interview. "Sometimes it's an opportunistic consideration if there is capacity available and at the same time there are customers we are able to persuade to go there. If that's the case, then we'd be quite open to expand our capabilities or capacities. The good thing is we have the ability to do it financially as we are in reasonable shape."
ExpansionLast year ST Aero purchased bankrupt Texas-based MRO Dee Howard Aircraft Maintenance, giving ST Aero three US facilities. ST Aero is spending 2003 gradually building back up Dee Howard's capacity. But the company will need a new acquisition to continue its US expansion push in 2004, given its decision to not build a facility in Corpus Christi, Texas as previously planned.
"There is no immediate expansion plan in the US, but who knows," Tay says. ST Aero is also directing attention much of this year to China, where it plans to open in about six months a new joint venture facility in Shanghai with China Eastern Airlines. In Europe, ST Aero is still building up the Bournemouth, UK joint venture facility it opened last year with FR Aviation.
ST Aero and other large MROs believe United Airlines' recent move to outsource all its heavy maintenance is a precursor of a positive trend. They are also noticing the playing field is shrinking and both smaller independent MROs and in-house airline maintenance organisations are closing shop.
"The market is very uneven. You find MROs going bankrupt. But on the other hand there are other MROs that are doing very well," Tay says.
"I think there is also a big trend in the MRO business that we are in which will increase in tempo over the coming months because of the pressures the airlines are facing. As a result of the pressures from the profit point of view, most of the airlines will be looking at innovative ways to reduce costs and one of the very obvious ways that many of the airlines have gone into is to actually increase the outsourcing, which is much more cost effective to them then if they tried to do everything in-house."
Closer to home, Tay says ST Aero also has weathered the storm in Asia created by SARS and the resulting dramatic decline in the financials of Asian carriers. But ST Aero had no trouble expanding in the USA in the wake of the September 2001 terrorist attack and is not about to let a short-term downturn dim its outlook.
Perspective"The crisis in the industry is a temporary one in my opinion in that inevitably given time, whether two years or three years, aviation will certainly pick up, and that's our perspective," Tay says. "Moreover, when we do anything, especially in terms of expansion, it's not for a short-term basis. So there is no reason to change our direction because of a short-term impact due to a regional crisis or SARS."
Source: Flight Daily News
