Paul Lewis/BEIJING/GUANGZHOU/XIAMEN
A WORLDWIDE OVERCAPACITY in aircraft maintenance and overhaul has left many companies struggling under the weight of intense competition and uneconomical work rates. This gloomy global picture, however, has not deterred three international engineering joint ventures from embarking on a massive expansion of capacity in China.
Beijing's Aircraft Maintenance and Engineering (AMECO), Guangzhou Aircraft Maintenance Engineering (GAMECO) and Xiamen newcomer Taikoo Aircraft Engineering (TAECO), plan to invest collectively nearly $300 million in China over the next five years. Existing capacity will be quadrupled with the addition of 13 new maintenance and overhaul docks and accompanying support and back-up workshops.
The trigger for adding maintenance and overhaul capacity has been the increase in numbers of new passenger aircraft purchased by Chinese carriers over the past five years. There are now about 370 Western-built 100-seat or larger passenger jet-airliners and over 800 engines in service or on order for China's 20 principal airlines.
LOW-COST ENVIRONMENT
In addition to domestic demand, China's relatively low-cost environment is now attracting international airlines wanting to escape from prohibitively expensive areas of Asia. With labour costs typically up to 40% lower than in many Asian and Western countries, Chinese maintenance companies can easily undercut the $39-40 an hour average industry, break-even point and still remain profitable.
When AMECO was established in 1989 as a 60:40 joint venture between Air China and Lufthansa, it inherited a large number of buildings belonging to the former Beijing Maintenance Base and its Chinese civil aviation authority (CAAC)-owned predecessor, Repair Factory 101. These sites, however, can no longer adequately support Air China's 48-strong fleet.
Under construction is a new $64 million four-bay hangar scheduled for completion in the first quarter of 1996. The 31,000m2 (334,000ft2) hangar will be capable of accommodating up to four Boeing 747-size wide bodies and another six-eight narrow bodies.
It will boost AMECO's total hangar space to 50,500m2, and workshop area to 61,300m2. The new hangar will allow lighter A- and B-checks to be moved indoors, particularly during Beijing's extremely cold winter.
In addition to its existing single-bay 747 hangar and old narrow body-size "Russian hangar", AMECO in 1994 completed a $6.5 million expansion of its 22-year-old Boeing 707-size paint hangar. An 82m wide x 26m high frontal extension has enlarged its covered area to 10,000m2, sufficient to take a single 747.
The paint hangar is being used temporarily for overhaul work until the completion of the new four-bay hangar. The paint hangar was used in 1994 for AMECO's first D-check of a 747-200 combi. It was recently host to the company's first 2S4C-check of an Air China 767.
AMECO has also poured considerable resources into developing its engine overhaul capability. The company's 12,000m2 engine shop, the largest in China, already performs B3-level overhauls on Pratt & Whitney PW4000, JT9D, JT8D and the few remaining JT3Ds engines still in service, as well Rolls-Royce RB.211-535s and AlliedSignal GTCP85 auxiliary power units.
It is negotiating with potential joint-venture partners, including P&W, to expand its engine shop and test cell capability.
AMECO's existing test cell is rated for engines of up to 223kN (50,000lb) thrust, but has sufficient volume to handle up to 445kN. According to general manager Karl Stahlschmidt, the company is considering either refitting the existing interior installations to take a wider-diameter turbofan engines, or building a new 445kN-plus engine test cell.
GAMECO EXPANSION
China Southern Airlines' five-year-old joint venture with Lockheed Aircraft Service and Hutchinson of Hong Kong, GAMECO, has announced plans for a $120 million expansion through to the year 2000. When completed, the expansion will give the Guangzhou-based company a five-fold increase in capacity.
Around $70 million of this has been set aside, for a new triple-bay hangar at Guangzhou's planned replacement airport. The new 22,000m2 hangar will have two fully equipped docks for overhaul and an emergency sick bay.
Construction of the new airport - 25km (14nm) west of the existing Baiyun International Airport - has still not been given formal approval, and its projected date of completion has slipped to the year 2000.
The company has begun cycling China Southern's 20 Boeing 757s through a scheduled heavy mid-term 4C-check and, from 1997, they will be joined by the first of the carrier's 34 Boeing 737-300/500s. "That's when we've got to have the other hangar," explains GAMECO general manager Lange.
Plans originally called for the building of a 9,000m2 double-bay hangar, large enough to take two 767s. With the first of China Southern's six 777s due for delivery in November, consideration is now being given to enlarging this to a 777/747-size building. While it will give GAMECO more future flexibility, says Lange, it will also cost considerably more than the $30 million already budgeted.
GAMECO's Baiyun hangar is large enough to take a combination of two 737/757s or 737/767s, but only one 777. "That's really the most urgent capacity issue, with the first 777 coming this November," states Lange.
A shareholder decision on the second hangar, as well as its location, is expected shortly. The Hubei provincial capital of Wuhan is GAMECO's preferred choice, but this is also subject to local authority approval. The company is considering financing options, including creating a separate joint venture or expanding GAMECO's shareholding (Flight International, 30 August - 5 September, P14).
Wuhan's added appeal is its central location, 850km north of Guangzhou. "The reason I want to set up that far north is that there is a different set of customers and a different customer base," explains Lange.
Additional capital investments include a recently completed administration and training block, equipped with two computer-based-training classrooms for 777 maintenance training, a planned 737/757 nose-dock shelter for outdoor A- and B-checks and a $23 million workshop expansion. The latter, due to be completed by the end 1995 includes $8 million for new avionics test-equipment sets.
Further improvements are being made to the hydraulic, mechanical, electrical, composite and machine shops, while a landing-gear tear down capability has been added.
Nearing completion in Xiamen, is TAECO's new, 25,000m2 double-bay hangar and attendant workshops. The $63 million site, will include two joint-venture component-overhaul workshops, run by AlliedSignal and Lucas Aerospace, accommodation for 616 people and a 5,000m2 apprentice training school.
The project is being managed by Swire Pacific's Hong Kong Aircraft Engineering (HAECO), which holds a 41% stake in the joint venture. Other shareholders are Xiamen Aviation Industrial (20%), CAAC (9%), Cathay Pacific Airways, Japan Airlines (JAL) and Singapore Airlines (each 10%).
For TAECO's three airline shareholders, each confronting rapidly escalating operating expenses in Hong Kong, Singapore and Tokyo, Xiamen's main appeal is its comparatively low land and labour costs.
HEAVY MAINTENANCE
TAECO'S's first bay is scheduled to come on-line in December and the second will go live by the middle of 1996. Each will be primarily geared towards meeting heavy maintenance and modification needs, such as section 41 and engine-pylon replacement work, on Cathay Pacific, JAL and SIA 747s.
"Providing we can achieve low labour costs, high quality and good turnaround times, the injection of business from the partners will give me a full workload in the first operational phase," claims HAECO China director P K Chan.
Hinging on its first year's performance is a $35 million second development phase, provisionally due to start around the middle of 1997. The plan calls for the construction of a second similar-sized hangar, but with fewer shops.
The addition of two more docks will allow TAECO to expand into third-party work and diversify beyond 747 heavy maintenance to other types, such as 737, 757 and Airbus aircraft.
The expansion in China's civil-airline fleet and the planned introduction of new aircraft types, such as the 777 and the Airbus A340 and A320, is creating opportunities for more joint venture agreements.
Among the more interesting deals being negotiated is General Electric's plan to establish a joint-venture engine overhaul company with China Southern in Zhuhai, close to Macau. The operation is intended to support CFM56-3, CF6-80 and, eventually, GE90 engines in service in China, and will include a 445kN test cell (Flight International, 16-22 November, P12).
As with most joint ventures in China, the Zhuhai negotiations have proved prolonged and, after 18 months, talks continue. China veterans, however, point out that this is still short when compared to the four years its took to conclude the AMECO and GAMECO joint-venture agreements. Preparations, in the meantime, have continued to move ahead. China Southern is understood to have already purchased a site at Zhuhai.
Chengdu Aircraft Maintenance and Engineering (CAMEC) had originally intended taking a small stake in the proposed China Southern-GE joint venture, but, according to local sources, it has now dropped out and signed a letter of intent to collaborate with AMECO. Several other companies are also in discussion with CAMEC, including Sochata and Airbus.
CAMEC, formerly known as Chengdu Maintenance Base and, before that, CAAC Repair Factory 103, has traditionally supported China's Russian-built aircraft and engines, but is now keen to broaden it activities to include Western equipment. The company already performs B2-level module changes and testing of CFM56-3 engines, but is not internationally certificated for airframe maintenance.
Both CAMEC and AMECO are keen to develop a full B3-level CFM56-3 engine- overhaul capability, while the Beijing company also is looking to expand into new areas of China. "There is interest from both sides," says Stahlschmidt.
Source: Flight International
