IN FOCUS: MRO growth in China

Guangzhou
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As the construction of a 60,000m² (646,000ft²) second hangar continues, Guangzhou Aircraft Maintenance Engineering Co (GAMECO) is already planning a third.

The maintenance, repair and overhaul firm, based at Guangzhou Baiyun International Airport, has even set aside land for the third hangar, which will hold four widebodies and eight narrowbodies simultaneously.

guangzhou mro hangar mavis toh/flightglobal

 Mavis Toh/Flightglobal

Guangzhou's expansion reflects a wider trend

It hopes to start the approval process next year and have the hangar operational by 2017, GAMECO general manager Norbert Marx told Flight International in an interview at his Guangzhou office.

The three hangars will allow GAMECO, a joint venture between China Southern Airlines and Hong Kong's Hutchison Whampoa Aircraft Investment, to bring in more third-party work, says Marx. He adds that its current facility is already running at almost full capacity.

"We're expecting the MRO industry here to grow 9-10% annually over the next 10 years."

Aviation consultancy ICF SH&E forecasts that Chinese airlines will spend $10.5 billion on MRO work in 2021, up from an estimated $4.6 billion in 2012. This reflects the mood and pace of MRO firms operating in China, most of which are preparing for strong growth.

The numbers appear to be in their favour. Boeing forecasts that China will need 5,260 commercial jets over the next 20 years and 99,400 technicians to maintain them.

The Civil Aviation Administration of China has said it will build 50 new airports over the next five years and expand 100 existing ones.

Singapore-based ST Aerospace has grown significantly in China and has major investments in Shanghai, Xiamen and Guangzhou.

JOINT VENTURES

The firm entered China in 2004 when it started a joint venture with China Eastern Airlines to form Shanghai Technologies Aerospace Co (STARCO). The joint venture largely maintains CEA's fleet at its two hangars at Hongqiao International Airport in Shanghai. In 2010, it expanded with the addition of a 14,200m² hangar at Pudong International Airport.

Both hangars focus on heavy airframe maintenance and have enjoyed "healthy fill rates", says ST Aerospace president Chang Cheow Teck.

Last year, the firm set up an engine MRO facility in Xiamen that has a fully computerised data acquisition engine test facility, which is capable of testing up to 90,000lb (401kN) of thrust. The facility expects to service at least 100 engines annually. Now, it is building a facility in Guangzhou that is due to start operations in the third quarter of 2013 and will provide line and heavy maintenance services.

boeing shanghai aviation services

 Boeing Shanghai Aviation Services

The outsourcing of MRO brings opportunities

"A growing market with large and expanding domestic fleets, China is expected to become the world's second largest aviation market after the USA in 10 to 15 years," says Chang.

One of the largest market players, with over 6,000 staff, is Ameco Beijing. The firm is a 60:40 joint venture between Air China and Lufthansa. Between 2005 and 2010, Ameco invested CNY1.5 billion ($239 million) on expansion. The company built a 70,000m² Airbus A380 hangar, a painting and overhaul hangar large enough to accommodate a Boeing 747, a new warehouse and a logistics centre. It also extended its aviation college.

Air China is considering a merger between Ameco and its maintenance arm Air China Technics. This would further raise the group's market share, staff strength and capabilities.

Ameco is also popular with foreign carriers. Last year, it made a record 80% of its airframe maintenance revenue from third-party work, adding 10 new international clients to its list.

"The main competitive challenge in the China MRO market is the fight for skilled labour and resources to support this strong growth, especially as the major airlines seek to bring more MRO activity in house," says ICF SH&E vice-president David Stewart.

He expects consolidation among the MROs in the long term, as major players grow in strength and MRO activity increases. "In the short term, however, the growth provides enough work for all," he adds.

Another major player is Hong Kong Aircraft Engineering (HAECO), which owns Taikoo Aircraft Engineering Co (TAECO) at Xiamen in Fujian and Taikoo (Shandong) Aircraft Engineering at Jinan in Shandong.

Newcomer Boeing Shanghai Aviation Services, a joint venture between Boeing, Shanghai Airport Authority and CEA, is also planning to double its hangar capacity by 2014.

While most of its business to date has been scheduled base maintenance work, the MRO - an approved modification facility for 737-300/400 passenger to freighter conversions - also wants to do more modification work.

"We see an increasing global trend towards outsourcing of MRO work, as well as Asia being the largest region for aircraft fleet growth," says Boeing Shanghai Aviation chief executive Dermot Swan.