KAI to enter commercial MRO business

Korea Aerospace Industries (KAI) has signed a memorandum of agreement with several South Korean companies to establish an MRO business in South Gyeongsang province close to its headquarters in Sacheon.

Joining KAI in establishing the MRO company will be the Korea Airport Corporation (KAC), Jeju Air, Eastar Jet, Unical Aviation, BNK Financial Group, Hizeaero and A-Tech, says KAI.

The new company will have W135 billion ($127 million) as its initial capital. KAI will be the largest shareholder with a 65.5% stake, followed by KAC with 19.9%.

KAI says the MRO subsidiary will be launched in July. It is in the process of obtaining an Approved Maintenance Organisation certificate from the Ministry of Land, Infrastructure and Transport, before starting operations by the end of 2018 for domestic carriers.

KAC estimates that by 2026 the MRO company will create around 20,000 new jobs and generate W5.4 trillion ($5 billion) in revenue.

KAI has a large production facility at Sacheon where it makes military aircraft such as the FA-50 fighter, the KUH-1 Surion transport helicopter, and aerostructures for commercial aircraft programmes. It also has MRO experience on military aircraft.

Seoul had earlier approved KAI's business plan for the unit in December 2017, after an evaluation committee found that the company had sufficient infrastructure to set up the state-sponsored MRO business.

Flight Fleets Analyzer shows that Jeju Air operates 32 Boeing 737s and Eastar Jet 18.

South Korea's main MRO firm is Korean Airlines Aerospace Division (KAL-ASD). Located at Busan International Airport, it is a significant player in the commercial and military MRO space, and also produces aerostructures.