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Southeast Asia’s emerging aerospace sector

December 1, 2017
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Why this is important to Wisconsin businesses: Low-cost carriers in particular are growing rapidly, and will have a need for aircraft, parts and MRO services.

The aviation market in Southeast Asia is one of the world’s fastest-growing. In 2017, Singapore’s Changi Airport and Thailand’s Suvarnabhumi Airport became the first airports in Southeast Asia to have more than 60 million annual passengers. Aside from rapid economic growth, the explosive growth of low-cost carriers has been the main driver of air traffic growth in the region. According to aviation think tank CAPA, Southeast Asia has 1,656 more aircraft on order than their existing fleets of 1,449, of which almost 80 percent are bound for low-cost carriers. Seat capacity provided by the region’s low-cost carriers has grown by an annual average of 22 percent, and the region currently provides the highest number of seats in the global low-cost carrier market.

Companies looking to do business in Southeast Asia must be aware of the member countries’ differences in terms of development stage and needs.

  • Singapore has over 120 aerospace companies, has garnered one-quarter of the region’s maintenance, repair and operations (MRO) market, and carries out comprehensive nose-to-tail MRO. Two of the top airframe MRO players in the world are home-grown Singapore companies: ST Aerospace and SIA Engineering. In addition to MRO services, Singapore is seeing a growing number of companies offering aerospace design and manufacturing operations. Rolls-Royce carries out activities such as engine assembly and testing, training and R&D, as well as manufacturing of the company’s titanium wide-chord fan blade in Singapore. Moreover, Singapore also has the Seletar Aerospace Park, which is a 790-acre development that hosts a dedicated cluster of aerospace activities.
  • Malaysia is another important regional MRO hub. It also aims to position itself as the leading center for aerospace training and education, as well as manufacturing, in the region. The industry is projected to generate about $220 billion in revenue and create 32,000 high-skilled jobs in Malaysia. The quick expansion of Malaysia’s AirAsia, the largest low-cost carrier in the region, boosted the development of Malaysia’s MRO market, which is estimated at $2 billion. Though Singapore is a major competitor, Malaysia offers a lower cost base for all segments of the MRO sector. As such, in 2016, RUAG Aviation from Switzerland has opened a regional MRO facility at the International Aerospace Centre in Subang. In addition, Asahi Kinzoku Kogyo Inc., a leading Japanese aerospace parts maker, has also opened a surface treatment facility in Klang. Asia Aerospace City in Subang was also developed to bring together university research with the Aerospace Malaysian Innovation Centre and MARA Aerospace & Technologies.
  • Thailand has a labor force with precision engineering skills and experience developed by the country’s automotive and electronics sector. This provides the country with a solid base to develop a strong aviation industry. However, Thailand lacks a coordinated national policy aimed at developing a dynamic aviation industry. Because of this, the Board of Investment is placing special emphasis on developing the country as a Tier 2 and Tier 3 aviation parts supplier, building on Thais’ technical skills and knowledge already in place.
  • Vietnam’s MRO industry is burgeoning. Vietnam Airlines’ maintenance and engineering subsidiary, Vietnam Airlines Engineering Company (VAECO), provides most of the country’s MRO services. VAECO also services 40 other airlines operating in the country.
  • The Philippines has a keen interest in growing its MRO industry and has a production of aerospace components and parts. Recently, its budget carrier Cebu Pacific tapped Air France Industries’ KLM Engineering & Maintenance for the maintenance of its Airbus A320 and A321 neo-aircrafts. Meanwhile, in 2017, Philippine Airlines (PAL) disclosed that it is spending $80 million (PHP 3.96 billion) to reconfigure eight of its Airbus A330 aircraft to include Thompson Vantage XL, Zodiac 5810, Economy Zodiac, and a pneumatic comfort system (PCS). PAL is the first Asian carrier to offer PCS.
  • Indonesia’s MRO sector is forecast to grow 10 percent annually over the next decade, according to projections by GMF AeroAsia, the country’s largest MRO operator. As a sign of this growth, PT Dirgantara Indonesia was commissioned by Airbus Helicopters to provide MRO services for Airbus’ helicopters in Indonesia. Additionally, Jabil Defense & Aerospace and UTC Aerospace Systems announced plans to establish their factories in Bandung. However, as Indonesia is challenged by a shortages of skilled workers, Indonesian airlines still need to outsource much of their work.

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