According to an official of the Civil Aviation Administration of China (CAAC), the number of foreign firms in talks with local companies to set up joint ventures (JVs) continues to grow.
Currently there are more than 15 MRO JV companies in China. This includes Taikoo (Xiamen) Aircraft Engineering Co (TAECO), Beijing-based Aircraft Maintenance Engineering Co, Shandong TAECO Aircraft Engineering Co, Guangzhou Aircraft Engineering Co, GE Engine Services (Xiamen) Co and Boeing Shanghai Aviation Services (BSAS). In Hong Kong, the Hong Kong Aircraft Engineering Co. Ltd. (HAECO) provides base and line maintenance while Hong Kong Aero Engine Services Ltd. (HAESL) undertakes engine maintenance.
BSAS currently leases a bay from Shanghai Airlines to carry out its services. Its hangar which is currently under construction will be operational next year. It will have four bays offering MRO services including modifications.
In its 2008 Current Market Outlook Report, Boeing projected that China would require 3,710 new aircraft by 2017. Chinese airlines currently have 1,210 aircraft in operation. Traffic is expected to grow at the rate of 7.3 per cent over the next 20 years and the market for MRO services to grow in parallel.
AeroStrategy Management Consulting Services estimates China’s MRO market to be worth US$2.5 billion by 2014. Similarly, Beijing-based CCID Consulting projected China’s MRO revenue to grow 5.7 per cent this year to US$1.85 billion.
China’s MRO industry is still in its start-up stage and there is a lack of skilled personnel across the board and at the same time labour costs continue to rise.
The CAAC dismisses claims by some that there is MRO overcapacity in China currently and a few local shops are in the red, as unfounded.
“There is no overcapacity among MRO firms in China,†a CAAC official told Payload Asia. MRO companies would not be in the red even if the global slowdown continues, he assures.
“China-based MRO companies are not affected by slowdown of companies outside China,†the official optimistically pointed out. Chinese airlines are a major source of business for MRO companies in the country, be it local set ups or JVs.
“MRO companies in China will continue to exploit the global market for engine and airframe maintenance,†the official added. An estimated 22-25 per cent of Chinese airlines’ maintenance work is contracted to MRO companies outside China. This is expected to reduce as more local shops expand their capacity and capability. Chinese carriers are also looking at reducing costs and keeping the foreign exchange in the country.
China’s MRO industry has progressed with leaps and bounds since the first MRO shop was set up in 1984 between Air China and Lufthansa Technik. Boeing gave the industry a boost recently with BSAS organising a competition for college students in China to create more environmentally friendly ways of operating an MRO facility. Students from the top 15 universities including five aeronautical based ones were invited to prepare ‘green’ concepts for BSAS operation.
Going green is no longer seen as an option, but rather is a mandate for the aviation industry and this includes the MRO segment – whether in China or the West.