MRO sector gears up to meet demand
Shalini Kumar 
Last month, the company opened its second hangar which can handle two Airbus A320 aircraft at any one time for major maintenance checks

The domestic maintenance, repair and overhaul (MRO) sector is expected to see robust growth as regional airlines, including those in Malaysia, rapidly grow their fleets in the coming years.

The MRO sector and the aerospace industry have been identified as among the strategic focus areas under the 11th Malaysia Plan.

Several national strategies have been put in place to drive the growth of the aerospace industry, including the Malaysian Aerospace Industry Blueprint 2030 and the Entry Point Projects (EPPs) of the Economic Transformation Programme (ETP).

Goals have been set for the industry, such as Malaysia aiming to be the leading aerospace nation in Southeast Asia by 2030, as well as to capture 5% market share of the global MRO business. Singapore is the dominant hub for Southeast Asia’s MRO business, but its position is seen to be under threat from lower cost rivals in Malaysia, Indonesia and Thailand.

However, this raises the question of whether these lofty goals are attainable, or if Malaysia is more competitive than other regional countries.

According to Endau Analytics founder and primary analyst Shukor Yusof, the simple answer is yes.

“Aerospace investment and aviation spending are seeing incremental growth, and the scale and pace vary from country to country. Malaysia leads the region in MRO and discount flying due to its low costs and geographic location,” he tells FocusM.

He says the aviation outlook is very positive and will accelerate this year, driven by expansion in major local carriers such as AirAsia Bhd, AirAsia X Bhd, Malindo Airways Sdn Bhd and Malaysia Airlines Bhd (MAB).

“MRO will see exponential growth as it supports growing fleets of aircraft in the region. MRO and aviation training will converge in Southeast Asia,” he adds.

Speaking at the recent opening of Sepang Aircraft Engineering Sdn Bhd’s (SAE) new hangar, Second Minister of International Trade and Industry Datuk Seri Ong Ka Chuan says the domestic MRO industry’s revenue is expected to reach RM6.1 bil this year, from last year’s RM5.7 bil.

“Today, Malaysia is among the leading countries in the Asia Pacific for MRO services. We have been able to stay competitive because of the sheer volume of business in this region coupled with our advantage of an early foray into the sector, and an edge in quality human capital at far more competitive rates.

“With the development of our own MRO capability, it will encourage airlines to look no further than Malaysia for the full suite of MRO services. The potential of the MRO business is huge and growing. It is also an important catalyst in Malaysia’s development towards high-income nation status,” he says.


More overseas customers

SAE CEO Pierre Reville says the centre has been gaining more customers from other Asean countries as well as places such as New Caledonia and Tibet, which seek out SAE’s aircraft check services.

“Our first hangar is full until April next year. This is a good sign, as a few years ago things were slower and activity has picked up since early 2017.”

Last month, SAE opened its second hangar, which will boost the centre’s capacity to handle Airbus A320 aircraft. It can accommodate two such aircraft at any one time for major maintenance checks.

Reville says there are no plans for a third hangar. “We have to make sure that the first two hangars are full and well occupied. There could be a plan to develop our capabilities to maintain A330s, maybe in about five years.”

He says the second hangar will strengthen and expand the centre’s capabilities. “As a European Aviation Safety Agency-approved independent aircraft MRO centre, SAE is able to offer world-class maintenance services to airlines from across Southeast Asia and beyond.

“The new hangar gives us added flexibility and space to offer more services to our customers. Since we opened in 2007, we have completed 500 C checks and established a strong reputation in the MRO market for on-time and reliable service,” he says.

The C check is a major scheduled aircraft maintenance check usually performed every 20 months on an A320 aircraft. It entails an inspection of most of the aircraft’s components, and can take up to two weeks to complete.

SAE has been gaining more customers from other Asean countries as well as places such as New Caledonia and Tibet for its aircraft check services

SAE’s first hangar, which opened in 2007, has a floor area of 37,000 sq m and can accommodate up to six single-aisle aircraft or two wide-body aircraft at any one time. SAE is a 40:60 joint venture between Airbus and Datuk Syed Budriz Putra and his holdings.

It was recently reported that Airbus is expected to increase its shareholding in SAE, with discussions ongoing.

Reville says apart from carrying out more aircraft checks, SAE will also be developing more technical capabilities and doubling the size of its shop for its component repair segment, as well as doubling the level of work it does for component repairs next year.

Meanwhile, MAB and US aircraft maker Boeing Co are reported to be negotiating an MRO deal worth over RM5 bil.

The deal is part of a memorandum of understanding inked between MAB and Boeing to set up a specialist MRO facility in Sepang, during Prime Minister Najib Razak’s recent visit to the US.

Both parties are said to be working on a 12-year contract to service MAB’s new Boeing MAX and Dreamliner fleet.

Government push

Ong says to further encourage growth and development in the sector, Malaysia also offers attractive incentives to companies undertaking activities covering MRO, manufacturing and system integration for the aerospace industry.

“The government views the aerospace industry as a critical sector which offers abundant opportunities for MRO, the transfer of advanced technologies in engineering, electronics, composite materials, system integration and industry-led research and technology,” he says.

In a previous interview with FocusM, Malaysian Investment Development Authority (Mida) CEO Datuk Azman Mahmud says the agency approved RM166.3 mil worth of investments in the sector last year. This is a four-fold increase from the RM34.9 mil approved in 2015, and reflects “the growing momentum of the MRO sub-sector”.

On the progress made in fulfilling the goals set out under Blueprint 2030, Azman says the industry maintained its positive growth despite global economic uncertainties.

“The aerospace manufacturing sub-sector has taken the lead as the largest revenue contributor for the aerospace industry at RM6.4 bil. Aerospace exports also recorded the highest value at RM5.53 bil,” he adds.

This article first appeared in Focus Malaysia Issue 255.