China's - Orient Aviation

SPECIAL REPORTMaintenance, Repair and OverhaulSTARCO doubles up in ShanghaiNew hangar a move to build overseas businessBy Charles Andersonin ShanghaiShanghai Technologies AerospaceCompany (STARCO) has begunbuilding a new maintenancehangar at Pudong to operatein tandem with its facilities atHongqiao as part of the company’s long-termplan to work from both of the city’s airportsand win significant heavy maintenancecontracts from overseas customers.The joint venture between China EasternAirlines (CEA) and Singapore TechnologiesAerospace (ST Aero) began business inJanuary 2005 as the maintenance providerfor the Chinese airline. Major work hasbeen completed on more than 150 aircraftsince then at the two hangars at Hongqiao,inherited from CEA’s old maintenancedivision. Some 75% of those came fromthe carrier’s own fleet and those of itssubsidiaries, keeping work in China thatwas previously sent overseas.But now the needs of the joint venturepartner have been nailed down, thecomplexion of the business is changing, with50% of revenue in the first six months of theyear resulting from third party contracts.And that, according to ST Aero president,Tay Kok Khiang, is what the companyblueprint demands. “From the very firstday, while most people were looking to setup MRO [operations] in China to serve theChinese market, our intention was to set upan MRO to serve the international market,”he told Orient Aviation.The idea is to include STARCO in STAero’s extensive global network, whichincludes two centres in Singapore, two in theU.S. and one in Panama as well as taskingthe company with meeting all CEA’s heavymaintenance needs.The addition of a Pudong hangar wasalso part of the plan, easing restrictions oncapacity brought about by CEA’s demands.“This will give us sufficient scale to meetthe objective of serving a much broadercustomer base, be a more sizeable MRO andgain economy of scale,” said Tay.Heavy maintenance will be at the core ofthe business, although light checks will beprovided if needed for individual customers.STARCO can currently handle threewidebodies and one narrowbody at Hongqiaowhere heavy maintenance capabilities runthrough the full Airbus family and Boeing’sB737s and B747s, plus McDonnell Douglasmodels. The Pudong hangar, which is costingsome 280 million remnimbi (US$37 million)to build, will be capable of accommodatingtwo widebodies and three narrowbodieswhen it opens in mid-2009. It also will be‘From the very first day,[STARCO’s] intention was toset up an MRO to serve theinternational market’Tay Kok KhiangPresidentST Aero>>>>>>>>>>>>>>>>>>>tooled for A380s and B767s.Currently STARCO has Airbus, GECAS,Air India, Pacific Airlines, Jet Airways anda leading, unnamed European airline on itscustomer list. But it is ST Aero’s position as theworld’s largest heavy maintenance providerand its moves into providing full support inall areas that should pay dividends.“Our customers, many of them globalairlines, fly all over the world,” said Tay.“In that context we are pretty confident weshould be able to bring in more work to theChinese joint venture.” But the current 50-50split is not set in stone. “Take a full year, itcould change again,” said Tay.STARCO also provides componentsupport for five of China’s six low-costcarriers and heavy work has been carried outfor Shenzhen Airlines and Spring Airlines.“Chinese airlines are equally important tous,” said Tay. “When we do components forthem, it’s very convenient for them to give usthe airframe as well.”Further expansion is possible in Shanghaiif demand is there, or elsewhere in China. “Tous, it doesn’t really matter. The main thingis to find the right place where we can servecustomers’ expectations,” said Tay.STARCO can take advantage of China’slow-cost base, but only in some areas. Thecompany’s new hangar will cost 50% morethan a similar one built in Singapore andsome 70% to 80% more than in the U.S. “InChina the labour cost is low, but the overheadcost is high,” he said.Tay acknowledges the joint venture istaking a different tack from Ameco Beijingand Guangzhou Aircraft MaintenanceEngineering Company (GAMECO), theMRO partnerships that handle Air China andChina Southern Airlines’ fleets. Both takeon less external work and, although each isexpanding, they are not quite so forthrightabout their third party ambitions.“Different companies operate on differentbases,” said Tay. “China Eastern is a majorairline in China. ST Aero is a global MRO. Sothe world might be interested to see what wedo differently from other people.”ST Aero may expand supportservices for the CFM family of enginesbeyond Singapore, where all work iscurrently done, to another base withinthe region.The company increased itscapabilities last year from theCFM56-3 to the -7 and added the -5this March. “We will have the wholeCFM family, the biggest installedengine base in the world, in the nextcouple of years,” he said.52 ORIENT AVIATION NOVEMBER 2007