MROs find ripe market in Singapore

Singapore Air Show » 2010
January 28, 2010, 4:23 AM

Over the past 30 years, Singapore has become a leader in aerospace maintenance, repair and overhaul (MRO) work and components supplier in the Asia-Pacific region. At the heart of this achievement is the ST Engineering group, whose umbrella covers ST Aerospace and its subsidiary MRO specialists STA Engineering and SASCO.

But more than 100 international aerospace firms also are operating here, and prominent among them is engine maker Rolls-Royce, which has set up a manufacturing base at Seletar Aerospace Park (SAP).

“There is strong potential for Singapore to move into manufacturing small airplanes, if it so desires,” said Dr. Aloysius Tay, executive director of the Association of Aerospace Industries Singapore (AAIS). “We have built up a highly educated and skilled workforce and a sophisticated R&D and technological base. Even our precision engineering has evolved from low-cost, high-volume to high value-added, low-volume work.”

But whether the city-state decides to build planes would depend on national objectives, business dynamics of the time and partnerships that can be forged.
Singapore’s aerospace industry has grown at an average rate of 12 percent annually since 1990. It is seen as a key growth area amid efforts to diversify the economy.

This success is due to the strong vote of confidence by companies such as Eurocopter, which has anchored its MRO activities in Singapore and designated it as its regional headquarters and continues to introduce new activities there.

Singapore’s aerospace industry had a record output of S$7.1 billion (U.S. $5.1 billion) in 2008 (2009 figures are not out yet). The country claims to account for 25 percent of the Asia-Pacific region’s MRO business and 1.5 percent of its aerospace manufacturing output.

Manufacturing Aircraft a Possibility
“Given these capabilities, I don’t see why we can’t go into the manufacture of small aircraft,” Tay said. “Manufacturing now accounts for S$830 million [about 10 percent] of the S$7.1 billion aerospace output, while MRO accounts for 90 percent,” he said.

“Our aim is to enlarge the manufacturing base, while growing MRO, and to train more people. We want manufacturing to account for 30 percent of output,” Tay said. He envisions Singapore’s aerospace manufacturing output will hit S$12 billion in 2030, with MRO business growing to S$28 billion.

About 60 manufacturing companies employ some 3,000 people there and the MRO companies have another 2,000 technicians and engineers. They have built up significant capabilities in high value-added areas such as engines and avionics. But only one third of them are homegrown.

Tay believes that with Rolls-Royce, Eurocopter and Pratt & Whitney shifting operations to Singapore there is potential for local companies to move up the value chain. “We are building up a critical mass of local supporting industries that can develop capabilities in avionics, airframes and ultimately even engines,” he stated. AAIS aims to have at least 15 local aerospace manufacturers by 2011 and 25 by 2015.

Large Manpower Pool
Another key area is manpower. “The industry will need about 1,500 new skilled workers every year, and our tertiary institutions are well placed to meet this demand,” Tay added.

The National University of Singapore, Nanyang Technological University and the five polytechnics offer 14 aviation courses to more than 3,500 students at undergraduate and diploma levels. Singapore Polytechnic alone has more than 1,000 students enrolled. Last year, EADS and Singapore’s Economic Development Board launched the first postgraduate scholarship program for aerospace industry graduates.

Tay said that if Singapore decides to build planes, it could be either a joint venture with established global players or a partnership between the private sector and the government. “I don’t see why we can’t do it. In fact, Singapore should be able to do it better, faster and more cost effectively,” he commented. “We have a very strong precision engineering industry. Many of our industry players are able to produce whatever drawing is given to them for the parts. These parts will have to make up a bigger component. That needs a lot more specialized and competent skills. At the moment we are finding it a challenge to search for such companies.”

Although experienced personnel are constantly lured by foreign competitors with aerospace ambitions, the industry keeps expanding in Singapore. Eurocopter South East Asia (ESEA) is building a S$15 million facility at SAP, which is to be completed before the end of this year.

The 88,000-sq-ft facility will have a hangar twice as large as ESEA currently has, allowing work to be done on 24 helicopters at a time instead of 12 as is the case now. Established in Singapore in 1977, ESEA–which employs about 200–is now based in Loyang Way.

“This facility is too small,” said ESEA president Bernhard Brenner. “Also, flight operations are difficult due to its proximity to Changi Airport. It will be much easier to bring our customers directly to SAP.”

Twenty-seven researchers from EADS Innovation Works will also make the move to SAP this year. “The new facilities will allow ESEA and EADS Innovation Works to expand MRO and training services, as well as research and development activities,” said Eurocopter senior executive vice president Philippe Harache.

With names such as Eurocopter and Rolls-Royce setting up shop at SAP, interest from companies is strong, said Manohar Khiatani, CEO of JTC Corp., which is building the park. Khiatani said JTC is in talks with companies from the U.S., Europe and Japan. “We are talking to companies about expanding current operations in Singapore, as well as to those that are not here,” he said.

The development of SAP is integral in supporting Singapore’s growing aerospace industry. With its projected completion in 2018, SAP will host a cluster of aerospace activities comprising not just MRO activities, but also aviation services and manufacturing.

The recent announcement by Rolls-Royce that it plans to establish its S$700 million engine assembly and fan-blade manufacturing facilities at SAP, which marks a first in Asia, is a clear indication of the strong interest in SAP.

“This clustering of world-class aerospace activities will make SAP unique,” said Khiatani. The aerospace cluster promises to create vibrancy, foster integration and partnerships and enable companies to reap the benefits of economies of scale through shared infrastructure and related activities being located in close proximity, he said.

JTC also plans to build a business aviation complex to provide office space and warehousing facilities for SAP tenants and a general aviation center that will offer hangar space for companies in that sector.   

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