Arun Sivasankaran ST Engineering's Aerospace Sector, the world’s largest independent airframe MRO service provider, is looking for expansion opportunities in the Asia Pacific region and also investing in new growth areas. After forming ST Aerospace Aircraft Seats, a joint venture...
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Arun Sivasankaran
ST Engineering's Aerospace Sector, the world’s largest independent airframe MRO service provider, is looking for expansion opportunities in the Asia Pacific region and also investing in new growth areas.
After forming ST Aerospace Aircraft Seats, a joint venture with Tenyru Holdings, in 2015, the company entered into an MOU with Vietnam Airlines earlier this year to set up a joint venture with its MRO subsidiary, VAECO, to provide component MRO services. Freighter conversion is another growth area that the company is focusing on, Lim Serh Ghee, President of ST Engineering’s Aerospace sector, tells
Asian Airlines & Aerospace in an interview.
You are one of the MRO companies with a truly global presence, with facilities in North America, Europe and Asia. How much of an advantage does that give you over your competitors?
A MRO service provider with a wide global network would be able to offer flexibility and convenience to customers to get the maintenance or modification service wherever and whenever they need, sometimes at a short notice. If I were an airline or air freight operator, I would certainly see this as a good value proposition.
You recently opened an MRO facility in Florida, to make it three airframe facilities in the U.S. How important is North America as a market for the company?
The North American market is an important market for us as most of the major US airlines are our customers. With intra-regional and international travel continuing to grow, we are positive about the North American market and the opportunities available there. Before the new MRO facility in Pensacola, Florida, we had in mid-2017 set up 787 heavy maintenance capabilities at our MRO facility in San Antonia knowing that there is potential demand for heavy maintenance services for the 787 platform in the Americas. With the setting up of the capabilities, we also became the first MRO service provider in the Americas to perform heavy maintenance on the 787.
With the center of gravity of the aviation industry moving toward Asia, do you see the company expanding further in the region? What are some of the new contracts you have signed in the region?
We have been on a constant lookout for the right opportunities to enhance our global network of facilities to serve our customers better. With the Asia Pacific market forecast to become the world’s largest aviation market, we are definitely keeping an eye on the region for expansion opportunities.
Earlier this year, we entered into an MOU with Vietnam Airlines to set up a joint venture with its MRO subsidiary, VAECO, to provide component MRO services. Partnering the national carrier will give us not only access to their base-load; we can also leverage their MRO network and facilities in Vietnam to capture the high-growth aviation market of Vietnam and the region.
According to industry forecasts, 58% of the global fleet will be new-generation aircraft by 2027. What are some of the challenges that the rapid induction of new generation aircraft by carriers are posing to the MRO industry? What is ST Engineering doing to face the challenges?
Increasing level of software focus and complexity of the new material used on new-generation aircraft mean that investments in new equipment and training are necessary to provide effective maintenance support. As a MRO solutions provider with engineering and composite manufacturing capabilities, we have been able to leverage our knowledge and expertise in these aspects to develop the necessary capabilities quickly to meet the demand for composite repair as it grows.
It also helps that we are one of the few MRO service providers in the world that has a 147 certified in-house training center, and we constantly provide training and skills upgrade opportunities to our employees to ensure that we have a pipeline of mechanics, technicians and Licensed Aircraft Engineers who are well equipped to handle new requirements in technical skills and capabilities.
Does the increasing role of OEMs in the aftermarket threaten the market prospects of independent MRO providers like ST Engineering?
While OEMs have been getting more involved in the MRO aftermarket, OEM’s core business is still ultimately in the manufacturing of the products and ensuring annuity of aftermarket parts sales. They would need fulfilment centers, given that their strategies thus far have been to minimize the setting up of actual facilities and instead partner with MRO services providers. Similar to air operators, they look out for those with a good geographical footprint, as well as one that can consistently provide quality, high safety standards and fast turnaround time. This is where we have built extensive relationships with the OEMs over the years, and some of our key partnerships include the Airbus Corporate Jet service centre network with Airbus and long-term license agreements with UTC to provide component MRO support for the Boeing 787 Dreamliner aircraft.
At the same time, we believe our suite of nose-to-tail aircraft MRO solutions, coupled with our strong engineering capabilities and broad customer base would put us in a strong position to partake in the growing global MRO spend. We continuously strengthen this competitive edge by focusing on delivering with the high safety and quality standards that our customers have come to expect of us. This track record is part of the reason why we many of our customers are return customers who enter into multi-year contracts with us.
One of the major challenges that the MRO industry is facing is shortage of maintenance technicians. What is the company doing to tackle the shortage?
The shortage of technician workforce is one of the biggest challenges facing the MRO industry, and we are looking at ways to attract new talent to the industry by offering training and rewarding career paths. As one of the few MRO service providers in the world that has a 147 certified in-house training center, we are able to provide training and skills upgrade opportunities to our employees.
At the same time, we are exploring automation and the use of artificial intelligence in MRO work such as aircraft inspection. We also continuously to implement work improvement initiatives to increase efficiency in operations. This would enable us to do more with less or at least with the same manning level.
How successful has the company been in incorporating technological innovations? Can you elaborate on the Smart MRO concept and your efforts in going digital?
We have been investing in Smart MRO initiatives on three broad fronts – digitization & data analytics, additive manufacturing and automation.
Going digital brings along with it a host of benefits. Other than improving workflow and efficiency at the operational level, it will allow us to better support airlines/operators when they have newer-generation fly-by-wire aircraft or large-scale fleet replacements. Secondly, given that we support many different customers whose aircraft types overlap, we can use the data collected from all the aircraft we service, analyze them and provide predictive maintenance solutions. We have a dedicated data analytics team working on this.
On the digitization front, AeroBook3 is our solution to digitizing our processes. It is a mechanic-centric platform that offers a full suite of applications to assist in MRO work via mobile devices. We are currently customizing our AeroBook3 system to address the specific requirements of key airline customers, and fully digitize our engine MRO facility in Singapore. We expect to deploy this system gradually to our global network of facilities over the next one year.
On the additive manufacturing front, we have been working closely with interested airline customers and conducting trials to create a virtual warehouse for cabin parts. This will help us and our clients move closer toward Supply Chain 4.0 whereby a virtual warehouse can be developed with 3D-printed just-in-time cabin parts designed and certified by us. To date, we have been granted EASA certification for certain aircraft interior parts, and are working towards similar certification with other authorities to expand our parts inventory list based on customer requirements.
We have also been introducing more robotics into our operations as well to lower costs and increase productivity. For instance, we have implemented a robotic arm to replace the task of manually polishing airfoil surface. This has led to a reduction of manpower time taken to polish one set of airfoil from 2,800 minutes to just 1,000 minutes, which is a saving of over 60%.
Do passenger-to-freighter aircraft conversions constitute a sizable part of your business? Do you see revenue from conversions growing substantially in the next 10 years?
With air cargo forecasted to grow at 4% CAGR over the next twenty years, freighter conversion is one growth area that we are focusing on. We have more than 400 conversions under our belt, which makes us one of the world’s largest passenger-to-freighter aircraft conversion houses. We have invested in new passenger-to-freighter (PTF) conversions programs such as the A330 and AS320/A321, and we expect we expect revenue of more than S$400m per year to come from the PTF business by 2022.
How far are you in your efforts to produce an unmanned freighter? Do you have a timeline for it?
We are actively exploring this unmanned freighter concept and are studying the various technologies required to support a pilotless aircraft. We estimate a single-pilot solution can be commercialized in four to five years.
How important is it for an independent MRO company to diversity its services in the current market?
While ST Engineering enjoys a strong leadership position in the industry (we are currently the world’s largest independent airframe MRO service provider), we are also investing in adjacent businesses/new growth areas that can add value to our MRO work and give us a competitive edge though the ownership of intellectual properties.
For instance, we formed ST Aerospace Aircraft Seats, a joint venture with Tenyru Holdings Co. Ltd and expanded our cabin interior products offering with proprietary aircraft seats designs. We are currently refreshing the cabin interior and installing the seats for a launch customer, which is a regional airline.
By offering both cabin interior products and modification services, customers can engage us earlier in their cabin reconfiguration plans and benefit from more integrated and turnkey solutions; from design and certification, to implementation and maintenance – all under one roof. This strategic move upstream will also allow us to benefit directly as an OEM as the commercial aviation industry continues to grow strongly and as the airlines refresh their fleet cabin interior more frequently.
What are some of the other growth areas that you have identified?
Freighter conversion is definitely one growth area that we are focusing on. We are also leveraging our engineering capabilities and expertise in UAVs to develop systems that help shape autonomous networks and future freighters. For example, we have developed an end-to-end operating Unmanned Aerial Systems called DroNet
[1] which utilizes an integrated network of autonomous drones to complete a range of tasks in an urban environment. This versatile solution is able to provide solutions for various applications such as and not limited to security, inspections and delivery. The DroNet solution, together with other smart city solutions developed by the other sectors within the ST Engineering Group, will help to engineer tomorrow’s smart cities by addressing challenges from road congestion to physical and cyber-security threats.