By Ramanan Vijayaraghavan, Research Analyst, Aerospace & Defence - Asia Pacific

Malaysia’s seriousness in staking a claim in the global Maintenance, Repair & Overhaul (MRO) industry will be demonstrated, if plans to transform its three-decade-odd Subang Airport into a regional industry hub becomes a reality.

The airport - Malaysia’s international gateway until 1998 – will likely be transformed into an aviation park housing local and global MRO companies in 2005.

While, there were strong reasons put forward by Malaysia’s sole Low Cost Carrier (LCC) Air Asia to convert Subang into a regional LCC hub, the Government would likely give primary considerations to a MRO hub and secondary to the latter – when a decision is made during the first quarter.

In short, the proposed Subang International Aviation Park (SIAP) will likely be given priority over a budget airline airport, unless a mutual agreement is reached by the Government, MRO and LCC industry players to accommodate both into the airport.

SIAP’s other facilities are also enticing, as it would house a helicopter centre, an aerospace training centre of excellence and an aerospace technology park.

Malaysia’s reasons to have a MRO hub lies south of the border, in Hong Kong and cemented by a positive outlook for the industry in Asia.

It’s a fact that the MRO industry in Singapore’s Loyang Aerospace Park near its Changi International Airport contributes the lion’s share to the island’s $3.8 (USD) billion aerospace industry.

Its also a known fact through shrewd business acumen, Hong Kong’s Aircraft Engineering Co Limited (HAECO) has managed to solicit business as far away as Latin America into the island’s Chek Lap Kok International Airport.

Both HAECO, Singapore Airlines Engineering Co (SIAEC) which operates out of Loyang and together with Air New Zealand Engineering Services (ANZES) have been market leaders in commercial and military MRO, and total maintenance solutions.

Their achievements have been acknowledged by Frost & Sullivan through its awards in 2003.

The Asian MRO outlook looks promising with Frost & Sullivan reporting that the aircraft and engine MRO segment has risen from $5.16 billion to $5.51 billion from 2003 to 2004 respectively, and this has been enhanced with the rise of passengers and Low Cost Carriers (LCC).

These factors have prompted Malaysia to strive for a slice of the global MRO cake and according to Government sources – an initial and reasonable five percent of the business will be the target.

The Malaysian Industry-Government Group for High Technology (MIGHT), the body entrusted to chart the nation’s aerospace fortunes, and which promoted the concept of SIAP confirmed that it would also house some 30-odd local MRO companies, some who have formed strategic alliances with the likes of Lufthansa Technik.

Frost & Sullivan also understands that if SIAP becomes a reality, local and foreign MRO companies can expect perks such as leasing of land up to 99 years and tax breaks.

While that seems on the cards, the Malaysian Government needs to examine ways to bring the likes of GE, Pratt & Whitney, Rolls Royce and Honeywell into SIAP.

While all these global companies have a presence in Loyang, SIAP’s perks must be more enticing for them to relocate.

Although, it would be initially difficult to entice them, Malaysia would likely approach middle to small foreign MRO companies into SIAP until it establishes itself.

Frost & Sullivan expects the formation of SIAP to garner initial publicity, before the Government starts on a marketing blitz to get foreign MRO players into it.

For further information, please contact :

Ramanan Vijayaraghavan

+603-6204-5805 (Direct Line) or ramananv@frost.com

The photo on the left is an aeriel view of Subang Airport (www.airliners.net) and Subang Airport’s terminal 3 building (www.airliners.net)