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Photo: SIA Engineering
Following up on last year’s SIA Engineering 2014 AGM, I attended this year’s meeting to find out the latest updates on the company and the aircraft maintenance, repair and overhaul (MRO) industry.
In January, SIA Engineering welcomed a new CEO, Png Kim Chiang, whose track record boasts three decades of experience in the MRO industry. Png started his speech at the AGM by sharing some of the major challenges faced by SIA Engineering in the MRO industry.
Another example: SilkAir has moved on to the newer Boeing 737 and phased out the older A320. Subsequently, SilkAir’s recent contract renewal with SIA Enginnering was $197 million – a 30% drop compared to the $300 million contract signed five years ago.
SIA Engineering’s tie-up with Boeing is an example of partnering with OEMs. SIA Engineering no longer go directly to its parent company, Singapore Airlines (which contributes 50% of SIA Engineering’s revenue in 2014/15), for direct maintenance services; Boeing is now the intermediary between the two entities. Because of this SIA Engineering has to share a portion of its profits with OEMs like Boeing moving forward.
However, should SIA Engineering successfully adapt themselves to this new challenge, the company is likely to be remain profitable as this new environment erects a barrier to entry and reduces a number of MRO players. According to the chairman this transition will take around two to three years.
This figure grew from $83 million the previous year. Line maintenance contributed close to 48% of SIA Engineering’s total profit before tax. The main reason is because SIA Engineering has a near-monopoly on line maintenance business in Singapore.
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