China Aircraft Services plans HK$300m centre
Firm expands airport maintenance activities as competition intensifies with Haeco
China Aircraft Services, whose shareholders include state-owned China National Aviation Corp and Hutchison Whampoa, will spend more than HK$300 million to build a maintenance hangar at Hong Kong airport as it expands its service portfolio, according to a senior executive.
The Airport Authority last week awarded China Aircraft a 25-year franchise from 2008 and expanded its remit to allow the company to branch out into 'base' maintenance activities, intensifying its competition with Swire's Hongkong Aircraft Engineering Co (Haeco) at Chek Lap Kok.
Angus Cheung Him-wah, China Aircraft's general manager, said the facility will be operational by July 2008 just as its present 10-year franchise expires.
'After eight years of operating in Hong Kong we reached the stage where we felt we needed to expand our technical capabilities and widen the scope of our services,' Mr Cheung said. 'So it was important for us to negotiate base maintenance services into the new franchise.'
The company's present contract at the airport restricts it to 'line' maintenance services, which include cleaning aircraft between flights and providing towing assistance.
Its new, more lucrative remit includes heavier work such as overhauling hydraulics, electrical components and some airframe work, a portfolio Mr Cheung said will boost China Aircraft's sales by 30 per cent in the first year.
The privately held firm, a minority partner in a similar venture with China Eastern Airlines Corp in Shanghai, does not disclose revenue or profit figures.
However, Haeco, Asia's leading maintenance, overhaul and repair firm, said its wider range of services generated 65 per cent of group sales in Hong Kong, or HK$1.19 billion, in the first half.
China Aircraft serves 30 airlines and China Airlines, Taiwan's biggest carrier, bought 20 per cent of the firm for HK$60 million in January, according to sources in Taipei.
China Aircraft will not comment on the price the Taiwanese carrier paid.
While Mr Cheung said China Aircraft plans to bring new airlines into its portfolio, a Haeco executive said yesterday it does not expect a major impact from increased competition.
'We compete for contracts on a global level, so we do not anticipate pricing pressure as a result of [China Aircraft] being able to offer base maintenance services in Hong Kong,' said Masie Shun Wah, the general manager of group public affairs for Haeco's parent firm, Swire Pacific.
Both firms expect increasing demand for maintenance, repair and overhaul services, a result of more airlines outsourcing such operations, to more than compensate for any increase in supply.
The maintenance, repair and overhaul market in Asia-Pacific outside China is expected to reach US$7.6 billion by 2010, up from US$5.4 billion in 2004, according to a report by consultancy TeamSAI and Back Aviation Solutions. China's market is expected to reach US$2.9 billion by 2015, up from US$1.7 billion in 2004.
Haeco in August received approval to build a HK$380 million maintenance, repair and overhaul hangar at the airport, its third.
Wider reach
China Aircraft's new 25-year franchise starts from 2008
The maintenance hangar will be operational by July 2008
Taiwan's China Airlines has 20 per cent stake in the firm
