Singapore's aviation maintenance sector to remain challenging next year
OCBC Investment Research had already seen sign of weakening in global air passenger figures going into end of September, as stronger pick-up in capacity outstripped passenger traffic growth.
Singapore has come a long way in becoming the hub for aircraft MRO in Asia, with more than a quarter share of aircraft MRO industry in Asia. According to the Economic Development Board of the city state, the MRO industry has grown at an average rate of 10 percent in the last two decades.
However, with new generation jetliners such as the Airbus A350 XWB that boasts better fuel efficiency and travel comfort, Singapore aircraft MRO industry is facing structural changes.
OCBC said these changes include newer aircraft and engine models which have longer maintenance cycle amid extension of on-wing life, and older engine models which get phased out without new product replacement.
As a result, the MRO industry players will see reduction in aircraft and engine workshop visits by the aircraft fleets of their clients.
OCBC expects the slowdown in Singapore's aircraft MRO industry to last for at least another 12 to 18 months before the aircraft are due for maintenance again.
The good news is that when these newer aircraft and engines are due for maintenance again, the amount of works to be performed on them may be heavier than if they were sent into the workshop earlier.
This means higher revenue per maintenance job. But OCBC said on the whole, the outlook of the MRO industry may remain challenging even into 2017. ■