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which was in bankruptcy protection, fell apart after
seller failed to obtain certification as a stand-alone
entity, within an agreed time frame.
"We remain very committed to North American
market," says Chang. "We want to grow - we're
looking for opportunities." He says that access to
a workforce is important in the US because the
negative equity in the housing market means the
workforce has become less mobile.
There is also a restructuring going on at ST
Aerospace Solutions (Europe), due to the cessation
of the SAS contract in April 2013.
The restructuring will lay-off a workforce of around
300 people, and is seen by Chang as an opportunity
to rejig an area of the company that has always
struggled from a European wage structure on a
Former SAS back shops are being closed. "In a
typical power by the hour agreement airlines have
their own back shops - there is no reason to sustain
those anymore," notes Chang.
More fundamental changes are also taking place,
notes Chang. "It's also a good chance for us to
restructure our component capabilities to focus
on areas where we are strong, where we have
niche capabilities and we can compete effectively."
These include thrust reversers, landing gears and
PBH agreements don't really need local capability,
he says. "In the sense that if you have competitively
priced global repair sources in Asia - like in our
Singapore facilities - then we can use those."
Negotiations have been held with a logistics provider
to provide a global logistic management, with a pool
stock to be centred on its London Stansted facility.
Chang hopes all this will strengthen the European
business. "Our cost structure is different from
European MRO providers. I hope it will allow us to
grow a bit more in the European market. We remain
very committed to European market for component
The restructuring will see a new structure based
around PBH, component asset management, and
component repair. "This is the structure now for the
whole group. It is structured in such a way that the
discipline is there - there is no cross subsidising."
Elsewhere, the VIP conversion business in San
Antonio, USA is off to a good start, Chang says.
It has already redelivered one Boeing Business Jet
(BBJ) to a customer and the site has also secured
another 767 which will start work in November.
In China, ST Aerospace (Guangzhou) Aviation
Services is set to see its first hangar open in the
second quarter of next year, providing one widebody
and two narrowbody bays.
In Xiamen, engine specialist STATCO is on target to
see 15 CFM56 engines pass through the workshop
this year, with a gradual ramp up to 30 next year.
In general though, the CFM56 MRO market
has been slower than expected, with an expected
upsurge put back from around 2014 to 2015. Chang
says this is probably a result of some aircraft being
parked and general capacity discipline.
In the Middle East, the hunt for a joint venture
continues. "Things are more or less set in terms
of big three players. Our solution would be around
working with aspiring airlines or maybe an alliance
of a few - but this is a long-term play," says Chang,
noting that a joint venture would need to be with a
partner that didn't rely on imported labour as "this is
not a long-term solution."
Freighter conversion remains a staple, despite the
tough cargo market. The deal to develop an A330
programme with EADS EFW struck earlier this year is
being cemented, with regulatory clearance expected
by the first quarter of next year. ST Aerospace has
taken a 35% stake in EADS EFW, which will become
its European MRO centre.
Back in Singapore, by the end of September 60
converted 757s out of a total of 102 aircraft on order
had been delivered - with a rate of 17-18 redeliveries
a year meaning that there is still more than a couple
of years work here.
ST Aerospace is also developing new solutions
for the 757, offering 15 and 14 pallets. A conversion
for 757s with winglets is also being worked upon.
Chang is confident that despite the prolonged
downturn in the cargo market, the long-term outlook
is still positive. "You can't plan the long-term need
for freighters around short-term movements. It is
definitely a fact that [passenger] belly capacity
is up, but in the long-run you still need dedicated
freighters," he says.
While the company saw no 767 conversions last
year, there are three on the books for next year.
"Freighter people are still investing. That's because
residual values for the 767 get down to an attractive
level when 787 deliveries start in a large way," he says.
The premise for the freighter sector is always
based on GDP growth and the haulage that you
need, he says.
For the A330 programme, Chang is confident of
getting customers in the not so distant future, but
expects orders to really take off from 2017, once
residual values for the A330 come down as the A350
deliveries hit critical mass.
In the meantime, the strength of the Singapore
dollar is a bit of a headache. "We have normal
growth, but we're challenged by the lower US dollar
and euro." All customers, particularly when they
outsource, are very price sensitive, says Chang. "And
that translates to how we manage our costs - all our
units have a very keen eye on costs."
"You can't plan the long-term need for freighters around short-term movements."
A Boeing 767-300 undergoing conversion. ST Aerospace
is confident the freighter conversion downturn is cyclical,
rather than structural.
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