CCID Consulting: China's Civil Aviation MRO Market Shows Strong Momentum in Growth of Scale

BEIJING, Feb. 17 /PRNewswire-Asia/ -- CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), reviewed China's civil aviation MRO market in 2008.

In 2008, the negative impact from the financial tsunami on the global civil aviation transportation industry has gradually fanned out. China's civil aviation transportation market, which has been growing continuously over the past years, has significantly slowed down following a series of natural disasters such as the snow storm and the Sichuan earthquake, and external economic influences such as the financial crisis. Unlike the civil aviation transportation market, China's civil aviation MRO market maintains its strong growth momentum in 2008, highlighted by alliances among major enterprises for the share of the market.

Civil aviation MRO market maintains strong growth momentum

The introduction of a large number of airplanes over the past years has driven the development of civil aviation MRO industry, as China becomes the fastest growing market of civil aviation MRO in the world. The MRO costs account for 10-20% of the civil aviation companies' operation costs; the civil aviation MRO market is very lucrative. According to statistics, the total scale of China's civil aviation MRO market in 2007 was approximately US $1.64 billion. In 2008, the warranty periods of the civil aviation companies' newly purchased airplanes were over one after another and the aircrafts have entered MRO market, with actual demands growing at fast pace. CCID Consulting predicts that the total scale of China's civil aviation MRO market in 2008 is expected to exceed US$1.75 billion, above the average growth rate.

    Fig. 1: 2006-2008 Total scale of China's civil aviation MRO market
            http://www.ccidconsulting.com/upload/14170.jpg
    Source: CCID Consulting, 2009, 01

Foreign and joint-venture enterprises occupy the high-end market

China's civil aviation MRO industry is still in a start-up stage, with a low level of industrialization. In recent years, the number of civil aviation MRO enterprises in the domestic market maintains a stable growth rate, with the number of foreign enterprises growing faster than that of local enterprises. Given the fact that civil aviation MRO industry is a technology and capital-intensive sector with high threshold for entry, there are about 365 domestic civil aviation MRO companies ratified by CAAC, most of which small in scale and weak in technical capability without much competitiveness. Renowned foreign companies such as Boeing, Lufthansa, GE and SNECMA have entered the domestic civil aviation MRO market through joint ventures with domestic civil aviation companies. In the field of high-end aircrafts and engines MRO, foreign companies and joint-venture enterprises, such as GAMECO of Guangzhou, AMECO of Beijing and TEACO of Xiamen, play dominant roles; in the field of on-board equipment MRO, the major companies include HAITE, Hangxin of Guangzhou, Xiangyu of Xi'an and Hangda of Wuhan.

    Fig. 2: Number of domestic/foreign MRO companies ratified by CAAC
            2006-2008
            http://www.ccidconsulting.com/upload/14171.jpg
    Source: CCID Consulting, 2009, 01

Major players form alliances for bigger market share

The establishment of Taikoo Sichuan Aircraft Engineering Services Company Limited in July 2008 became the focus of attention in China's civil aviation MRO market. The company, jointly set up and owned by Sichuan Haite High-tech Co., Ltd., Sichuan Civil Aviation Group, Hong Kong Aircraft Engineering Company Limited and Xiamen Taikoo Airplane Engineering Co., Ltd., is the first MRO company in the country specialized in MRO of Airbus series. In terms of MRO strength, Sichuan Taikoo is the result of a win-win alliance. Haite Group is a leading company in China's civil aviation MRO industry, with strength in the MRO of the general-purpose aircrafts, small and medium-size engines, and civil aviation engineering. It is a civil aviation MRO enterprise in the country with the largest scale in airplane on-board equipments, most complete set of MRO equipments, biggest number of MRO projects and the widest coverage of clients. The investment in Sichuan Taikoo is conducive to Haite Group's business in civil aviation MRO and expansion of business in MRO of jumbo jets. Sichuan Civil Aviation Group is mainly dedicated to domestic civil aviation transportation and services, import and export and civil aviation equipments and related technologies, and airplane leasing business. The company grows rapidly in recent years, with rapid expansions to its A320 fleet. It plans to add A330 jumbo jets to its fleet in the coming two years, and the peak period for airplane MRO is expected to be around 2011. Hong Kong Aircraft Engineering Company Limited is an aircraft MRO company affiliated to British Taikoo Group, with the longest history in airplane MRO, repair and major over-overhaul in Asia; it is also one of the 13 members of Airbus' MRO global network. Xiamen Taikoo, affiliated to Hong Kong Aircraft Engineering Company Limited, has great strength in MRO, and is capable of providing all-around MRO and related services for a wide range of airplanes.

Similarly, in November, the three giants in China civil aviation industry -- China Southern Airlines, Air China, and China Eastern Airlines -- signed a letter of intent, announcing their comprehensive partnership in the field of airplane MRO. The three parties' respective airplane MRO units will be negotiating the detailed MRO services. The cooperation aimed at improving the three parties' capabilities and efficiency in the field of airplane MRO, and reducing the costs of airplane MRO.

Though there is nothing new in the united development between civil aviation MRO enterprises or between civil aviation MRO companies and airlines, in terms of the strength and diversity of the participating parties, win-win alliance is no doubt the highlight of competition in civil aviation MRO market in 2008.

China's civil aviation MRO market outlook remains brisk in 2009

In the short run, under a gloomy global economic outlook, the consolidation of airline companies, fleet reorganization and the out-of-service of the older aircraft models will have a negative impact on the civil aviation MRO market. However, the civil aviation MRO market will maintain its growth momentum in the long run, and the Chinese market will draw particular attention. Currently, most of China's imported aircrafts have passed from warranty period to MRO period. CCID Consulting estimates that the number of airplanes going into MRO period in China will exceed 500, with the total market scale exceeding $1.85 billion, and the growth momentum is expected to continue.

In terms of the competition in the industry, lack of skilled technical staff will be the major factor restraining the development of enterprises, and the labor costs will continue to rise. Furthermore, integrated services will increasingly gain popularity among civil aviation companies. In spite of the negative impact of the financial crisis on joint investment, the cooperation and consolidation in various forms between civil aviation MRO companies, OEMs and airlines have become a trend which will be even more noticeable in 2009.

About CCID Consulting

CCID Consulting Co., Ltd. (hereinafter known as CCID Consulting), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: 8235.HK), is directly affiliated with China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu, with over 300 professional consultants after many years of development. The company's business scope has covered over 200 large and medium-sized cities in China.

Based on major areas of competitiveness: industrial resources, information technology and data channels, CCID Consulting provides customers with public policy establishment, industry competitiveness upgrading, development strategy and planning, marketing strategy and research, HR management, IT programming and management. CCID Consulting's customers range from industrial users in electronics, telecommunications, energy, finance, automobile, to government departments at all levels and diversified industrial parks. CCID Consulting commits itself to becoming the No. 1 advisor for enterprise management, the No. 1 consultancy for government decisions and the No. 1 brand for informatization consulting.

    For more information, please contact:

     Cynthia Liu
     Coordinating Manager
     CCID Consulting Co., Ltd.
     Tel:   +86-10-8855-9080
     Email: liuyan@ccidconsulting.com