As you may have seen here, and here, the ASEAN region is indeed growing rapidly. With this growth, it is inevitable that many aviation services are now being outsourced. As operators approach their capacity, services such as aircraft maintenance are likely to be contracted out to third-party providers.
Outsourcing Around The World
Take the U.S as an example – approximately 24% of heavy maintenance is outsourced to companies outside the country. According to a report compiled by the Transport Workers Union, U.S carriers spend roughly US$ 2 billion on aircraft maintenance work in South America, China, and Europe. At these locations, maintenance services are offered at much lower prices, and so naturally, airlines opt to outsource instead.
Outsourcing To ASEAN
Source: Dviation Group
In the ASEAN region, the Maintenance, Repair, and Overhaul (MRO) industry is expanding, both in size and popularity. In Indonesia, you will find the world’s largest maintenance hangar for narrow-body aircraft. Airlines from various countries, including Malaysia, India and Russia have had their aircraft serviced there. And headquartered in Singapore is the world’s largest airframe maintenance provider, ST Aerospace (of Singapore Technologies Engineering). Other ASEAN member states, such as Thailand and Malaysia, are also rising in the MRO sector.
ASEAN is an attractive region for MRO due to the low labour cost available in this part of the world.
It is predicted that US$27.1 billion will be spent on MRO in Asia (excluding China) by 2027. This accounts for a 55% increase from 2017. Of this amount, ASEAN will account for 40%. Yet, while the outlook seems positive, in reality, the path may not be so smooth.
Growth Limitations
Despite growth efforts, some experts speculate that the growth rate is insufficient for supporting increasing demand from operators all around the world. Already, in 2017, 60% of aircraft maintenance services for Thai airlines was outsourced to foreign providers. If domestic capabilities do not expand, the ASEAN region may not be able to support the demand for MRO services from foreign carriers.
Added on to the existing pressure on the MRO sector, 11% of the world’s new aircraft deliveries will be to Southeast Asia. The ASEAN MRO market will need to respond to this with unparalleled expansion.
So, is ASEAN ready?
Source: Dviation Group
The governments of most ASEAN member states have expressed interest in increased aerospace investment and aviation spending. From the development of an MRO hub at U-Tapao airport in Thailand, to plans of establishing the 100-squared-kilometre KLIA Aeropolis, an aviation hub in Malaysia – such expansions may help prepare the ASEAN region for the influx of engineering and maintenance outsourcing.
However, increasing capacity is not the only preparation ASEAN needs; these days, MROs are increasingly expected to move up the skill ladder. Fleet technical management services and other engineering services are added values that many airlines look for, when outsourcing to third-party providers.
Without a doubt, the ASEAN region is making a name for itself in the global aviation industry. As it makes its way to become a hotspot for outsourcing services, individual firms must play their part by adding value to their services. Without the full cooperation of all industry players, ASEAN may not be ready in the near future.
What do you think – is ASEAN ready? Let us know in the comments below!
The Dviation Group strives to drive the ASEAN region to the forefront of the global aviation industry. Discover more about their goals at www.dviation.com, and find out how you can be part of this vision!