MRO to Grow in China

The Civil Aviation Administration of China (CAAC) is confident that despite the downturn in the global airline industry, more maintenance, repair and overhaul (MRO) joint venture companies will be set up with Chinese airlines within the next two years.

The optimism stems from the projected 8% annual growth in the local MRO industry that the CAAC expects to be maintained through 2006.

A recent study carried out by the Market Research Department of the China Institute of Aeronautic Systems Engineering says that the country would need 1,710 new aircraft by the year 2019. This is an increase of 211 from the 1,599 cited last year.

According to a CAAC official, China has given the World Trade Organization (WTO) the assurance that it will open up the local MRO industry to foreign companies now that it has been admitted to the WTO. The CAAC spokesperson said that apart from the negotiations currently taking place between foreign MRO providers and Chinese carriers, the Chinese government expects to receive scores of applications from Western companies after China's WTO admission.

Currently, there are more than 10 MRO joint ventures in China, which include Guangzhou Aircraft Engineering Co., Taikoo (Xiamen) Aircraft Engineering Co., Aircraft Maintenance Engineering Co. in Beijing, GE Engine Services (Xiamen) Co. Ltd and Shandong TAECO Aircraft Engineering Co.

While conceding that there currently is MRO overcapacity in China, CAAC believes that the major MRO companies would not be in the red even if the global downturn continues. There is no overcapacity among local Chinese firms. With more than 650 aircraft currently in service in China, the 21 local airlines are a major source of business for local firms. Another factor is that Chinese airlines are not affected by the slowdown outside China.

"There may be a drop in business from third-party work outside China, but this would be made up by some of the local carriers shifting their maintenance back to China," the official said. He pointed out that CAAC is in the process of talking to these airlines to make a shift to boost the local industry and save on foreign exchange. CAAC estimates that only 27% of Chinese carrier maintenance is done outside China.

By William Dennis