Market Trends of Southeast Asia Aircraft MRO Industry
Commercial Aviation Segment Projected to Exhibit the Highest Growth Rate During the Forecast Period
The growth in air traffic in the region over the years has put pressure on airline operators to maintain their fleets in operational condition. Since Asia-Pacific overshadows the other regions in terms of new aircraft deliveries, and Southeast Asia, in particular, has become a focal point in terms of the commercial aviation industry growth, the operators in the region are ramping up their capabilities to cater to a growing aircraft fleet that is propelling the demand for aircraft maintenance.
For decades, the commercial aircraft Maintenance, Repair, and Overhaul (MRO) market in Southeast Asia has been dominated by established players in Singapore, providing maintenance services for airlines both in and outside the region. However, several players have entered the market in countries like Indonesia, Thailand, and Malaysia over the years and have challenged the dominance of established Singaporean players. The low labor costs in countries like Indonesia attract foreign players to set up their own MRO facilities in these countries.
Despite the considerable growth in competition in the market, several major airlines in the region have only minimal in-house maintenance capabilities and outsource most of the work to companies affiliated with rivals or independent service providers. In this regard, the airlines in the region are enhancing their maintenance capabilities to cut out cash outflow to third parties and rivals by developing their in-house maintenance businesses.
For instance, the Garuda Maintenance Facility (GMF) by AeroAsia is taking aggressive steps to expand its MRO business overseas while improving its in-house maintenance capacity in the country to cater to more airlines. In January 2021, Revima Group, which has set up a new landing gear maintenance facility for the A320 and the B737NG narrowbody aircraft in Thailand, announced that it has obtained Part-145 certification from three key agencies, namely CAAT (Civil Aviation Authority of Thailand), EASA, and FAA, and is ready to start its activities.
Singapore to Dominate Market Share During the Forecast Period
The aviation sector is the major contributor to the development of the Singaporean economy. Despite its relatively small size, Singapore has been one of the fastest-growing aviation markets in the region over the years, driven by the huge tourist inflow and growing business travel into the country. Singapore caters to about 1/4 of Asia's maintenance, repair, and overhaul (MRO) requirements and 1/10 of the global MRO output, and it possesses comprehensive nose-to-tail MRO capabilities.
Singapore's home-grown aviation companies, ST Aerospace and SIA Engineering, are among the top MRO companies globally, both in terms of revenues and capabilities. ST Engineering, one of the major players in the country, is looking to expand its aerospace MRO business, both locally and internationally. In September 2023, ST Engineering initiated the construction of its fourth airframe MRO facility in Singapore. The new 84,000 sq m (904,000 sq ft) hangar facility, on the northern end of the Changi airport compound, would feature three maintenance bays capable of handling widebody aircraft, as well as a fourth line with paint and maintenance capabilities.
In February 2022, the government of Singapore announced a defense budget of about USD 16.36 billion, a 6.5% increase over the 2021 defense budget. As most of Singapore's fleet is aging or due for a mid-life upgrade, the demand for military MRO is also expected to grow during the forecast period.
At the same time, driven by the positive outlook for general aviation demand in the country, several foreign players are entering the market in Singapore. In October 2020, Jetex, an executive aviation provider, announced the expansion of its global FBO network in the Asia-Pacific region with the addition of a fixed-base operator in Singapore. In collaboration with Bombardier, the new FBO expands the Singapore Service Centre at Seletar Aerospace Park beyond aircraft service and maintenance and now offers a full range of services to the business jet operators. Such developments are expected to drive the growth of the market in Singapore during the forecast period.
