Aerospace
OWNS
world's
largest
Supplemental
Type Certificates
from FAA and
EASA for Boeing
757 combi
aircraft
commercial airframe
MRO service provider,
with an annual
capacity of close to
9 million manhours
total
aviation
support
of Singapore’s aerospace
industry output
covering
airframes,
components
and engines
FIRST
in Singapore to develop
the Multi-crew Pilot
Licence programme
The Aerospace sector crossed the
$2b revenue mark for the first time,
against a challenging operating
environment marked by volatile US
dollar and Euro. The increase in sales
was fuelled by a healthy order book
through new contracts secured in all
business segments. In 2012, a steady
stream of orders worth more than $2b
was announced. With continued focus
on productivity and costs management,
PBT for the sector improved 9%.
As part of our efforts to address
evolving market needs, we moved
up the value chain and broadened
our range of integrated support. To
maintain our competitive edge in
the global market, we introduced
new service offerings including VIP
52
Making an impact
2,019
2012
1,920
2011
Profit Before Tax ($m)
15%
Moving up the engineering
value chain, we strengthened
our support to customers
through a wider global network
and integrated support for
airframes, components
and engines.
Revenue ($m)
for both military and
commercial aircraft
completions, freighter conversion for
A330 aircraft, rotable asset leasing
and green engine washing. We also
continued to expand our global
presence, adding new nodes in the
Americas and Europe through joint
ventures and new set-ups.
Aircraft Maintenance &
Modification (AMM)
The AMM division continued to grow
both in capacity and capability during
the year. In November, ST Aerospace
broke ground to add a two narrowbody bay hangar in Changi, Singapore,
in response to rising demand for
narrow-body aircraft line and base
maintenance services. In December,
we completed the construction of
our newest purpose-built General
Aviation aircraft hangar at the Seletar
Aerospace Park in Singapore, putting
us in a strong position to extend our
role as a global market leader in aircraft
maintenance, repair and overhaul
(MRO). Apart from the new hangar,
a VIP lounge will be added for our air
charter customers, as well as facilities
for flying and technical training.
In Guangzhou, China, hangar
construction for our joint venture
company ST Aerospace (Guangzhou)
Aviation Services Company Limited
is progressing well. With operations
expected to start by late 2013, the
hangar will be able to accommodate
one wide-body and two narrow-body
aircraft simultaneously.
Identifying VIP completions as a new
growth area for the Aerospace sector,
a new brand – AERIA Luxury Interiors
– was introduced to drive our foray
into the niche VIP aircraft completions
and refurbishments market segment.
Located in San Antonio, US with ready
access to highly skilled craftsmen and
the pool of engineering talent in the
region, ST Aerospace is now able to
extend a suite of aircraft engineering
design and maintenance services
to customers.
This complements the earlier acquisition
of affiliate company DRB Aviation
Consultants, Inc in 2011, a holder of the
Federal Aviation Administration (FAA)
awarded Organisation Designation
Authorisation (ODA). The ODA enables
303.8
2012
278.2
2011
Revenue of $2,019m for FY2012 was 5% or $99m higher
than that of FY2011. The higher revenue was contributed
mainly by AMM in both its Singapore and US operations.
Despite a challenging aviation market in FY2012, the sector
achieved PBT of $303.8m, a growth of 9% or $25.6m as
compared to FY2011.
The higher PBT was due mainly to higher gross profit
resulting from higher revenue and favourable sales mix,
as well as higher other income due mainly to the one-off
gain on disposal of a property, but these were partially
offset by higher operating expenses, higher finance costs,
net and lower contribution from associates.
Legend:
1Q2012
2Q2012
3Q2012
4Q2012
1Q2011
2Q2011
3Q2011
4Q2011
ST Aerospace to accomplish and
certify aircraft modifications to the
FAA’s requirements in a more efficient
and effective manner, ensuring that
we deliver reliable turnaround times
to our customers. Having completed
cabin reconfiguration and refurbishment
for over 150 aircraft to date, we will
be able to leverage our established
programme management and aircraft
engineering expertise, to offer a wider
range of cabin interior modification
capabilities for both airline and VIP
aircraft operators.
In the US, VT Aerospace completed the
acquisition of Volant Aerospace, LLC,
a company with capabilities in
commercial aircraft interior products.
This acquisition will strengthen the
sector’s ability to support our airline
customers better. During the year, we
secured our first contract for the VIP
Boeing Business Jet maintenance
check, for a Middle Eastern aircraft
owner. Involving A and B level checks
and replacement of various IFE
system components, the aircraft was
redelivered within a month of induction
and was well received by the customer.
A second contract was subsequently
secured for the interior modification of a
Boeing 767-200ER VIP aircraft. On top
of an all-inclusive modification which
covers design, engineering, installation
and project management, heavy
maintenance work was concurrently
performed to minimise aircraft down
time. Additionally, we were awarded a
contract to refurbish the cabin interiors
of 15 Boeing 747-400 aircraft.
Of the 87 Boeing 757 freighters
contracted by FedEx Express,
ST Aerospace had delivered over 60
converted aircraft as at end of 2012.
Further cementing our engineering
and development strengths in aircraft
conversions, we were awarded two
Supplemental Type Certificates (STC)
by the European Aviation Safety Agency
(EASA) and the US FAA respectively,
for the Boeing 757-200 passengerto-passenger/cargo (combi) (PTC)
conversion programme. With the FAA
certification, ST Aerospace becomes
the holder of the first and only STC for
a PTC, with a main cargo compartment
meeting the Class C requirements.
ST Aerospace partners Airbus, EADS and EADS
EFW to develop a new freighter conversion
programme for the Airbus A330
Building on our established track
record in aircraft conversions, we
partnered Airbus, EADS and EADS Elbe
Flugzeugwerke GmbH (EADS EFW)
to develop a new freighter conversion
programme for the Airbus A330
aircraft. Besides adding a new freighter
conversion capability, ST Aerospace
has taken a 35% stake in EADS EFW,
with its Dresden facility serving as our
European MRO centre. This fills the gap
in our global airframe MRO footprint.
Singapore Technologies Engineering Ltd Annual Report 2012
53
Aerospace
ST Aerospace continued to work
with the Republic of Singapore Air
Force (RSAF) on its Public-Private
Partnership arrangement. In November,
we provided the first two of 12 M346
advanced trainers to the RSAF, as
part of a 20-year programme which
is worth about $50m in the first year
of operations.
ST Aerospace and Alenia Aermacchi provided
the first two M346 aircraft to the RSAF
Additionally, we secured a contract to
provide the Royal Air Force of Oman,
with a full-scale maintenance and
modernisation solution for three of its
C130 Hercules aircraft.
On the unmanned aerial vehicle (UAV)
front, we showcased our latest miniUAV system at the Singapore Airshow
in February. A joint development with
the DSO National Laboratories, the
Skyblade 360 boasts increased mission
versatility as a result of longer flight
endurance.
On pilot training business development,
we obtained Joint Aviation Authorities
(JAA) certification, becoming one of
the first few flight training organisations
in Asia Pacific with this qualification.
Already licensed by the Civil Aviation
Authority of Singapore, Australia’s Civil
Aviation Safety Authority and the Civil
Aviation Administration of China (CAAC)
for various pilot training programmes,
ST Aerospace is now able to enrol
students from countries that recognise
the JAA licence.
We continued to seal pilot training
contracts in 2012. Following the
54
Making an impact
successful completion of the first
Multi-crew Pilot Licence (MPL) for
Tiger Airways, the airline awarded us a
five-year pilot training contract, to train
more than 100 pilots. We also partnered
Hainan Aviation Academy to train 50
cadet pilots for our Chinese partner.
Catering to the growing demand for
commercial pilots, our pilot training
academy signed a partnership with
Lockheed Martin’s Sim-Industries
B.V. for the latter to provide an Airbus
A320 full flight simulator (FFS) for
ST Aerospace’s MPL programme. The
FFS will be housed in our simulator
training centre in Singapore, which is
designed to house six FFSs and one
full size fixed base simulator, as well
as state-of-the-art computer-based
training rooms for both Air Transport
Pilot Licence and entry level ground
training.
Affirming the sector’s confidence in the
pilot training business, we continue to
upgrade our flight training capacity and
capabilities to meet rising demand. To
this end, ST Aerospace’s wholly owned
subsidiary, ST Aerospace Engineering
Pte Ltd, injected capital into its wholly
owned subsidiary ST Aerospace
Academy Pte Ltd. Part of the funds
will be used to equip a new Flight
Operations Centre at Ballarat
Airport, Australia.
Component Total Support
(CTS)
Our component Maintenance-By-theHour (MBHTM) support programmes
continued to be the lynchpin of the
sector’s CTS business, supporting over
800 aircraft to date.
During the year, we received a 10-year
component repair management MBHTM
contract to support 75 of AirAsia’s
Airbus A320, above and beyond our
existing support for 100 of its A320.
On top of this, we secured a 10-
year component MBHTM contract for
TransAsia Airways’ two new Airbus
A330. In Europe, our Copenhagenbased facility, ST Aerospace Solutions,
also secured a 10-year contract to
provide aircraft rotables MBHTM support
for a fleet of Boeing 757 for a US
aircraft operator.
In the area of landing gear repair
and overhaul, our Madrid facility
successfully completed and delivered
38 landing gears in 2012. Expecting
landing gear demand to pick up in
the near term, ST Aerospace formed
an alliance with Iberia Maintenance
to jointly market and provide global
landing gear maintenance services for
various Airbus and Boeing platforms.
Our CTS business was further
augmented when Gulfstream
Aerospace appointed us as an
authorised supplier of component repair
and overhaul services. Additionally,
ST Aerospace concluded an agreement
with Woodward for the maintenance
support of Woodward’s components to
Bell helicopter operators worldwide.
Identifying rotable asset leasing and
management as a complementary
extension to our CTS offerings, a new
rotable asset management business
was established. This new business
will also support our global MBHTM
programmes.
In view of persisting weakness in the
European market for domestic travel
and cargo, ST Aerospace embarked
on a restructuring programme in
September to manage the cost
structure and work processes of the
Scandinavian operations of our wholly
owned subsidiary, ST Aerospace
Solutions (Europe) A/S. The exercise
is anticipated to conclude by the third
quarter of 2013.
The award winning EcoPower® engine wash helps
to improve the operational efficiency of aircraft
operators’ fleets
As part of an ongoing business review
to better support the regional growth of
our partner BAE Systems plc through
our existing network, ST Aerospace
commenced Members’ Voluntary
Winding Up of our 51%-owned
subsidiary, Singapore British
Engineering Pte Ltd. Existing contracts
were novated to ST Aerospace’s wholly
owned subsidiary, ST Aerospace
Supplies Pte Ltd, to ensure
uninterrupted support to our customers
while we explore further collaboration
with BAE Systems plc.
Engine Total Support (ETS)
Recognising that engine MRO will
continue to lead in the global MRO
scene, we enhanced our ETS capability
portfolio with an expansive range of
aftermarket services to stay ahead of
the competition.
During the year, VT Aerospace
completed the investment of a 50.1%
stake in EcoServices, LLC, becoming
a partner to Pratt & Whitney in the
joint venture. Tapping into the engine
aftermarket for advanced green
technology services, the award
winning EcoPower® engine wash
reduces fuel burn and CO2 emissions,
helping aircraft operators reduce their
environmental impact and improve the
operational efficiency of their fleets.
• acquired 100% equity interest in
Volant Aerospace, LLC
In the second year of its operations,
our engine leasing business secured a
contract from Lion Air for the lease of
three CFM56-7B engines over 10 years.
Industry Review & outlook
The global aviation industry operated
in a weaker economic environment
in 2012, as it coped with oil price
fluctuations, the deepening Eurozone
crisis and languishing freight growth.
Airlines globally delivered profits of
US$6.7b, with a small net profit margin
of 1%. The marginal improvement in
financial performance over the previous
year was a result of airlines’ flexibility
in adjusting during this tough period,
by redefining their business models,
exercising discipline in managing
capacity, better route planning, shaving
costs and improving efficiency.
We also bolstered our footprint in the
Korean engine MRO market with a
contract to support low fare airline
Eastar Jet’s CFM56-7B engines over
10 years. In China, our Xiamen engine
MRO business added new customers
from the Asia Pacific region. On top of
this, the facility received certification
from the EASA, adding to its existing
certifications from the US FAA, CAAC
and Korea MLTM. Our Singapore
engine facility obtained certification
from the Japanese Civil Aviation Bureau
for CFM56 engines.
Progressing up the value chain,
ST Aerospace started focusing on
engine parts and accessories repairs,
on-wing support and engine parts
trading in 2012.
INVESTING FOR GROWTH
The Aerospace sector continued
to invest in existing businesses and
establish new focus areas to better
support our customers. Acquisitions
and capital injections include:
• subscribed to new shares in EADS
EFW, representing 35% of the
enlarged share capital of EADS EFW
• invested a 50.1% stake in
EcoServices, LLC
• injected US$1.44m (approximately
$1.8m) into ST Aerospace Academy
Pte Ltd
• injected a total of US$2.36m
(approximately $2.88m) into engine
leasing joint venture Total Engine
Asset Management Pte Ltd
• set up wholly owned subsidiary,
ST Aerospace Rotables Pte Ltd
with a total capital of US$75m
(approximately $91.68m)
Airlines in the Middle East and Asia
Pacific, notably in China, experienced
rising passenger demand while US
carriers remained profitable with raised
fares and consolidations. However, the
EU environment remains delicate as
the sovereign debt crisis continues to
plague the Eurozone. In 2012 alone,
Europe lost many airlines, with the
remaining carriers continuing to
suffer losses.
Global commercial MRO revenues
continue to be under pressure as
aircraft operators shift their financial
pressures to MRO providers. The
industry faces overcapacity, and
some MROs have ceased operations.
Nevertheless, aviation MRO is expected
to grow by about 40% over the next
20 years.
At ST Aerospace, we are confident
that our continued focus on efficiency
and innovation while maintaining a
diversified portfolio of services positions
us well to partake in the industry’s
growth.
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