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Western airplane maintenance providers rush to sign Chinese contracts By Reuters


© Reuters. The display of VN16 amphibious assault vehicles at China International Aviation and Aerospace Exhibition in Zhuhai (Guangdong province), China September 29th, 2021 is seen by many. REUTERS/Aly Song

By Stella Qiu and David Kirton

ZHUHAI (Reuters) – Western aircraft maintenance, repair and overhaul providers (MROs) signed a flurry of new contracts with Chinese customers and joint-venture partners at the country’s biggest air show this week to strengthen their foothold in the lucrative market.

Providers trying to minimize pandemic-driven revenue losses have made China more valuable due to the rapid recovery of China’s domestic air traffic to pre-COVID levels.

Kailash Krishnaswamy from Spirit AeroSystems (NYSE) China stated, “China is the key to the futurity of aerospace” after signing a 10-year maintenance contract with cargo carrier SF Airlines. Spirit attended the show for its first time.

Oliver Wyman Consulting estimates China’s MRO Market will increase by 8 percent this year, which is a significant improvement on the 2019 level. This would place it in the top two countries to beat pre-pandemic levels along with eastern Europe. It projects that China’s MRO market will grow to more than twice its size in 2031, from around $20 billion per year before COVID.

Honeywell International is a significant supplier of Commercial Aircraft Corp of China’s (COMAC) C919 narrowbody programmes and it is currently bidding to work on the SinoRussian CR929 widebody.

These deals provide it with a foundation for future maintenance. Honeywell has signed an agreement with China Eastern Airlines to offer MRO for the C919’s auxiliary power units. The company also stated that they expect to add other airlines as COMAC expands its production.

It sees similar prospects to Spirit in the cargo market. This is a growing sector that has seen rapid growth with e-commerce. This industry typically relies on older aircraft, which require greater maintenance, than those of the most recent generation.

Lien indicated that cargo’s future outlook is strong. China’s cargo capacities are not as developed globally as the U.S. or Europe. However, it’s in China’s national interest to grow it.

Boeing (NYSE) Co and Guangzhou Aircraft Maintenance Engineering Co Ltd.

In a last week forecast by Boeing, China will require 8,700 more planes in 2040. The cost of these new aircraft is estimated to be $1.47 trillion.

Sherry Barbary, Boeing China president, said that China’s focus is increasingly on making domestic planes. She also stated that her company’s strengths in service were key to maintaining a long-term market position.

Carbary stated that it is the support services that will actually help the airplane throughout its lifetime, for the next 20, 30, and 40 years. It isn’t a once-off sale. We value a long-term relationship with our clients.

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Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.