Here’s why the MRO industry’s evolution is bad news for Singapore’s MRO firms

New entrants are making things difficult for incumbents.

The business of MRO firms basically revolve on how frequent aerospace vehicles need repair, and with newer, tougher aircraft, firms like SIA Engineering and ST Aerospace are seeing less frequent visits for inspections and overhauls.

And that’s just one of the firms’ problems, according to RHB Research, as airframe original equipment manufacturers (OEMs) have also barged into the MRO business and are now competing with independent operators.

RHB adds that the outsourcing trend of moving heavy airframe checks to facilities to Asia vs North America could be in decline, as the cost freebies Asia-based MROs enjoy in developed markets are deteriorating.

“SIA Engineering, which focuses on wide-body aircraft, has seen a dent in its earnings amidst these changing business dynamics. However, ST Aerospace’s earnings have been more resilient, given its focus on narrow-body aircraft,” RHB Research said.

Meanwhile, while the firms grapple with these headwinds, analysts from RHB are not discounting the potential of a combination of ST Aerospace and SIA Engineering.

“A combination of ST Aerospace and SIA Engineering would result in a formidable Singapore-based Asian MRO entity, which could benefit from complementary capabilities and achieve cost efficiencies – while it effectively competes in the growing MRO market in Asia,” analysts said.