SINGAPORE: With flights cut and planes grounded, the impact of COVID-19 on commercial aviation has had a knock-on effect on the aerospace industry which supports it.
Eighty-five per cent of Singapore’s aerospace industry is involved in maintaining and repairing aircraft, and local companies also play a “small but critical” role in the global supply chain, said the Association of Aerospace Industries (Singapore) (AAIS).
“Today, more than 60 per cent of the global aircraft fleet has been grounded by the pandemic,” the association said. “As Singapore has 10 per cent of the global maintenance market share, this has resulted in a direct impact on aerospace businesses here."
Parts manufacturers and suppliers here have also suffered, after Boeing and Airbus cut production in the United States and Europe.
“Made-in-Singapore aircraft engines, engine cases, fan blades, avionics and electrical systems are installed in many new Boeing and Airbus aircraft,” AAIS said, pointing to the “key role” played by small and medium enterprises in Singapore for services such as maintenance, repair, overhaul and manufacturing.
According to figures from the Economic Development Board, Singapore’s aerospace sector employs more than 22,000 people, with the industry’s output surpassing S$11 billion in 2018.
SIA Engineering - the maintenance, repair and overhaul (MRO) arm of Singapore Airlines – said there has been an immediate impact on its line maintenance unit, noting the 50 per cent drop in the number of flights it handed at Changi Airport in March.
“An extended period of flight restrictions will also have consequent impact on our other businesses,” it said.
During its annual general meeting on Friday (May 15), ST Engineering said it expects a slowdown in its aerospace unit due to MRO services being deferred, as well as original equipment production rates being lowered.
Collins Aerospace, which just three months ago opened a 10,000 sq ft innovation hub in Singapore, said it is “monitoring the evolving market conditions very closely”.
Rolls-Royce, which has a facility in Singapore that assembles and tests Trent aero engines, said operations have been scaled down.
“We are still continuing our operations to meet the production deliveries in our civil aerospace business, though operations have been scaled down in line with revised demands and the circuit breaker requirements,” said Dr Bicky Bhangu, Rolls-Royce's president for Southeast Asia, Pacific and South Korea.
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“MRO has slowed as planes are parked around the world, technicians are laid off or furloughed or shops have had to close because someone tested positive,” said Matthew Driskill, editor for industry publication Asian Aviation.
Meanwhile, original equipment manufacturers such as Boeing and Airbus are trying to survive by “saving cash, reducing production (and) raising money if they have to”, he said, pointing to Boeing’s US$25 billion bond sale last month.
He believes some companies may go bankrupt during this time, although he added that it is likely there will a greater move towards more consolidation in the sector, pointing to how manufacturers such as Boeing and Airbus have moved into servicing as well.
“So consolidation has been happening and will likely increase in the 12 to 18 months ahead,” said Mr Driskill.
In a report last month, consulting firm Accenture said that in light of challenges brought about by COVID-19, firms in the aerospace and defence sectors need to "assess permanent market shifts" and reorganise so as meet the needs of the market.
FOCUSING ON THE LONGER TERM
Amid the downturn, major players in the aerospace industry are trying to keep busy.
In addition to providing airlines with disinfection fogging service, SIA Engineering said it has deployed staff to perform aircraft preservation and preparation of aircraft for parking overseas.
“We are engaging airlines to schedule maintenance checks during this period of lull traffic,” the company said.
“During this time, we are also scheduling our staff for technical and soft-skill training courses to strengthen our position and readiness to seize opportunities when the aviation industry recovers and business returns.”
Even while it takes measures to ensure the health and safety of employees, Collins Aerospace said it is “taking necessary actions to reduce costs and to ensure we maintain a position of financial strength and market leadership so that we can emerge from this crisis stronger”.
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AAIS noted that it has formed a COVID-19 taskforce for the aerospace sector here.
The taskforce has been working to collect industry feedback to support government policy making, facilitating information and experience sharing, as well as extending assistance to the association’s members.
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Dr Bhangu said he believes that the aviation industry will recover from its significant downturn. He noted that Rolls-Royce’s defence and power systems businesses, which service military industrial and civil markets, are helping support the firm during the aviation sector’s downturn.
“Our focus is on the longer-term – we will continue to invest in digitalisation, automation and smart manufacturing technologies, which we believe will put us in good stead for the new normal post-pandemic,” he said.