How SIA Engineering offsets challenges in MRO industry

It guns for more deals with aircraft and engine manufacturing players.

SIA Engineering Company is expected to face headwinds in the maintenance, repair and overhaul (MRO) space.

According to OCBC Investment Research analyst Eugene Chua, the MRO industry is set to drive on a rocky road with lower work content required and longer maintenance intervals on new aircraft/engine models and this could delay recognition of revenue.

"The structural shift in MRO requirements of newer aircraft/engine models towards breaking down traditional heavier checks into multiple phases of line maintenance does not help as it also means revenue is recognised over a longer period of time," the analyst said.

To offset this, SIAEC has been actively entering into partnerships with original equipment manufacturers for both aircraft and engines. One such deal was with Pratt & Whitney for the engine that powers the fast growing A320neo aircraft favoured by the low-cost carriers (LCCs).

The analyst also noted that the group is continuing its pursuit its line maintenance business by investing in Osaka, Japan.

"We do not expect these recent partnerships and investments made to be accretive over the near to medium term but are positive that SIAEC’s partnerships will be one of the key drivers for future growth," Chua stated.

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