4 reasons why SIA Engineering is still on industry's top spot

While Asian peers scramble for qualified engineers.

UOB Kay Hian released its outlook for Singapore Airlines Engineering, and here's what the firm has to say:

1. Should benefit from more wide-bodies checks in 2013. Aviation Week estimates that wide-bodied aircraft maintenance will accelerate in 2013, particularly for A330 and Boeing B777 aircraft.

Asia-Pacific has the highest number of wide-bodied aircraft at 1,200 and SIAEC will be a primary beneficiary as it has dedicated hangars to serve A330 and B777 aircraft.

In addition, Aviation Week opines that there would be a capacity crunch for both A330 and B777 visits, which is likely to translate into higher MRO labour rates. This should benefit SIAEC.

2. Shortage of qualified engineers in parts of Asia, but not at SIAEC. In Sep 12, Hong Kong-based HAECO warned that a shortage of qualified engineers could see maintenance work move to other regions.

Singapore and in particular SIAEC could be a primary beneficiary. The MRO operator does not recruit engineers from the open market, but has a training school, whereupon the engineers are bonded to the firm.

3. Engine maintenance revenue could rise in FY13 or FY14. Singapore and Hong Kong rank as the world’s number 5 and 4 in the Rolls Royce Trend 700 overhaul market.

There is a possibility that some of the work originally scheduled for Hong Kong could be shifted to Singapore due to the shortage of qualified engineers, thereby benefitting SIAEC.

4. Commencement of Rolls Royce manufacturing facility should benefit SIAEC. In Dec 12, Rolls Royce commenced production of Trend 900 and Trend 1000 series of engines in Singapore.

The facility, which is the only one outside of the UK, will serve Asia-Pacific countries, including China, India and Australia. The facility has a manufacturing capacity of 250 engines and 6,000 fan blades annually, and will double global capacity.

The facility is also said to provide long-term service for rotating equipment. SIAEC has a 50% JV with Roll Royce to provide after-market service for Trent 900 engines. This will very likely be extended to include Trent 1000 engines.

SIAEC is a major maintenance, repair and overhaul operator in the Asia-Pacific region. It has a client base of more than 80 airlines and aerospace OEMs.

Some of these OEMS are based in Singapore, which enables quick turnaround. It provides line maintenance at 20 airports in 7 countries, as well as airframe and component MRO services.

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