2 October, 2013

Majlis Perasmian ‘Sepang Aircraft Engineering Sdn Bhd (A Regional Maintenance, Repairs and Overhaul Centre for Airbus Aircraft’)


Ladies and gentlemen,

Assalamualaikum Warahmatullahi Wabarakatuh and a very good afternoon.

First of all, allow me to express my gratitude to Sepang Aircraft Engineering, EADS and Airbus for inviting me to this momentous occasion. I am indeed very happy to be here to officially mark the ‘expansion of SAE Regional MRO Centre’ and the ‘ launch of Airbus new Customer Services Centre in SAE offering specialized Engineering solutions for airlines’. I regard this as another milestone in the development of the aviation industry in Malaysia, and a commendable step forward for the Malaysian industry.
Ladies and Gentlemen,

Air transport changed the landscape of our economy and society. Its contribution goes far beyond direct economic effects. It promotes international trade, tourism and stimulates investment throughout the globalized world. It is a major driver for economic and social development, it has in fact made the world much smaller. Today the aviation industry continues to be resilient in spite of huge challenges from all around. Despite economic uncertainties and crisis in many parts of the world, the industry has grown just over 50% since the year 2000.
3. It is said that if aviation was a country, it would rank 19th in terms of GDP. The annual growth rate in air traffic is forecast to be about 4.7%. The driver for air traffic growth is economic growth. Increasing urbanization will also drive economic growth and the propensity to fly. Another key driver is the growth in middle classes. Today, 30% of the world can be classified as middle class, with forcasts suggesting that will be 60% by 2031.

4. The outlook is indeed most promising, especially for this part of the world. Industry experts predict that Asia Pacific will lead in world traffic volume by 2031 accounting for 32% of global traffic. This is on the back of a burgeoning middle class in the region which, in the same time period is expected to grow by 5 fold.

5. Inevitably, airlines will require more aircraft, and ones with greater sophistication, energy efficiency and comfort to boot. The demand would appear to be insatiable. By 2030, the passenger fleets will very likely double, and as I understand it, Airbus believes that of these 30% will be replacement aircraft and about 60% will reflect growth and expansion.

6. In tangent with this, the demand for MRO services will indubitably increase. Even now, good MRO services are highly sought after. There are 80,000 jet-powered aircraft in the civil aviation market. Easily one third of this is operating in the air transport market, and a third of that in the Asia Pacific region. In Malaysia alone, we have three major airlines flying on average about 2500 to 4500 hours per annum per aircraft.

7. It is no surprise therefore that he global civil aviation MRO business is estimated to be worth over USD 65 billion. Today, North America holds 35% of the market share, Western Europe 26% and the Asia Pacific 17%. By 2020, the Asia Pacific is forecast to command a whopping 30% share. Consequently, growth in the Asia Pacific in MRO is forecast to be more than 6% per annum. Hence the center of MRO activity will be moving in our direction.

8. The market as you know contains four distinct segments: heavy airframe maintenance, line maintenance, engine and component. In Malaysia, heavy maintenance is undertaken by companies like SAE, line maintenance by MAS and AirAsia respectively, engine overhaul by GE and component by MTU.

9. The heavy maintenance accounts for about 20% of the MRO revenue with heavy emphasis on labour. Labour represents about 70% of the typical cost, whereas materials make up another 30%. Every Ringgit spent on heavy aircraft maintenance generates about 40% economic activity for the country. Hence it is an important segment for job creation in Malaysia. It is for this reason that the Malaysian Government stands ready to support the growth of this industry with a view of seeing the participation of more Malaysians in this highly specialized field.

10. Today, Malaysia is among the leading three countries in the Asia Pacific for MRO services. We have been able to stay competitive because of the sheer volume of business in this region coupled with our advantage of an early foray into the sector, and an edge in quality human capital at far more competitive rates. Our superior cost position is powerfully attractive to airline customers.

11. Malaysia has thus identified the MRO business as one of the sectors in the Business Services Entry ‘National Key Economic Areas’ (NKEA). The NKEA represents an important catalyst for our development toward a high-income nation status in 2020. The MRO sector is projected to grow by 10% annually and new projects are expected to create 20,000 jobs in the country. This year our ‘Entry Point Projects’ (EPP) target RM 380 million in revenue from fleet technical management and RM 2.4 billion from airframe MRO.

12. Several initiatives are already underway to develop the MRO ecosystem. There is the greater development of Malaysia’s airport infrastructure, the availability of land and the creation of a more conducive operating environment through improved tax and civil aviation regulations. These, we are confident, will continue to make Malaysia a preferred MRO destination.

13. However even as we speak, we are ever mindful of the changing landscape of the industry. There is more involvement of OEMs. Aircraft manufacturers are more involved in supporting their aircraft after delivery. The trend of airlines asking for aftermarket services will increase. The OEMs have the intellectual property to be able to drive a high reliability rate and be accountable for achieving them. The continued investment in facilities, the focus on process innovations, technology breakthroughs and training are ever pressing to ensure competitiveness. There is also the persistent issue of whether the industry can produce enough skilled personnel to meet mounting MRO requirements. Full training and certification for an aircraft technician takes between 5-8 years and the pipeline of trainees is simply not enough to meet future demand.

14. In respect of the changing landscape, having Airbus onboard as a partner in SAE is definitely a good strategic fit to stay relevant and on the cutting edge of a very competitive industry. The partnership brings in new technology and innovative processes and at the same time develops the local talent pool. I am especially pleased and excited to see this kind of entrepreneurial spirit and partnership that makes Malaysia progressive.

15. Since 2008, the company has grown steadily to support both local and international customers. In 2012, SAE has secured EASA 145 certification, creating a potential to establish a regional presence. I understand it has already completed A380 wing ribbed modification for Singapore Airlines and Korean Airlines. It is serving regional airlines such as Myanmar Air, Mandala, Tiger Airways, Asian Wings Airlines, to name a few. I am certain SAE will continue to implement the highest standards in its service delivery.

16. I am certainly pleased to see the commitment that Airbus is making to develop its presence in Malaysia. SAE will be able to offer world class maintenance services to airlines from across the region and beyond, while the new Airbus Customer Services facility will put Malaysia on the international map as a centre for specialised aerospace engineering services. Both of these initiatives will significantly enhance our position in this high value business and it will also provide further proof that Malaysia is a major player in the MRO business in the region. It is my fervent hope that SAE’s entrepreneurial spirit will become a role model for others in Malaysia and that EADS and Airbus will pursue their Smart partnership and investment Policy with the local industry, towards making Malaysia as a fully recognized, mature Aerospace and MRO Hub regionally.

Ladies and gentlemen,

17. With the development of our own MRO capability, I would encourage our airlines to look no further than Malaysia for the full suite of maintenance, repair and overhaul. The potential of the MRO business is huge and growing. It is an important catalyst in Malaysia’s development towards high-income nation status. The aspiration is to capture 5% of the world market share of the MRO business. Thus the Government will be most supportive of any efforts to partake in this journey.

18. I congratulate SAE first and foremost on its entrepreneur spirit, and successes. I look forward to see you grow from strength to strength and to continue to make Malaysia proud. Thank you for inviting me today to celebrate this special occasion and I wish SAE, EADS and Airbus a very good journey forward.

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