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April 2015

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Avioserv has been acquired by Aergen Leasing. Avioserv specialises in the sale, lease and trading of later-life engine parts, engine components and whole engines to airlines, repair facilities and parts distributors. The combined companies have raised an initial $200 million of committed equity capital from a group of financial and strategic investors led by Greenbriar Equity Group, and plan to raise additional equity funding to support future growth. Aergen will leverage the technical analysis and expertise of Avioserv as it builds and manages a fleet of mid-late stage narrowbody aircraft.

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ST Aerospace has signed a joint venture agreement with Tenryu Holdings to set up ST Aerospace Aircraft Seats. The joint venture will have a planned investment of $29.8 million. ST Aerospace will own 90% of the shares, with the remaining 10% to be held by Tenryu. Based in Singapore, ST Aerospace Aircraft Seats will be responsible for the end-to-end design and manufacturing of a range of aircraft seating solutions. The company’s long-term business roadmap will include a series of economy, business, as well as first class seats. It will be marketed as part of ST Aerospace’s global network, working in tandem with the other network members to deliver an integrated cabin interiors offering.

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The HAECO Group reported an attributable profit of HK$573 million in 2014. This compares with a profit of HK$625 million in 2013. Revenue increased by HK$4,540 million to HK$11,927 million. The acquisition of TIMCO Aviation Services Inc in February 2014 accounted for HK$2,885 million of the increase in revenue.

 

Demand for line services of HAECO in Hong Kong (HAECO Hong Kong) was stable. Airframe maintenance results in Hong Kong continued to be adversely affected by capacity constraints caused by labour shortages, though these eased in the second half of the year. Though more staff were employed, it takes time to train them. Demand for component and avionics overhaul services in Hong Kong fell substantially as a result of the retirement of Boeing 747-400 aircraft. However, cost savings achieved through stringent cost control helped improve the overall performance of HAECO Hong Kong. The performance of Hong Kong Aero Engine Services Ltd (HAESL) was badly affected by the retirement of the Airbus A340 and Boeing 747-400, coupled with a reduction in the frequency of scheduled maintenance for Trent 700 engines.

 

HAECO USA Holdings completed the acquisition of TIMCO Aviation Services in February 2014. HAECO Americas recorded a loss for the period following the acquisition. This principally reflected the costs of reducing the size of a seat manufacturing facility in California, coupled with the finance charges associated with the acquisition. HAECO Americas’ airframe maintenance services produced good results. Its cabin and seat business was adversely affected by the deferral of some work.

 

The profit of Taikoo (Xiamen) Aircraft Engineering Company Ltd (HAECO Xiamen) decreased slightly. It did less airframe maintenance work, moving to focus on private jet conversions. Revenue and profit of Taikoo Engine Services (Xiamen) Company Ltd (TEXL) increased substantially as more engines and components were overhauled. The profit of HAECO ITM increased in 2014, due to a higher utilisation of rotable parts as its operations increased. Taikoo (Xiamen) Landing Gear Services resumed landing gear overhaul work for customers in April 2014. It reported a higher loss in 2014 than it did in 2013. This was mainly because the 2013 results included income from a business interruption insurance policy. HAECO Component Overhaul (Xiamen) Ltd started operations in May 2014, incurring a loss, which reflected the company’s staff training and start-up costs. The overall contribution from the Group’s other joint ventures in mainland China improved.

 

As training of new recruits progresses, airframe maintenance capacity in Hong Kong will increase in 2015. Demand for line services in Hong Kong is expected to fall, mainly as a result of the loss of work from a significant customer in 2014. Demand for HAECO Americas’ airframe maintenance services is expected to weaken, while the performance of its cabin and seat business is also expected to improve. Demand for HAECO Xiamen’s airframe maintenance services is expected to improve, but less private jet conversion work is on the cards. HAESL’s performance will continue to be adversely affected by the retirement of A340 and 747-400 aircraft and by the reduction in the frequency of scheduled maintenance for Trent 700 engines. TEXL is expected to continue to perform well.

 

The municipal government of Xiamen’s proposal to develop a new airport at Xiang’an is being evaluated by the National Development and Reform Commission in Beijing. The timing of the development of the new airport and its impact on the operations of HAECO Xiamen and other HAECO Group companies at the existing airport are not clear. Management maintains regular communication with the local authorities in order to understand the likely path of development.

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