Aerospace Industry

An Expert's View about Aerospace in Singapore

Posted on: 25 Feb 2012


The Asia Pacific aerospace industry has made remarkable strides over the past decade given the positive economic growth across the region. Singapore has become an industry leader by carving out its own niche market within the Asian aerospace industry. Singapore has become the region’s aerospace hub, a leader in aerospace maintenance, repair, and overhaul (MRO) services, and has promoted significant investment in research and development (R&D). Given Singapore’s strong position in the industry, and home to many aviation base operations, incentives for American firms to enter the Greater Asia aerospace market have increased.

Market Demand

Singapore’s aerospace industry revolves around MRO activities. With the expected growth in air traffic in the region, the demand for MRO services will also increase. Low-level MRO services will continue to support Singapore as the regional MRO services hub in an attempt to supply the increasing demand. Singapore has become the region’s MRO Hub as a result of the Government of Singapore’s (GOS) specialization initiatives within the aviation industry during the 1990s. Singapore Technologies Aerospace (ST Aerospace) has become the world’s largest third-party MRO provider. Singapore is a regional MRO hub and provides significant opportunities for American companies interested in ‘nose to tail’ MRO activities.

Emphasis on specialization has produced a significant level of aerospace research and development in Singapore and spurred growth of the aviation industry in the region. Local universities such as the National University of Singapore (NUS) and the Nanyang Technological University (NTU) have worked with both public and private sector companies on many promising niche market projects. These projects are usually developed in conjunction with established R&D operation in Singapore. Major aerospace companies that have R&D facilities in Singapore include Boeing, Thales, Rolls-Royce, GE and ST Aerospace.

Singapore also has an established OEM market that is supplemented with an international supply chain for the aerospace industry. As a result, the OEM sector experienced close to a 14% Compounded Annual Growth Rate (CAGR) over the last decade. Products designed and manufactured in Singapore include: engine casings, engine gears, and valves to seat actuators, electrical power systems and galley equipment. From 2010 to 2014, the global MRO market is predicted to grow from $41.5 billion to $50.8 billion or at a 5.2% compound annual growth rate (CAGR). Despite the 2008 Global Financial Crisis and the 2009 market contraction, the modest growth in 2010 suggests a strong recovery for the MRO sector. With an increase in ageing aircrafts, MRO services are expected to increase.

One of the recent positive developments within Singapore’s aerospace industry has been the announcement of the Air Cargo Express (ACE) Hub in Changi Airport’s free trade zone. Singapore is now the fourth busiest air cargo hub in Asia and the regional air cargo hub growth will only strengthen its position.

Changi Airport Group (CAG) has budgeted over $21 million in investments for structural improvements including an additional two aircraft cargo bays. A land lease agreement has already been signed for the project.

In order to support the future development of Singapore’s aerospace industry, a new aerospace park is being developed at the Seletar Aerospace Park (SAP) and will host a variety of aerospace activities including R&D and MRO services. The SAP is expected to contribute $3.0 billion value-added activities annually and create 10,000 new aerospace-related jobs by 2018.

Market Data

The Singapore market grew strongly due to the overall growth levels within the region. MRO services remain the largest market in the Singaporean aerospace industry. As the regional MRO hub, Singapore holds nearly 20% of the Asia-Pacific market share, at $3.75 billion. Engine overhaul made up the largest portion of MRO spending, generating just under half of the MRO market. Activities such as line maintenance and component overhaul and repair, also contributed to the market. Growth is expected to continue and increase as companies continue to make-up for a lack of activity following the global financial crisis.

Best Prospects

The Asia-Pacific region’s high growth rates in recent years are expected to lead the regional aerospace industry out of the global financial crisis. In 2009, travel within the region surpassed that of North America for the first time. The Asia-Pacific region is viewed as the ideal location due to the continued growth and investments in the aerospace and aircraft service market.

The ASEAN Open Skies Agreement was signed in January 2010 (with full liberalization expected by 2015), and the ten ASEAN member countries (Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) will liberalize their markets and enable regional carriers to make unlimited flights between capital cities. This agreement will encourage airlines to land in ASEAN countries by removing prohibitive costs, such as tariffs, which in turn will increase flight numbers. The demand for aircraft and MRO services is expected to surge in the near future. Singapore aims to grow from 10% of aerospace manufacturing output within the region to 30% in the next 20 to 30 years, and the region is predicted to account for nearly a third of the world’s total global aircraft fleet size by 2020. Given the increase in demand, there are many opportunities for U.S. firms that provide aviation related services and equipment.

Key Suppliers

The aerospace manufacturing industry is facing strong competitive forces, and is forcing industry players to adjust their outlook for long-term growth. Rising oil prices has caused Western suppliers to look towards lower cost regions such as the greater Asia-Pacific region. Singapore’s connectivity and infrastructure make it an ideal location for aerospace companies to setup regional headquarters and distribution centers in the Asia-Pacific region.

Most major American aerospace and aircraft parts and service providers are represented in Singapore. Some of the major aerospace corporations located in Singapore are: Rolls-Royce, GE Aviation, Boeing, Pratt & Whitney, Lockheed Martin, Raytheon, Lufthansa Technik, Messier-Dowty, Nordam, Rockwell Collins and Honeywell. Foreign companies such as the Brazilian Embraer, French Thales, and EADS, operate out of Singapore through established headquarters or agents and distributors. Brazilian Embraer chose Singapore as its regional logistics and spare parts hub, and rotable support to regional airline customers.

Rolls-Royce has established its first hollow titanium wide chord fan blades (WCFBs) manufacturing facility outside the UK. GE Aviation built a manufacturing engine components plant in Singapore and recently expanded its GE Aviation Services Operations facility in Loyang.

Singapore has expanded its manufacturing capabilities in high precision aircraft component and systems, and has a complete range of MRO capabilities for both passenger and freight aircraft. Singapore companies have also been successful in building on their capabilities in maintenance and overhaul, high precision engine components and systems, and have substantial R&D investments in repair development and engineering design. 

Read the full market research report

Posted: 25 February 2012

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