Aerospace industry is making an Asian pivot of its own

Published by Christian Science Monitor Global Outlook, March 11, 2014.

The aerospace industry – and its supporting services, from parts and equipment manufacturers to maintenance, repair, and overhaul firms – are pivoting to Asia. The Asia-Pacific region will account for one in three new aircraft deliveries over the next two decades.

Despite the disappearance on March 8 of a Beijing-bound Malaysia Airlines flight – which might turn out to be Southeast Asia’s worst aviation disaster – the commercial aviation industry is flying high in Asia.

Just as US foreign policy makes its Asian “pivot,” western aerospace companies are turning to the world’s fastest-growing economic region and the largest air travel growth market in the world.

That means huge demand not just for new aircraft but also for supporting services, including parts and equipment manufacturers, MROs (maintenance, repair and overhaul firms), new and expanded airports, trained pilots, crews and high-skilled technicians, and related education programs.

Asia (excluding China) will be the largest MRO market in the next decade, accounting for $6.6 billion in growth from 2012 to 2022, followed by China and the Middle East, each with $4.6 billion in growth for the same period, management consultant ICF International projects.

“The link between Asia and the United States grows stronger each and every day,” Michael Huerta, head of the US Federal Aviation Administration, said at last month’s Singapore Airshow, Asia’s largest aerospace and defense exhibition, where a record $32 billion in deals was struck. “As Asian economies continue to expand, we anticipate that air travel between Asia and the United States will remain one of the healthiest markets worldwide.”

The Asia-Pacific will account for one in three new aircraft deliveries over the next two decades, tripling its commercial fleet from 5,000 today to about 15,000, aircraft manufacturers Airbus and Boeing project. The two aviation giants also predict the Asia-based airline fleet will overtake that of both North America and of Europe by 2032.

“Fleet growth requires the support infrastructure to grow and align with it,” says David Stewart, vice president of ICF International. “Support means getting the right parts at the right time, ensuring the right training is available, keeping the planes flying with appropriate resources and technical help, and making sure the supply chain is sorted out.”

Emerging Asian economies, including China and India, and rising consumer affluence are driving the growth. Routes within or connected to China will be the single largest driver of growth over the next four years, accounting for 24 percent of new passengers, according to the trade association International Air Transport Association (IATA).

“There are about 280 cities in East Asia that have a million or more people and that lack an airport,” says Bryan Erwin of the US Department of Commerce’s International Trade Administration. “That gives you a sense of the opportunities.”

The focal point for US companies expanding eastward is strategically located Singapore, with its strong US ties and brisk trade relations, and a highly developed industry infrastructure that is ready-made to host and foster aerospace industry growth. Singapore is emerging as Asia’s hub for aviation just as it was the key midpoint on the sea trade route between China and British India two centuries ago.

American companies like Pratt & Whitney are vastly expanding their operations in Singapore. P&W recently opened its eighth and broke ground on its ninth business in Singapore, which is now home to P&W’s largest commercial engine overhaul and repair operations outside the United States.

“This opening marks a major milestone for Pratt & Whitney and demonstrates our commitment to such an important region for our business,” P&W President Paul Adams said as the company marked its newest opening in February. The company’s presence in Singapore, he added, “continues to grow today thanks to its highly trained, technically skilled workforce, and close proximity to our many customers in the Asia Pacific region.”

The U.S. aerospace industry contributed $128.6 billion in exports in 2013, an 8.6 percent increase over 2012. Aerospace remained the industry with the largest surplus among US manufacturers in 2013, reaching $76.1 billion, a 7.8 percent increase from 2012. (The next-highest trade balance, for chemicals, stands at $29.9 billion).

During a visit to Singapore last summer, Vice President Joe Biden called a local P&W plant “a reminder of what’s at stake, the livelihoods of good and decent people, decent paying jobs from Southeast Asia to my home country.”

“America,” the vice president added, “is all in here in Asia.”