HAECO Xiamen thrives on China e-commerce

Money Glitz | Staff reporter 11 Jun 2018

The Xiamen operations of HAECO (0044) have benefited from the burgeoning e-commerce activities in mainland China as courier service providers build up their own fleet by converting passenger aircraft into cargo carriers.

Summit Chan Ching, chief executive of Taikoo (Xiamen) Aircraft Engineering, says that despite the growing number of wealthy people in China and Asia and the relatively low private jet penetration rate compared with Europe and America, the firm's private jet work business is cyclical as it depends on the economy and the schedule of aircraft makers launching of new models.

His comment came when HAECO Xiamen recorded a year-on-year revenue growth of 159.8 percent in 2017 in private jet solutions.

On average, it costs between US$20 million (HK$156.9 million) and US$30 million to modify an aircraft into a private jet. Costs are higher for special designs. Customers can choose from a range of high-quality materials at HAECO Xiamen design workshop to refurbish cabins.

The Xiamen company is 58.55 percent owned by HAECO, a member of Swire Group. HAECO also has operations in Hong Kong, which is responsible for relatively light maintenance service, and in America, which serves mainly narrow-body aircraft.

HAECO Xiamen serves more than 100 global customers.

As of December 2017, it recorded a 43.6 percent year-on-year growth of net profit to HK$135 million.

It is capable of handling maintenance for various Boeing and Airbus models, even A380. With six double bay wide-body hangars, it can accomodate 12 wide-body and five narrow-body aircraft simultaneously. Chan says that by using some extra space, it can serve some 20 aircraft simultaneously during peak season such as March.

Aircraft park at HAECO Xiamen for services can range from 9 days to more than 70 days.

While the third quarter is a peak time for travel, it is a low season for the aircraft maintenance service provider.

But Chan says it has evened out this year, thanks to business from several courier companies, which are converting small passenger aircraft for cargo operations. The conversions generate good profit margin.

Demand also comes from premium airlines, which need cabin modifications for seats, beds, entertainment facilities, and so on for business class and adding economy seats. This can help offset reduced maintenance demand with more new aircraft, Chan says.

These works are classified as airframe services that contribute 80 percent of revenue to the firm and 3.76 million work hours were sold in 2017, he believes the maximum capacity of 4 million work hours could be reached this year. Since there is no room for further expansion, efficiency enhancement works have been done.

Since 1993, HAECO Xiamen has completed maintenance work for more than 3,000 aircraft.

He believes the firm will also benefit from more aircraft leasing activities as airlines would need modifications when they get and return aircraft from the lessors.

HAECO Xiamen is able to fabricate some 3,000 aircraft parts. With manufacturers including Airbus, Boeing, and China's COMAC having or planning to have assembly lines in the mainland, Chan expects this segment to grow.

Airports in Wuhan and Harbin are the latest two destinations of its 12 maintenance stations across China, serving over 70 airlines. It also runs a training and license examination center where most of its 4,500 staff are trained and courses are offered to other organizations too.

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