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Aerospace Market Brief - Singapore Section I Narrative A. Summary by sew21405

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									Aerospace Market Brief - Singapore

Section I: Narrative

A. Summary

Singapore is a proponent of liberalized aviation policies and expansion of open air traffic policies
throughout Asia. It has promoted these policies in international fora such as ASEAN meetings.
Over the past couple of years, Singapore has signed eleven liberalized air services agreements
and one new air service agreement. In the process of liberalizing its aviation policy, Singapore is
also promoting its key role as a regional aviation hub.

Singapore actively encourages the growth of the aerospace industry. Aerospace is considered a
high value-added industry and is targeted in the “National Technology Plan.” According to the
government's Economic Development Board (SEDB), the total output of the aerospace industry
totaled US$2.54 billion in 2004. Repair and overhaul activities accounted for US$2.29 billion or
90.0% of the total output of Singapore's aerospace industry in 2004. Anecdotal evidence indicates
that this figure has been growing at an average of 10% annually for the last five years due to
Singapore's development as the aviation hub of South East Asia. We conservatively estimate a
10% average growth rate over each of the next three years.

Singapore is home to original equipment manufacturers (OEMs) from the United States, United
Kingdom, France and elsewhere that either set up their own repair centers here or in joint ventures
with local companies. They rely mainly on parent companies for the repair equipment. There are
also local aircraft repair and overhaul companies that manufacture aircraft spares and
components, and provide repair and overhaul services. In general, Japanese and German
manufacturers are the market leaders for aircraft repair equipment such as basic machine tools.
Prominent players in Singapore's aircraft repair and overhaul business include the Singapore
Technologies Aerospace (STA) Group, with subsidiaries in Mobile, Alabama (called MAE) and
most recently in Corpus Christi, Texas; SIA Engineering Company (SIAEC); Singapore
Technologies Electronics Limited; Rockwell Collins; GE Aviation Service Operation Pte Ltd
(GEASO); Samaero; Rohr Aero; and Messier-Dowty, Pratt & Whitney, Thales, Rolls-Royce,
Eurocopter, EADS, Honeywell, as well as Hamilton Sundstrand, Kidde, Airfoil Technologies and
The Nordam Group.

Singapore has one of the most open economies in the world. There are no special restrictive
trade regulations to sell aircraft related equipment and accessories here. There is a 5.0% Goods
and Services Tax (GST) applied equally to foreign and domestic products. Foreign firms have
ready access to credit and to modern banking and financial services.

The Singapore Economic Development Board (SEDB), the Civil Aviation Authority of Singapore
(CAAS), the Standards, Productivity, & Innovation Board (SPRING Singapore) and the US Federal
Aviation Administration (FAA) provide the necessary information on tax and financial incentives,
airworthiness standards, quality assessment and certification respectively. Their contact details
are available via their websites at http://www.sedb.com, http://www.changi.airport.com.sg,
http://www.spring.gov.sg and http://www.faa.gov respectively.


Market Overview and Outlook

The Singapore aviation industry has come a long way since its humble beginnings in the 1950’s.
In terms of commercial air transportation, the Singapore aviation industry has grown significantly to
encompass a broad spectrum of aviation activities. The key segments of Singapore’s aviation
industry today include: aerospace and aviation-related technology, airport infrastructure, air
transportation and air logistics, and aviation asset financing and leasing.
Aerospace and Aviation-related Technology: The aerospace segment of the aviation industry has
achieved sustained growth over the past two decades. Employing over 11,000 people, the
Singapore-based aerospace industry registered an output of $2.54 billion in 2004.

Maintenance, Repair and Overhaul (MRO): The development and expansion of the aerospace
industry is due in large part to MRO activities which comprised 90% of Singapore’s aerospace
sector’s $2.54 billion output, a 16.3% rise in 2004. Singapore is one of the most comprehensive
MRO locations in the Asia Pacific region, offering a full range of MRO services, including airframe
maintenance, engine overhaul, engine component repair, structural systems repair and avionics
systems repair.

Singapore’s MRO industry is expected to grow by 7% annually over the next 10 years, fuelled by
the rise of low-cost carriers across Asia and fleet expansions. Boeing estimated that Asian airlines
may take deliveries for 7,163 aircraft valued at $770.2 billion, or 36% of the industry total in the
next two decades. Asian airlines, which ordered more than 290 planes in 2005 from Boeing,
Airbus and other manufacturers valued at $29.4 billion, are renewing and expanding their aircraft
as econonmic growth spurs air travel. Boeing added that Asia’s passenger traffic is estimated to
grow 6.0% each year until 2023, faster than the 4.8% world average. Under these circumstances,
there is still significant room in Singapore for MRO activities to grow in terms of depth and scope of
capabilities. Companies are strongly encouraged to engage in repair development activities,
leveraging on the expertise of the various research institutes in Singapore to further strengthen
their core repair capabilities. In addition, a good strategy to enhance market access is to establish
asset management activities in Singapore. These assets, referred to as rotables, could entail a
wide range of aircraft components and systems, such as engines, landing gears and avionics.

Manufacturing: Manufacturing activities constitute the remaining 10% of the aerospace industry’s
output. Aerospace products manufactured in Singapore include engine components, landing
gears, avionics systems, aircraft structural components and helicopter transparencies. Through
two Local Industry Upgrading programs (LIUP), spearheaded by Singapore Aerospace
Manufacturing and Messier-Dowty Singapore, the Singapore market is nurturing a ready pool of
suppliers offering a variety of engineering support services, such as precision machining, casing,
surface treatment, printed circuit board manufacturing, metal stamping and rubber molding.

Singapore will continue to develop its aerospace manufacturing industry and the relevant
supporting capabilities. New areas of focus will include avionics and satellite systems and
components where Singapore can leverage on the complementary capabilities of its highly
developed electronics industry.

Research and Development (R&D): Over the last few years, Singapore companies have
advanced into the high knowledge-based R&D sector and the most successful player has been
Singapore Technologies Aerospace (STAe). The company was a partner in the EC120 light
helicopter development program where it was responsible for the complete range of engineering
activities involving design, prototyping, certification and serial production of the complete rear
structure, cabin door and fuselage components. Further, STAe successfully developed
engineering solutions for the Boeing 757-200 passenger-to-freighter conversion in partnership with
Boeing.

On the MRO front, many companies have worked with research institutes in Singapore to develop
repair process technologies, such as 3-D grinding/polishing, honeycomb repair, turbine blade
surface cleaning and EMI shielding.

Research and development will be a key area of focus for the aerospace industry. The increasing
electronic content in aircrafts provide significant opportunities for American firms to develop value-
enhancing systems like remote diagnostic tools, in cabin info-communications and in-flight security
systems.

Aviation-related Technology: On November 10, 2005, EADS announced its decision to locate its
research and technology center in Singapore, the first outside Europe. The EADS facility, which
will research commercial aircraft and defense-related products and technologies will initially hire
approximately 25 people. Just a month earlier, Boeing also picked Singapore’s Agency for
Science, Technology and Research as its latest international research partner to develop anything
from stronger and lighter materials for planes to better in-flight entertainment.

EADS’ and Boeing’s decision to do research work here will boost Singapore’s status as a center
for aerospace technology for the Asia Pacific region. Singapore’s key advantages include strong
intellectual property protection, a research environment that attracts researchers from across the
globe and a strong aerospace MRO and industrial base.

Airport Infrastructure, Air Transportation and Air Logistics: The Singapore Changi Airport, operated
by the Civil Aviation Authority of Singapore (CAAS), commenced operations in 1981. In addition to
serving regular airline passengers, CAAS established a dedicated facility in Terminal 1 to cater to
business travelers who typically demand exclusive and speedy passage through the airport.
Today, a record 83 airlines operate in Singapore, flying to 178 cities in 55 countries around the
world.

CAAS will continue to invest in the necessary infrastructure while simultaneously upgrading
existing facilities to meet and exceed the demands of passengers and airlines that view Changi
Airport as one of the best airport facilities in the world. Construction of the new Terminal 3 is
underway, and when completed the new terminal will increase the capacity of the airport from 44
million to 64 million passenger movements per year.

Aviation Asset Financing and Leasing: Aviation asset financing and leasing has become more
prevalent in recent years. Singapore aims to establish itself as the Asian capital for aviation asset
financing and leasing, attracting leading companies to base their headquarters here.

Singapore Aircraft Leasing Enterprise (SALE) is a major player in the aircraft leasing industry, with
aircraft being leased to 16 airlines in 13 countries. Other players in Singapore include Regionair
and its sister company, Aerostar, which provide both dry and wet leases to airlines in the region.
Numerous international aviation asset financing, leasing and consultancy companies are also
represented in Singapore.

Budget Aviation Market: Budget airlines are beginning to make inroads in the region, and the
market is becoming increasingly competitive. A fourth player, Jakarta-based Lion Air, has joined
the fray in tandem with the like of Singapore-based Valuair, Jet Air and Tiger Airway. AirAsia is
still awaiting approval to fly from Changi to Kuala Lumpur. Most of these low cost carriers offer
short-haul flights to regional destinations such as Bangkok and Bali.

Military Aviation: Singapore’s defense budget for Fiscal Year 2005 (FY05) is approximately $6.6
billion. The next ten years will see major new developments in the Singapore Armed Forces
(SAF), which should make it the region’s strongest fighting force. Singapore’s Armed Forces has
recently acquired stealth frigates with shipborne helicopters, attack helicopters, a new generation
of fighter aircraft, and replacements for the airforce’s E-2C aircraft. In fact, eight new AH-64D
Apache Longbow helicopters have recently been added to the airforce’s inventory, plus another
twelve on option. The remaining A4-SU Super Skyhawks will be phased out in five to ten years.
The Republic of Singapore Air Force (RSAF) has chosen the F-15T Strike Eagle as the
platform to replace the ageing A4-SU Super Skyhawks.
The bulk of the transport helicopter fleet is to be progressively modernized with four additional
CH47SD Chinooks, and a priority requirement has been identified for the replacement of the UH-
1Hs.

Singapore is the first and only Asian country to acquire a “major participant” status in the
DEM/VAL phase of the US JSF program, which is a potentially significant step with regard to
combat aircraft projects.


B.   STATISTICAL DATA

Detailed statistical data on aircraft repair or equipment is not available, but the sector is believed to
represent about 8.0% of the total aerospace industry of Singapore. The following statistical data
reflect the Value Added and Total Output for the aerospace industry, of which 90.0% constituted
repair and overhaul activities in 2004.



                     (U.S. DOLLARS MILLIONS)                      Est. Avg. Annual Real
                     2002        2003        2004                 Growth – Next 3 Years
Value Added          1,058       1,000       1,124                10%

Total Output         2,411          2,240           2,544         10%

Exchange Rates       1.69           1.69            1.69


Future Inflation Rate Assumed: 2.5%

Note: Value Added is derived as the difference between Total Output and associated inputs.

Source: Singapore Economic Development Board.

Receptivity Score (1-5): 4

A receptivity score of 1 means not receptive, while a score of 5 means the market is extremely
receptive.


C. MARKET ASSESSMENT

Statistics from the SEDB showed that more than 90.0% of Singapore’s aerospace industry is in
repair and overhaul services, which represents the market base for aircraft repair equipment sales
in Singapore.

According to the SEDB, the Singapore’s MRO sector contributes an estimated 6.0% to the global
MRO market and 25% to the Asian MRO market. Singapore is today one of the most
comprehensive MRO locations in the Asia Pacific region, offering a full range of MRO services,
including airframe maintenance, engine overhaul, engine component repair, structural systems
repair and avionics systems repair.

It is our view that Singapore's young aerospace industry is the leading regional aerospace player.
For a start, Singapore's goal to develop a first class one-stop hub for repair and overhaul is
becoming a reality as more and more companies use Singapore as a regional base to service
aircraft.
It is evident from press reports that the competitive aviation markets elsewhere in Asia is driving
lean and hungry aerospace players in the region in search of cross-border contracts, heating up
competition and driving down margins. Singapore is arguably the Asian leader in the aerospace
repair and overhaul segment, but watches carefully as other Asian rivals eagerly develop their own
aerospace industries. However, with its convenient location on major world transport routes and
access to a pool of skilled labor at relatively competitive rates, Singapore has created for itself a
particular niche in the airframe maintenance repair business which accounted for 34% of the total
repair & overhaul (R&O) output in 2004. Other capabilities in the R&O segment include R&O of
aircraft engines and power generation (34%), R&O of avionics & systems (18%) and repair of
aircraft structures (3.0%). However, with Singapore’s rapidly rising labor costs in recent years,
neighboring countries pose a formidable challenge in the R&O business.

With an increasing number of OEMs setting up maintenance facilities at locations convenient to
their customers, the scope of repair capabilities in Singapore has expanded to support the
introduction of new aircraft, such as the Airbus A380, and possibly Boeing's 787 in the years
ahead.

Singapore is developing manufacturing capabilities for aircraft components and parts. The
industry is able to draw on mechanical skills that have been developed over 20 years in precision
machining and metal fabrication. This makes Singapore an attractive manufacturing location for
high value-added and critical aerospace components.

The Asia Pacific region is widely considered the most promising market for the aerospace industry
worldwide, holding the key to future growth over the next few years. With growing influence and
intra-regional trade, tourism and investments, this region is already the fastest growth area for air
transport and is expected to remain so for the foreseeable future. In the view of the SEDB,
Singapore’s role in this context is to become:

(a) An integrated one-stop regional center for comprehensive and high value-added repair and
overhaul of aircraft and aircraft-related components.

(b) A base for the development and manufacturing of critical and high value-added aerospace-
components and complete sub-assemblies.

(c) A strategic partner for leading international aerospace companies in the design and production
of aircraft systems, engine components and avionics.

(d) A technology center for the research and development of aerospace repair and manufacturing
processes.


D. BEST SALES PROSPECTS

Despite regional economic problems in the recent years, and the more recent economic slowdown
exacerbated by the September 11 terrorist attacks on the U.S. and the SARS episode, the Asia
Pacific region still is poised to be one of the aerospace industry's strongest growth engines for the
foreseeable future.

In this regard, it is our view that the outlook for the next few years in the local aerospace industry
will be encouraging. Sales prospects for any products and services related to aircraft repair and
overhaul, such as repair equipment for landing gears and propellers, brake linings, tires, engines
and fuel systems, avionics systems and equipment, fan blades, test equipment, etc., will likely
receive a boost in the next few years.
E. COMPETITIVE SITUATION

The market for aircraft repair equipment in Singapore is comprised largely of OEMs that either set
up repair centers themselves or in joint ventures with local companies, and local aircraft repair and
overhaul companies that manufacture aircraft spares and components and provide repair and
overhaul services. These OEMs and local companies are end-users of aircraft repair equipment,
although the OEMs rely mainly on their parent companies for their repair equipment. In general,
for equipment such as basic machine tools, Japanese and German sources are the market
leaders.

The United States maintains a dominant position in the aircraft maintenance market in the region.
The only significant local production of aircraft maintenance equipment in Singapore is the
fabrication of aircraft hangars and maintenance docks. Singapore is unlikely to become a major
producer of maintenance equipment because the government’s focus is on aircraft R&O services
and, to a lesser extent, manufacturing of aircraft structure, engine components and composite
structures.

According to trade statistics from Singapore trade promotion agency, the International Enterprise
Singapore, imports meet most of the market demand for aircraft maintenance equipment. Growth
in imports is expected to continue as the market for aircraft maintenance remains buoyant. This is
especially true because local production will likely remain minimal.

The U.S. market position will remain strong because of its dominant position in the aircraft market
worldwide. While Airbus challenges the U.S. share of the aircraft market, the bulk of Airbus
aircraft parts originate from American manufacturers. Generally, aircraft maintenance firms are
biased towards buying repair and testing equipment that is closely associated with the original
manufacturer. Thus, American firms should enjoy an advantage in the maintenance market
because of their association with major aircraft manufacturers such as Boeing, Lockheed Martin,
Northrop Grumman, Cessna, Gulfstream, Bell Helicopter and Sikorsky.


F. END-USERS’ PROFILES

There has been a trend toward international alliances, in the form of consortia or risk-sharing
projects. For example, Singapore Technologies Aerospace has a partnership with Aerospatiale of
France and China's CATIC in the EC120 light helicopter project. Joint Venture Company (JVCo)
is a joint venture between Singapore Aerospace Manufacturing (SAM) and Messier-Dowty
International for the manufacture of small and medium-sized landing gear and related
components. Singapore Aero Engine Services Ltd (SAESL), a US$118 million joint venture
between SIA Engineering Company (SIAEC), Rolls-Royce and Hong Kong Aero Engine Services
Ltd (HAESL) for the repair and overhaul of Rolls-Royce Trent 800 engines in the Asia-Pacific
region. Eagle Services Asia (ESA) was formed in 1998 as a result of a joint venture between Pratt
& Whitney and SIAEC for the overhaul of PW4000, JT9D and CFM56 engines. ESA also provides
repair services for clean line, electroplating, machine shop, thermal spray, welding, heat treat,
sheet metal repair, painting, plating, silicone rubber and fan case rub strip.

Based on interviews and companies’ literature, the following are some of the end-users’ profiles.
Through its nine operating subsidiaries, Singapore Technologies Aerospace (STAe) provides
aircraft maintenance, structural modification and refurbishment, engine and aircraft component
overhaul and repair, precision manufacturing, supplies and materials support and engineering
services. Its activities are rationalized into three main business divisions: maintenance operations,
manufacturing, and materials.
STAe's core business is its Maintenance Operations Division which is largely represented (in
commercial aircraft maintenance) by ST Aviation Services Company (SASCO) and ST Mobile
Aerospace Engineering (MAE). ST Aerospace Engineering, one of STAe's subsidiaries, provides
depot level maintenance, upgrading and refurbishment of military aircraft. It has built up expertise
on maintenance of C-130 Hercules aircraft and upgrades of military aircraft such as A4s, F5s and
F16s.

Another subsidiary of STAe, ST Aerospace Systems, specializes in repair and overhaul of aircraft
avionics, components and systems. It is the authorised repair center for Aerospatiale, Bell
Helicopter Textron, Grimes Aerospace, IMI Marston, Lucas Aerospace and Rockwell-Collins. In
1991, STA Systems entered a joint venture with Messier-Bugatti of France to form Singapore
Precision Repair and Overhaul (S-PRO) to service landing gears, wheels and brakes.

ST Aerospace Engines, another STAe subsidiary, repairs and overhauls engines for both military
and civil aircraft. Its three test cells are equipped to test turbo-jet and turbo-prop engines. ST
Aerospace Engines has repaired and overhauled over 3,000 various types of engines. It is the
authorized center for Allison T56/501 engines and Textron Lycoming T53 engines, and has
capabilities to repair and overhaul GE F404, Turbomeca Makila 1A, GE J85, PW JT8D, PW
JT15D, Curtiss Wright J65 and Rolls Royce Avon 207 engines.

Singapore Technologies Aviation Services Company (SASCO), a joint venture between STAe,
Singapore Airlines (SIA) and Japan Airlines (JAL), was established in 1990 to undertake heavy
maintenance, structural repair and modification work on wide-body commercial aircraft. The
opening of a 2-bay, US$50 million state-of-the-art hangar at Singapore Changi Airport places
SASCO in an enviable position to capture a bigger share of the growing demand for commercial
aircraft maintenance in the Asia Pacific region. The hangar, designed to accommodate up to 2
B747s or 3 B737s at any one time, will enable SASCO to accept more business for maintenance
and overhaul works, especially for Section 41 work. Section 41 work involves replacing structural
frames, wires and cables in the area from the nose of a Boeing 747 to near to its first passenger
door. Section 41 works may be becoming very competitive, but SASCO has one very major
advantage; it still holds the industry record turnaround time of 42 days, while the industry's
average/norm is 57 days.

Leading the ST Aerospace manufacturing business is ST Aerospace Manufacturing, which
specializes in precision airframe manufacturing and aero-engine components and sub-assemblies.
Recognition of ST Aerospace Manufacturing's quality can be seen by contracts for the
manufacture of Boeing B777 nose-landing gear doors and Airbus and Fokker F100 passenger
doors. Other manufacturing contracts include the BAe 125 landing gear, A340 engine mounts and
CFM56 engine thrust reverser doors.

The main business of Turbine Overhaul Services (TOS) is the refurbishment and overhaul of jet
engine turbine airfoils. Its services mainly concentrate on the repair and overhaul of turbine blades
and vanes. TOS has been appointed the sole repair source within Pratt & Whitney (P&W) for the
high-pressure turbine airfoils of the PW2000 and JT9D-7R4 engines. The main shareholders are
United Technologies International Corporation (USA) and Singapore Technologies Aerospace.

A wholly owned subsidiary of Singapore Airlines (SIA) with a paid-up capital of US$31.3 million,
SIA Engineering Company (SIAEC) provides total support in aircraft, component and engine
servicing, maintenance and overhaul, including auxiliary power units (APU). The company's
capabilities cover the Boeing 747, 737 and 767 series and the Airbus 300 and 310 series aircraft.
Power plant support extends to the P&W 4000 and JT9D series engines, as well as to the Garrett
GTCP660 and GTCP331 series APUs and P&W Canada PW901A series APUs. SIAEC has in-
house overhaul capability for over 90% of B-747 and 80% of A310 components and this range is
increasing. The company has since developed a repair and overhaul capability for the CFM
International CFM56 turbofan. The two test cells have been upgraded for engines up to 68,000
pounds thrust and a third test cell added for 100,000-pound thrust engines in 1998. Work
performed by the SIAEC for SIA and SilkAir included the refitting of SIA's Megatop 747 fleet and
conversion of two A310-200s from an SIA to a SilkAir configuration. Maintenance work for other
airlines accounted for about 30% of SIAEC's total work. Major projects included heavy
maintenance checks for a Saudia B747 and a zonal inspection and landing gear overhaul for a
China Northwest Airlines A310. The company also completed a post-lease check for a United
Technologies A310 and maintenance checks for EVA Air's B767s and B747s. Other SIAEC
customers included Air China, Balkan Bulgarian Airlines, China Airlines, China Eastern Airlines,
China Southern Airlines, Garuda Indonesia, Kuwait Airways, Middle East Airlines, Myanmar
Airways International, Pacific Eastern, Philippine Airlines, and Thai Airways International.

Singapore Technologies Electronics Limited (STEL) is established under the Singapore
Technologies Engineering Group (ST Engineering). It is the leading electronic systems house in
Singapore experienced in the application, management and integration of core technologies in
Computer, Communications, and Control Engineering. It provides one-stop calibration and
electromagnetic (EMC) testing. Its EMC Center has a FCC-listed open field test site and the
facilities can carry out commercial and military compliance testing to FCC, VDE/VTZ, VCCI and
US MIL-STD-461 standards. It also undertakes shielding effectiveness testing to US MIL-STD-
285 and site ambient electromagnetic survey.

Turbine Coating Services Pte Ltd (TCS) is a three-way partnership between SIAEC, Singapore
Technologies Aerospace and US-based United Technologies Holdings. TCS performs depot level
maintenance on special heat-resistant coatings on turbine blades of Pratt & Whitney PW4000-
series engines.

Some OEMs set up only repair and service centers in Singapore. They tend to rely on their parent
companies for supply of aircraft repair equipment. For example, Dunlop Aviation receives their
aircraft spare parts and repair equipment from the parent company. The Dunlop Service Center,
located at Changi Airport, provides total service for wheels, brakes, braking systems, anti-skid,
electro-hydraulic and pneumatic components, anti-icing systems and aircraft tires. Dunlop has a
repair and testing equipment production plant in Singapore.


Honeywell Aerospace Pte Ltd is an OEM for spare parts, repair and testing equipment. They
provide after sales support including repair, overhaul, calibration and testing of aircraft avionics
equipment.

AAR Pacific Pte Ltd, is an OEM of specialized aviation components and systems such as cargo
handling systems and composite panels used in aircraft interiors, e.g. flooring and bulkheads. It is
the wholly owned subsidiary of AAR International Corporation (USA).

GE Aviation Service Operation (GEASO) performs high technology GE-CF6, GE-J85, CFMI-
CFM56, Rolls Royce RB211 and GELM2500/5000 marine and industrial engine component
repairs for more than 83 airlines and engine overhaul customers worldwide. Its facility has an
extensive range of equipment and expertise to perform sophisticated repairs. Its equipment
includes high temperature, rapid quench vacuum furnaces and an automated platinum plate
system. The furnaces give GEASO the capability to ADH & PACH repair both the directionally
solidified and single crystal alloys that are being used extensively in their new engines. The
platinum plate system will apply a layer of platinum to the surfaces of turbine blades prior to the
application of an aluminide coating. This new coating, platinum aluminide, provides greatly
enhanced hot corrosion protection and can increase blade life by up to three times when
compared to standard coatings.

Hamilton Sunstrand manufactures component parts for constant speed drives (CSD) and
integrated drive generators (IDG). The CSD or IDG is used on all free world commercial aircraft
and is the main accessory of the electrical generating system. Its function is to convert varying
engine speeds to a constant output speed, allowing the generator to produce a constant frequency
supply of electrical power to the aircraft electrical systems. The company also manufactures parts
from metal alloys ranging from low to high carbon harden-able alloy steel.

Local contacts report that European companies are constantly seeking contracts in repair and
overhaul services in Singapore. At the end of the day, it will be a case of who can offer the best in
price, turnaround time and quality. Similarly, for aircraft repairing equipment, key competitive
factors such as price, credit facilities and after sales services are equally important.


G. MARKET ACCESS

1. Import Climate and Technical Standards

Singapore's business climate is highly conducive to international business. The open economy
and free trade enterprise policy allows duty free importation of raw materials, semi-finished, and
finished industrial products.

Technical standards and labeling requirements for aircraft repair equipment are nearly the same
as those set by either the U.S. FAA or the U.K. CAA, depending on the type of equipment. Most
repair and overhaul companies use a directory which lists the FAA authorized repair stations from
which they can purchase their repair and test equipment.

Singapore Airlines generally imports its products directly from abroad so that the purchase price
may be lower. It does, however, buy a limited amount of equipment from local agents. Repair and
overhaul companies that are subsidiaries of larger firms may procure through their parent
companies. Many of the FAA-approved repair stations also act as distributors for equipment
manufacturers. Shop supplies, such as drills and cutting tools, are usually purchased through local
distributors. Among the sources used by Singapore companies to locate repair and test
equipment include “The World Aviation Buyer’s Guide Book” and an online service called, “The
Inventory Locator Service, Inc.,” located in Memphis, Tennessee.

Most repair and overhaul shops look for reliable and reputable firms when placing an order,
especially when dealing with precision equipment. Quite often, price is a secondary factor to a
supplier’s reliability and reputation. Local representation for firms selling aircraft maintenance
equipment is not mandatory, but it is a definite advantage.

2. Distribution Practices

Many of the largest aircraft repair and overhaul OEMs have regional offices or repair centers in
Singapore. This gives them a competitive edge over their competitors in the region and they are
also able to serve the Asia Pacific market better due to Singapore's strategic location. As
mentioned earlier, these regional repair centers purchase their supply of aircraft repair equipment
or spare parts from their OEMs.

Foreign equipment suppliers that do not have regional offices in Singapore can either appoint local
agents or representatives or sell directly to local end-users such as FAA certified repair stations.

In view of the competitive nature of the aircraft repair and overhaul business, any American
company seeking to enter the Singapore market should consider appointing a local representative.


3. Method of Financing
Shipments to Singapore are generally made under letters of credit and sight drafts, depending on
the exporter's preference and the relationship with the purchaser. Standard credit terms are
generally 30 to 90 days. The foreign departments of most major American banks are well
equipped to give service and advice on matters of foreign trading and credit. Singapore is a major
financial center whose banks have excellent correspondent relations with U.S. banks. U.S. banks
are well represented in this market.

Quotations are generally on a C&F basis. The prices given may be either in Singapore or U.S.
dollars but should be clearly stated. Exporters making quotations in Singapore dollars should
consult their banks for the prevailing exchange rate. Singapore uses the metric system, so it is
often beneficial for price/quantity quotations to be prepared accordingly.

For major government or commercial projects that involve feasibility studies and/or a training
component, the U.S. Trade & Development Agency (TDA) may offer financial assistance on a
case-by-case basis, in support of U.S. firms bidding on these projects. TDA-funded projects must
involve an American company or consortium. U.S. Export-Import Bank and the Asian Development
Bank are other sources of financing U.S. companies should consider when participating in major
projects in Singapore and around the region.


Contact Information

U.S. firms interested in exporting aerospace and aviation related products to Singapore are
encouraged to contact the U.S. Commercial Service (USCS) at the American Embassy in
Singapore. USCS offers a wide range of programs ranging from market research to contact
facilitation, tailored to suit the specific needs of American international traders. You can reach us
at:

United States Commercial Service
American Embassy
27 Napier Road
Singapore 258508
Tel: (65) 6476-9037
Fax: (65) 6476-9080
Mr. George Ruffner, Senior Commercial Officer
Email: George.Ruffner@mail.doc.gov
Mr. Ng Haw Cheng, Commercial Specialist
Email: Hawcheng.Ng@mail.doc.gov



Section II: Specific Questions from ODO Clients

1. General aviation (business jets, turboprops and piston aircraft) does not appear to be an appeal
in Singapore. The SEDB had promoted the general aviation business park concept in the early
1990s but the effort did not seem to take off. There are only a handful of business jet owners who
obviously belong to the top rung of corporate executives. This trend is likely to continue given
the ease and convenience of frequent commercial flights arriving and taking off from Changi
Airport.

2. Singapore’s defense budget is traditionally capped at 6.0% of its GDP, thus the defense budget
is about $6.6 billion. The Republic of Singapore Air Force (RSAF) is bolstered by the introduction
of Chinook and Apache helicopters, while the recently procured Sikorsky S70B shipborne
helicopters largely affects the navy. The RSAF has just announced Boeing’s F-15T Strike Eagle
as the replacement fighter aircraft for its ageing A-4SU Super Skyhawk fighter-bombers. The final
number of F-15’s to be procured by Singapore is expected to be about 20.

3. The RSAF’s inventory includes:

Combat and Trainer Aircraft                Helicopters
   2 F-16A                                 6 CH-47D Chinook
   5 F-16B                                 6 CH-47SD Chinook
   8 F-16C Block 52                        18 AS.332 Super Puma
  10 F-16D Block 52                        11 AS.332 Super Puma (SAR)
  12 F-16C/D Block 52                      12 AS.322 M1
  20 F-15 Strike Eagle (to be delivered)   16 UH-1H
  12 TA-4SU                                8 Bell 205
  32 F-5E/S Tiger 117 F-5F                  13 AS.550A-2 Fennec (with TOW)
                                            10 AS.550C
   Transport Aircraft                      6 Sikorsky S-70B
   4 Fokker 50
   5 Fokker 50 Enforcer (MPA)
   4 E-2C Hawkeye (AEW&C)
   4 KC-130B Tanker
   6 C-130H/H-30
   4 KC-135R Tanker

    Singapore Airlines Inventory:

   38 B747-400 (P&W PW4056)
   27 B777-200 (RR Trent 884/892)
   14 B777-200ER (RR Trent 892)
   8 B777-300 (RR Trent 892)
   2 A340-300E (CFM56-5C4)
   9 A310-300 (P&W PW4152)
   5 A340-500

   On order: 10 B777-200s; 10 A380-100s; 1 A340-300E
   On option: 9 B747-400s; 22 B777-200s; 15 A380-100s; 5 A340-500s

   SilkAir Inventory:

   6 A320-200 (V2527-A5)             On order: 6 A320-200s
   A319-100 (V2524-A5)               On option: 2 A320-200s

  Singapore Airlines Cargo Inventory:

  13 B747-400F (P&W PW4056)
  On order: 4 B747-700Fs

4. Aircraft retrofitting and maintenance are the two strongest competencies of the Singapore
aerospace industry. One major player is Singapore Technologies Aerospace (STAe). Apart from
offering maintenance support, STAe also undertakes aircraft retrofit for the RSAF. STAe is the
only aviation company to have successfully re-engined the vintage A-4 Skyhawk fighter-bombers.
It has also upgraded F-5 fighters for Venezuela and also changed F-5s into camera RF-5 Tigereye
reconnaissance fighters for several air forces.

5. Airlines operators and the RSAF generally have direct procurement agreements with OEM
equipment manufacturers. Non-propriety equipment is usually procured through local agents. The
RSAF also stocks float assets and keep fast turnaround spares. MRO providers normally
purchase equipment when required, mainly through local agents.

6. The Civil Aviation Authority of Singapore (CAAS), which is a statutory board under the purview
of the Ministry of Transport, operates the Changi and Seletar Airports. Procurements for airport
requirements are the responsibility of the CAAS. These are usually done through public tenders.
It is generally not a pre-requisite for a foreign supplier to partner a local firm when bidding for
CAAS project. However, it is preferable for foreign suppliers to have a local agent where the
tender calls for after-sales service support. This is so that emergency support can be rendered
when required. This will also provide a greater comfort level to the CAAS.

7. Singapore Airlines and its subsidiaries, SilkAir and SIA Cargo, generally buy rather than lease
aircraft. SIA is reputed for maintaining a young fleet averaging about five years old. Newly
established Valuair recently announced it was leasing two A-320 aircraft from Singapore Aircraft
Leasing Enterprise.

8. Government tenders are announced via the local newspapers such as the Straits Times, every
Saturday. In addition, tender opportunities are also released through the Government Business
Electronics (Gebiz) via its website at www.gebiz.gov.sg. Singapore’s Ministry of Defense,
government agencies, and airlines do not normally buy used equipment. The private sector may
acquire used equipment largely for re-export to the regional marketplace.


Section III

H. TRADE PROMOTION OPPORTUNITIES

Event: Asian Aerospace 2006
Date: February 21-26, 2006
Venue: Changi International Exhibition Center, Singapore
Organizer: Mr. David Lim, Project Sales Manager
           Reed Exhibitions Pte Ltd
           The Signature
           51 Changi Business Park Central 2 #07-01
           Singapore 486066
           Tel: (65) 6780-4573
           Fax: (65) 6588-3341
           Email: david.lim@reedexpo.com.sg
           Website: http://www.asianaerospace.com

Asian Aerospace in Singapore is one of the world’s premier aerospace and defense technology
events. Encompassing all civil and military sectors of the international aerospace industry, Asian
Aerospace is the foremost platform for companies to showcase their products and services in the
Asia-Pacific. In 2004, the show attracted 759 exhibitors from 37 countries, and 26,814 visitors from
81 different countries.

The U.S. Department of Commerce is pleased to bring to your attention three powerful
opportunities to participate at Asian Aerospace 2006. We are organizing/supporting programs for
U.S. companies exhibiting, attending or just wanting a presence at the show. Please review the
following for more information on the U.S. International Pavilion, Aerospace Executive Service and
the Aerospace Product Literature Center:

EXHIBIT IN THE U.S. INTERNATIONAL PAVILION through our official national pavilion organizer
Reed Exhibition. Exhibiting packages start at approximately $5,000 - please contact Ms. Sarala
Govindan at (203) 840-5355 or sgovindan@reedexpo.com for more information.
AEROSPACE EXECUTIVE SERVICE: The Aerospace Executive Service (AES) is best suited to
small- and medium-sized U.S. businesses attending Asian Aerospace 2006 with a goal of making
business appointments, generating sales leads, and developing sales channels. The service will
include two days of pre-screened business appointments on February 20-21, 2006 and an AES
booth for product literature display at exhibition. The cost to participate is $3,000 plus $700 for
each additional person from the same company. Contact either Eric Nielsen (tel: 520-670-5540 /
eric.nielsen@mail.doc.gov) or Amy Magat (tel: 213-894-3966 / amy.magat@mail.doc.gov) for
more details.

AEROSPACE PRODUCT LITERATURE CENTER: The Aerospace Product Literature Center
(APLC) is targeted to businesses that either will not attend the show, or would like to supplement
their presence with an additional method of promoting their goods and services. For the low cost
$650, the U.S. Commercial Service will display your company literature in a special booth. For
more information about the APLC, please contact Deborah Semb at 202-482-0677 or email her at
Deborah.Semb@mail.doc.gov.

								
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