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: firstname.lastname@example.org 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 email@example.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 / firstname.lastname@example.org) or Amy Magat (tel: 213-894-3966 / email@example.com) 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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