CALC and FL Technics Join Forces to Establish an MRO Joint Venture in Harbin, China

Hong Kong — 8 October 2018, CALC (the “Group”, SEHK stock code: 01848) together with its mid- to- end-of-life aircraft solutions arm – Aircraft Recycling International Limited (“ARI”), and FL Technics (“FLT”), one of the leading maintenance, repair and overhaul (MRO) services provider in Europe, are pleased to announce the signing of the agreement to establish FL ARI Aircraft Maintenance & Engineering Company Co., Ltd (“FL ARI”), a joint venture based in Harbin, China, which provides MRO services for aircraft targeting Asia and Europe regions.

FL ARI is held by ARI, FLT and CALC at a ratio of 49%, 40% and 11% respectively with a total investment amount of US$23 million. It will focus on aircraft base maintenance and scheduled checks and overhaul, aircraft disassembly, engineering services, technical training and consultation. In addition, FL ARI will provide MRO and supply service to various aircraft components, including engine, Auxiliary Power Unit (APU) and Landing Gear (LG). ARI will focus on aircraft parts and components supply, mid- to- end-of-life aircraft trading, logistics and supply chain management. FLT will be mainly engaged in aircraft maintenance & repair and technical support leveraging on its proven team, technical capabilities and management system. Meanwhile, CALC will make full use of its abundant aviation resources and extensive client networks to facilitate FL ARI's foray into its target markets.

Establishment of FL ARI will extend ARI’s business scope to comprehensive MRO services, as a strong complement to its current aircraft disassembly and part-out service to further enrich the offerings along its value chain. This will also strengthen CALC’s business strategy in providing solutions that cover aircraft's full life cycle. As for FLT, the new joint venture will strengthen its presence in Asia.

With over 20 years of operations, FLT has developed into a leading MRO service provider for narrow-body aircraft in Europe. Its comprehensive aircraft maintenance prowess, covering the major types of maintenance checks, i.e. A-Check, C-Check and D-Check, put it in par with leading European players and in line with international standards for quality management. It is an EASA Part-145, Part-M, Part-147, Part-21 and FAA 145 (Indonesia) certified company. The team of 1,200 people is working in hangars in Indonesia (Asia) and Lithuania (Europe) and within the network of 40 line stations worldwide. FLT is a part of Avia Solutions Group, an international aviation holding.

As Asia’s first one-stop solutions provider for mid- to- end-of-life aircraft, ARI has built up diversified and flexible aircraft solutions and close partnership with global airlines customers throughout the world. Together with CALC’s well-established aircraft asset management platform and the solid background of other shareholders, FL ARI is well poised to tap into the significant market opportunities by giving into full play the respective strengths and resources of the three parties.

Zilvinas Lapinskas, Chief Executive Officer of FLT, said, “We are honored to have a possibility of creating new MRO entity together with such credible, standing and experienced companies as CALC and ARI. We wish to extend our North-European know-how and LEAN-based process management in to China market.”

Mr. Mike Poon, Chief Executive Officer of CALC and ARI, said, “We are very pleased to form a partnership with FLT. With its cutting-edge technical capabilities and rich experience in aircraft maintenance services, FLT will help build quickly a sound aircraft MRO system for FL ARI. Development of comprehensive MRO services will further expand ARI’s service scope, complementing its aircraft recycling business by achieving efficient placement of second-handed aircraft components. It will also create strong synergy which sharpens ARI’s focus on providing mid- to- end-of-life aircraft solutions, and will further solidify our full value-chain strategy as we strive to strengthen our aircraft asset management capabilities.”

According to ICF International’s market forecast, narrow-body fleet in China is expected to grow at an annual rate of 4.8% from 2017 to 2027, creating huge demand for maintenance service for narrow-body aircraft. However, such maintenance demand, especially that from small- to- medium-sized airlines, is yet to be addressed due to the shortage of independent service provider in the current China MRO market. It is expected that the supply shortage in China's MRO sector will further increase to 40% by 2020.