ST Aerospace has signed a Memorandum of Understanding (MOU) with Vietnam Airlines to set up a joint venture (JV) to provide component Maintenance, Repair & Overhaul (MRO) solutions. The two companies have also entered into a 14-year component Maintenance-By-the-Hour (MBH™) contract that will support the airline’s whole fleet of 58 A321CEOs and 20 A321NEOs, including other A321s that will be delivered, in component maintenance starting from mid-2018. Under the MBH™ contract, ST Aerospace will set up an inventory base in Vietnam to provide timely services to Vietnam Airlines. The signing ceremony was held under the witness of Vietnamese Prime Minister Nguyen Xuan Phuc who is on an official visit to Singapore from 25 to 28 April 2018, and Singapore Minister for National Development Mr Lawrence Wong.
The JV, to be headquartered at Noi Bai International Airport in Ha Noi, will cater to Vietnam Airlines’ requirements and the region’s rising needs in aircraft MRO services. It will start with support for a wide range of technology groups including pneumatics, hydraulics and electrical components, before potentially increasing the collaboration to include aerostructure and airframe MRO. The partnership will leverage Vietnam Airlines’ maintenance subsidiary, Vietnam Airlines Engineering Company (VAECO)’s existing facilities in Hanoi and Ho Chi Minh City, as well as ST Aerospace’s core expertise in MRO to develop these facilities and their capabilities. The cooperation will also help Vietnam Airlines shorten the turnaround time for maintenance and repairs as the process will be conducted in Vietnam, rather than having to send it abroad as before, thus saving costs and creating higher operational efficiency.
Mr Lim Serh Ghee, President of ST Aerospace said, “We are happy that Vietnam Airlines has decided to entrust their A321CEO and A321NEO fleet to us for component support, and even more so by the prospect of deepening our partnership with the exploration of a joint venture. The robust development of the economy and a burgeoning middle class have created an ideal environment for the growth of the aviation industry in the Asia Pacific region, and Vietnam’s double-digit growth in the air travel sector is the best reflection of this. Riding on this growth, strategic partnerships with established industry participants such as Vietnam Airlines will enable us to increase our regional footprint and better penetrate high-growth markets.”
Mr Dang Ngoc Hoa, Executive Vice President of Vietnam Airlines said, “We are delighted to partner with ST Aerospace to establish a joint venture as well as to provide MRO support for the A321 aircraft family, which is the majority of our fleet. This partnership not only improves our fleet efficiency and world-class service quality, but also represent a major step forward for Vietnam’s aviation industry in general, contributing to the boost of bilateral economic, trade and aviation relations between Vietnam and Singapore.”
ST Aerospace is the world’s largest commercial airframe MRO provider, backed by a track record of over 15,000 commercial aircraft maintained and modified since 1990. With a global network of facilities in the Americas, Asia Pacific and Europe capable of accommodating 40 widebody, 27 narrowbody and 24 general aviation aircraft simultaneously, ST Aerospace provides support to a broad customer base that includes leading airlines, airfreight and military operators. ST Aerospace also has comprehensive components repair and overhaul capability covering more than 25,000 part numbers with facilities in Singapore and Europe, and rotable assets of more than US$500m.
ST Aerospace's components MBH™ programme, renowned for its flexibility and high level of customisation, is well established and popular among its global customers. For a fixed rate per hour, the airlines select a range of support services and pay a corresponding flight hour rate, which is pre-determined. This way, operators are able to keep operating costs low and also minimise fixed asset inventory holdings in terms of spares or maintenance equipment. Today, ST Aerospace provides integrated component support for a fleet of more than 600 aircraft on the MBH™ basis, servicing over 20 aircraft operators in Asia Pacific, Europe and the Middle East.
These agreements are not expected to have any material impact on the consolidated net tangible assets per share and earnings per share of ST Engineering for the current financial year.