Malaysia To Be A Major Hub For MRO - Based on Malaysian Aerospace Industry Report (AIR) 2011/2012 and 2013/2014.

1. Principle Of Management
"Malaysia To Be Major Hub For MRO - Based on
Malaysian Aerospace Industry Report (AIR)
2011/2012 and 2013/2014."
Group Member:
Muhammad Faizal
Reefear Eapear
Mohd Yusuf
Muhammad Syafwan
Norakilah
Nuramanina

3. About AIR (Aerospace Industry
Report)
 Published biennially by the Secretariat of the
Malaysian Aerospace Council (Malaysian-
Government Group for High Technology) to
disseminate information on the industry in an
integrated, cohesive and non-biased manner.
 AIR is expected to create awareness among industry
players, both local and foreign, and among the
Malaysian public on the aerospace industry.

4. About MiGHT
 MIGHT was established as an independent, industry-driven
non-profit organization in 1993 and was formally
incorporated as a company limited by guarantee on 15th
October 1994.
 Between 2004 and 2010, MIGHT operates under the purview
of the Ministry of Science, Technology and Innovation. In
2011, MIGHT was transferred to the Prime Minister’s
Department under the Science Advisor to the Prime Minister.
 Under the patronage of YAB Prime Minister of Malaysia,
MIGHT is governed by a Board of Directors, helmed through
the joint-chairmanship of a prominent private sector
personality and the Science Advisor to the Prime Minister.

5.  Today, three main roles for MIGHT in developing high
technology industries for Malaysia continues on being a
consensus building think tank, built through a membership
program which remains as MIGHT’s main platform to build
linkages.
 MIGHT also takes on the role of nurturing high-tech
industries via catalytic interventions programmes when the
need arises.
 MIGHT also acts as a key interlocutor, bringing together
policy and technology nurturing to advance high
technology interests in Malaysia.
 Programmes and activities will include building strategic
partnerships and alliances, technology acquisition and
nurturing, capacity building as well as strengthening the
growth of these sectors through policy interventions and
flagship programmes.

8. Industry Outlook
 Throughout the implementation of the Blueprint,
the council has shown its commitment in realising
the potential of the aerospace industry.
 One of the crucial decisions made by the Council
was the rationalism of the industry in 2001 where
four main focus areas were identified as follows:
1. Maintenance, repair and overhaul (MRO)
2. Parts and components manufacturing
3. Avionics and System
4. Global Centre for Training and Education

9.  Since then, a numerous strategic national programmes have
been implemented to catalyst the development of the four
priority areas which include:
1. Transforming of Subang International Airport to Malaysia
International Aerospace Centre (MIAC) to become a
regional MRO hub.
2. Endorsement for a locally development Unmanned Aerial
Vehicle (UAV) System to support military surveillance
operations.
3. Intensification of aerospace Research and Technology
activities through the establishment of Aerospace Malaysia
Innovation Centre (AMIC)
4. Development of earth observation satellites – TiungSAT and
RazakSAT.
5. Implementation of two aerospace projects under the
economic Transformation Program (ETP) as part of the
business Services National Key Economic Area (NKEA).

10. Concentration developing area
for aerospace-related activities
across Malaysia

11. Market Synopsis of The Malaysian
Aerospace Maintenance, Repair &
Overhaul (MRO) Sub-Sector

12. Sector Overview
 The approximately USD$ 46 billion global aircraft
Maintenance, Repair and Overhaul (MRO) market
witnessed the strongest year–on–year growth of
about 10% during 2008–2009.
 Driven by an increasing fleet of newly acquired
aircraft worldwide, shortage of trained and
experienced professionals, and a need to cut
aircraft maintenance and operational costs, MRO
market holds out a various of opportunities for
players in the technical services outsourcing
business.
 Leading players across the world are consolidating
and adapting to the market dynamics.

13. Malaysian Market
 The Malaysia aircraft
maintenance, repair and
overhaul (MRO) sector has seen
massive growth in recent years.
 Despite very stiff competition
from Singapore to become the
MRO hub of choice in
Asia, Malaysia is determined to
carve out its place under the
sun.
 Observers say the recent crisis in
the aviation industry caused by
soaring fuel prices, and the
current global economic
downturn, is shifting the balance
of cost- effectiveness in
Malaysia's favour.
 In June 2008, an Aerospace &
Defence consultant from Frost &
Sullivan said Malaysia has the
potential to capture a higher
market share in the aircraft MRO
industry with its existing
infrastructure and available
facilities.
 The recent downturn, which has
seen the worst and is picking
up, has forced global players to
take a hard look at their cost
structure.
 This strategy is slowly shifting
down stream activities to
geographies that offer cost
effective infrastructure and
human resources.

14. Malaysian Aerospace Industry Size
 Malaysia is targeting to capture 5% of global MRO
market by 2015; capabilities higher up the MRO value
chain are necessary in order to close the gap.
 The overall industry performance for 2012 recorded
turnover growth of 9.4% compared to
2011, contributing 3.23% to the country’s GDP (Growth
Domestic Products).
 The RM30.3 billion turnover is contributed by the
vibrant airlines activities particularly the low cost
carriers, the expansion of aerospace manufacturing
businesses and the positive development in the
airport sub-sector.

16. Growth Rate and Forecast
 The Global MRO market is growing exponentially. A six year analysis
indicates that the market will grow from USD$46 billion in 2010 to
USD$52 billion in 2013.
 Outsourcing of MRO work has been developing slowly but steadily
over the last 20 years or so. With the recent damp market coupled
with the Icelandic volcanic ashes, it has become extremely important
for Airline operators to outsource its maintenance work, and get
leaner in terms of operational cost.
 This industry has fast become extremely lean in terms of cost structure.
One of the main cost drivers has always been MRO. Instead of
maintaining an in-house centre that caters exclusively to internal
requirement, it has become a norm to outsource MRO.
 Setting up an MRO is a costly affair, and if it is solely for internal
consumption, it becomes a very expensive cost centre. Initially
legacy airlines tried to spin off their MRO centre as an independent
centre catering to internal as well as third party requirement.

18.  Hence, with fiscal pressures mounting, legacy airlines are forced to look
outside the box for a solution. Malaysia Airlines has already converted its MRO
into an independent centre, MAE (MAS Aerospace Engineering).
 But market forces, mainly driven by the AirAsia model will eventually ensure
MAE will become less of a MAS subsidiary and more of an independent
organization.
 This offers a multitude of opportunities for potential foreign investors in
Malaysia in the near future as there is a huge vacuum for a dedicated MRO
service provider in the country for all domestic and regional airliners.
 Though Singapore is a major competitor, Malaysia offers a lower cost base for
all segments of the MRO sector. In the long run this will be a major boost for
building the competency and capacity in the country.
 Based on these facts, Malaysia is well positioned to capture a sizable chunk of
the market due to a vibrant hinterland fast developing in the region.
 A point in case is the manner in which Indian private airlines sending its aircraft
over to Malaysia for heavy maintenance due to a paucity of such service
providers in the country.

19.  2012 has been a good year for Malaysia in terms of FDI
(Foreign Direct Investment) as well as Domestic Direct
Investment (DDI).
 According to MIDA, a total of 11 projects were approved in
2012 with investments totalling RM2.3billion, representing
30% of the total investments of the transport equipment
industry.
 From this investments, 61% or RM1.4 billion were DDIs which
indicates that the special aerospace industry incentives
package approved in 2010 has not only attracted quality
FDIs, but also encourage local players to expand their
businesses.
 In them of job creation, the approved projects are
expected to make available a total 2,739 employment
opportunities mostly in the aerospace manufacturing sub-
sector.

22. Employment

23.  In total, the aerospace industry currently employs
approximately 65,000 workforces of which the commercial
aviation is the largest employer with 23,300 peoples
(42%), followed by MRO sub-sector at 10,500 (16%) and the
aerospace manufacturing sub-sector at 6,400 (10%).
 The Malaysia MRO ‘big three’ companies employs more
than 5000 various skilled employees;
1. MAE - 3,500 employees
2. AIROD - 1,700 employees
3. GE Engine Service - 500 employees
 Supported by over 20 other companies bringing total MRO
employee to over 7,000. These numbers are expected to
increase at the rate of 15-20% annually for next 5 years.
 Though there are many Aviation Maintenance Schools set
up in the country over the years, there is still a major gap in
terms of an internationally acceptable quality school.

24.  Such an organization will help in developing the quality of the
manpower in the field, help the students to get an international
exposure, and allow the domestic companies to set up operation in
foreign lands so as to be closer to the market itself.
 This is the route Singapore has taken so far. There is major shortage
worldwide for License Aircraft Maintenance Engineers (LAME) and
associated technicians, and it will be some years before the shortage
is addressed.
 The single aisle as well as wide-body aircraft market is already shifting
to Asia with China and India leading the pack. North America is no
longer the biggest market for aircraft OEMs today, and hence there
will be a strategic shift in critical support structures towards Asia.
 Malaysia with its geographical, demographic and cost advantage is
well poised to capture a large segment of the market.
 For that, infrastructure and human resources is critical and hence
require strategic planning well ahead of its time.

26. Centre of Attention for MRO
Investments.

27.  Since the Malaysian government started to promote
Malaysia as a new hub for Maintenance, Repair and
Overhaul activities, Selangor has become the centre
of attention for MRO investments.
 Offering advanced infrastructure, including the
largest international airport and the most air-traffic of
Malaysia, as well as a highly trained and educated
workforce.
 Selangor is a prime opportunity to locate MRO
activities expanding into ASEAN. Since the region
has been resilient during the economic
crisis, sustained growth in air cargo and air travelling
with Thailand, Indonesia and Malaysia ahead
highlighted potentials.

28.  Malaysia’s MRO industry, not unlike the global
composition, can be divided into three main
categories and a smaller group of other suppliers.
 The three main categories are
1. Airframes
2. Engines
3. Components
 The Malaysian Department of Civil Aviation (DCA)
registered 25 MRO related corporations until June
2011, while the Malaysian Investment Development
Authority (MIDA) as well as the Malaysian Industry-
Group for High Technology (MiGHT) already list more
than 30 related corporations.

29.  With companies such as Rolls-Royce’s civil aviation
unit as well as the largest local MRO, Malaysia
Airlines maintenance subsidiary, located at Subang
and KLIA, there is plenty of reputable industry
knowledge already available.
 In addition, GE’s aviation engine unit and
Eurocopter, the world’s largest helicopter
manufacturer, have chosen Subang with
neighbours such as the local Airod Sdn Bhd. The
latter has gained a global reputation of excellence
and reaches clients in 33 different countries
worldwide.
 With more than 30 companies in Malaysia and
mainly Selangor, the potential from this
cluster, collaborations and existing facilities at both
airports is high.

30. Ideal MRO Locations
Due to the geographical nature of the country, one
single location will not be able to serve the entire
gambit of the industry.
1. Sultan Abdul Aziz Shah Airport, Subang (SAAS)
 Currently the biggest MRO centre in the
country, mainly due to the presence of MAE as an
anchor customer and supplier.
 Approximately 90% of the nation’s MRO infrastructure
is located in this airport.
 Malaysia Airports Holding Bhd (MAHB) has set up an
independent agency known as Malaysian
International Aerospace Centre (MIAC) to manage
this business at Subang Airport.

31. 2. Senai Airport
 Senai has the ability to service Singapore at the same time
maintaining a significantly lower cost, which gives customers long
term benefits.
 The Malaysian government is already incentivizing the Southern
region of peninsula Malaysia in order to capture a large number
of Singaporean businesses and MRO will be one of them.
3. Kota Kinabalu International Airport (KKIA)
 KKIA airport is the busiest international airport in the country after
KLIA. It is an alternative transit point between the East Asia &
North Asia and Australia & New Zealand.
 Over the years traffic has been on the rise, and one of the
reasons for the major airport expansion that was carried out
recently by MAHB.
 KKIA airport has the right environment for major MRO centres and
support activities due to this market. It is also a hub for regional
aircraft market and hence is ideal to set up the related support
structure.

32. MAJOR DOMESTIC PLAYER

33.  Over the last 40 years, MAE has been
delivering total maintenance, repair
and overhaul solutions (MRO)
solutions ranging from aircraft
maintenance services and
modification, component and engine
support, specialized engineering and
workshop support, training and
consultancy, to integrated fleet
technical management.
 Furthermore, Frost & Sullivan has
projected significant growth in the
aviation segment in the ASEAN region
as a result of the development of
‘Open Skies’ policies in various regions
of Southeast Asia resulting in
increased demand for air travel and
more investment into aviation
services.
 Recognising the potential that
aviation MRO holds for Malaysia, it
has been identified as one of the
Entry Point Projects (EPP) under the
Business Services National Key
Economic Area (NKEA) of Economic
Transformation Programme (ETP).
 Identified as a high value-add
sector, the aviation MRO services
sector is seen to be one of the key
sectors to nurture innovation and
broaden knowledge and skills base in
the country.

34.  SR Technics (Zurich, Switzerland) has moved a step
closer to making Malaysia its hub for
maintenance, repair and overhaul (MRO) activities
in the Asia-Pacific region with the commencement
of its latest facility in Shah Alam in January.
 The company, one of the world's leading
independent technical aircraft services
providers, through its subsidiary SR Technics Malaysia
Sdn Bhd, also successfully ramped up operations at
its new centre of excellence for component
maintenance on February 4.
 The facility will be equipped to handle many labour-
intensive repairs covering five main product
areas, namely avionics
panels, hydraulics, mechanical, pneumatics and
electrical.

35.  With the new facility, Malaysia will become
the base for its regional customer service
and distribution centres serving its Asia
Pacific-based integrated component
services customers and managing all of
their component supply needs.
 SR Technics mainly focuses on servicing
Airbus, Boeing and Embraer parts.
 Among its other customers are Malaysia
Airlines, Etihad Airways, Singapore
Airlines, SWISS, easyJet and Cathay
Pacific.

36.  Airod was established in 1976 as the first and only in-country facility to
support maintenance, repair and overhaul of aircraft belonging to the
Royal Malaysian Air Force (RMAF).
 In 1985, Airod was privatised as a joint- venture company between
National Aerospace & Defence Industries (NADI) of Malaysia and
Lockheed Aircraft Systems International (LASI) of USA.
 Airod is today in complete indigenous ownership, and is the major MRO
operator in the military space of the country. Major customer is
obviously the RMAF.
 Airod is the only maintenance and modification centre In Malaysia
authorized by Lockheed Martin for C-130/L-100 service.
 Major customers from Middle East, ASEAN, East Asia and Africa use its
facility to carry out major overhaul, very regularly.

37. Sepang Aircraft Engineering
 At the KL International Airport (KLIA), Sepang Aircraft
Engineering (SAE) was established and signed up
Malaysia-based low-cost carrier AirAsia as its launch
customer.
 It has built two large hangars at the airport and is
currently looking to attract third-party work.
 Apart from MRO and technical design services for
wide and narrow body aircraft, SAE aims to provide
full maintenance system and configuration
management, reliability data, cost control and status
reporting for customers, through its self- developed
computer system.

38. Composites Technology
Research Malaysia (CTRM)
 Composites Technology Research Malaysia Sdn. Bhd. (CTRM) was
incorporated in 1990 with Ministry of Finance incorporated as its
principle shareholder. Its strategic role was to develop the
aerospace and composites industries.
 The Malaysian DCA has certified CTRM's wholly owned
subsidiary, CTRM AV as an Approved Maintenance Organisation for
light aircraft such as the Eagle 105B, Cessna 300 and the Cessna 400.
 DCA Malaysia also approved CTRM AV and its engineers to sign off
the Certificate Release to Service for the Diamond DA40 &
DA42, Piper PA34 & PA28, and the Cirrus SR3G.
 CTRM AV also provides out-of-base maintenance by posting its
qualified engineers and technical personnel in Ipoh, Kota Bahru and
Bintulu. It also offers maintenance services in Johor, Subang and as
far away as Bangkok, Thailand.

39. Major Foreign Players

40. GE Engine Services
Malaysia
 General Electric decided on Malaysia as the regional hub for its
aircraft engine MRO activities many years ago. GE vice-
chairman, president and chief executive officer John G Rice recently
announced a US$ 3 million investment for the expansion of the
company's engine overhaul and service maintenance facility in
Subang.
 John G. Rice said, "The capabilities expansion at GE Engine Services
Malaysia (GEESM) sees a further US$ 3 million to be invested in the
next three years that will generate US$ 50 million in revenue.
 These new investments will offset the projected drop in older product
lines and will keep GEESM at the leading edge of engine MRO
technology.“
 GEESM is a joint venture between GE Engine Services, Inc, owning
70% and MAS, which holds the remaining 30%.

41. Eurocopter Malaysia
Sdn Bhd
 A wholly-owned subsidiary of Eurocopter
(EC) Group, Eurocopter Malaysia (ECM)
was incorporated in August 2002.
 Since then, it has established its footing as
not only a centre of sales and distribution
of EC products, but also a leading
maintenance, repair and overhaul (MRO)
service centre in Malaysia.
 Spanning more than 50,000 square feet,
ECM is fully-equipped to provide a broad
spectrum of services ranging from
scheduled and unscheduled
maintenance, aircraft modifications,
logistics support, ground handling and
garage.

42. Honeywell Aerospace
Services (M) Sdn Bhd
 A subsidiary of Honeywell Aerospace LTD, established in
1998 in Malaysia, mainly involved in repairing and overhaul
of Auxiliary Power Unit (APU) and its associated
components. Malaysian centre certified by FAA.
 Auxiliary Power Units deliver highly reliable electrical and
pneumatic power solutions for a variety of aircraft
operations, including main engine starting, cabin cooling
and electrical power generation.
 Using leading edge technologies, integrated system
architectures and innovative service solutions to deliver
higher performance with enhanced reliability and reduced
operational costs.

43. Malaysian Aerospace
Community

46. End of Presentation
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