Shanghai Airport, Shanghai Airlines, together with Boeing, Enter into Aircraft MRO Market

China aviation market recovered earlier than the international market. This enables its MRO and passenger to freighter conversion market to grow even bigger. Today, Boeing Shanghai Aviation Services (shortened as Boeing Shanghai as below), a joint venture between The Boeing Company, Shanghai Airport Authority, and Shanghai Airlines, celebrated the opening of its new hangar. It is the first time Boeing, the U.S. aircraft manufacturer, has taken a controlling share in an MRO joint venture in China.
It is known that with a total registered capital of USD 85 million, Boeing Shanghai was founded by The Boeing Company which controls a 60% stake, and Shanghai Airport Authority and Shanghai Airlines which respectively hold the remaining 25% and 15% stake.
The Boeing Shanghai hangar located in Pudong Airport is the first phase project.It can hold two Boeing 747 or two Boeing 777 aircraft for maintenance. The main business involves aircraft MRO, conversion related maintenance, spare parts maintenance and aviation equipment sales and maintenance and etc.
Marco Cavazzoni, Chairman, Boeing Shanghai board of directors, and Vice President, Technical Services, Boeing Commercial Aviation Services, mentioned to CBN reporter that Boeing Shanghai provides MRO service to B737 airplanes and will expand its service offerings to twin-aisle aircraft and to convert B767 passenger aircrafts into freighters. In the future the company will continue to invest on the second phase of the hangar project.
In China, there are already some aircraft MRO companies established by the airline companies. For example, Ameco Beijing, a joint venture between Air China and Lufthansa German Airlines; Shanghai　Technologies　Aerospace　Company　Limited　(STARCO), a joint venture between China Eastern Airlines and Singapore Technologies Aerospace.
How to be successful among the competition, Marco Cavazzoni mentioned that the quality standard requirement of Boeing and the electronic information technology which can refine the production process will provide Boeing Shanghai the best operation model. “The key of success is to achieve the best quality, shortest maintenance cycle time, competitive charge in the world. This is also the key of our work.”
The biggest expense for airline companies is oil, labor cost and aircraft maintenance cost. Aircraft maintenance cost is over 15% of the total cost of the airline company. Since Chinese companies are very competitive in terms of the price and services for aircraft maintenance, more and more foreign airline companies outsource their aircraft maintenance to China. Zhou Chi, Chairman of Shanghai Airlines mentioned that the reason to put Boeing Shanghai hangar in the Pudong airport is because Pudong Airport plans to become the hub port in the Eastern Asia region. Many foreign flights will land in Pudong airport. This also provides an important opportunity for the development of aircraft maintenance business.
Bernard Hensey, CEO of Boeing Shanghai mentioned to the reporter today that, besides Shanghai Airlines, Boeing Shanghai will provide its service to EVA Air and other foreign airlines.
As according to the insiders, the main intention of establishing the join venture is to win the promising and hardly touched passengers to freighter conversion market in China. An insider from China Eastern Airlines mentioned to the reporter that the failure rate of the passenger aircraft will increase after operating for 5 to 6 years. The passenger to freighter conversion can save the elimination cost and is much cheaper than buying a new freighter aircraft. The insider mentioned that taking B747 as an example, the price of each freighter and passenger aircraft is over 100 million, while B747-400 which has been operated for more than 15 years only costs 20 million USD in the market. The total cost is only around 35 million USD including the