SIA Engineering Company

[Musicwhiz]

Note: This is SIAEC's 25th Joint Venture. Over time, SIAEC will grow their share of profits from JV and Assoc and the cash flows will also increase under "Investing Activities" in the cash flow statement. I believe this will result in higher dividends being paid out over the long-term.

SIAEC in MRO JV with Panasonic Avionics

SIA Engineering Company Limited (SIAEC) announced on Thursday that it has signed a joint venture agreement with Panasonic Avionics Corporation to set up a Singapore-based facility for the maintenance, repair and overhaul (MRO) of in-flight entertainment and communications (IFEC) systems and components produced by Panasonic Avionics.

Under the agreement, SIAEC will hold a 42.5 per cent equity shareholding in the joint venture, with the remaining 57.5 per cent owned by Panasonic Avionics Corporation.

The joint venture will meet the growing demand for IFEC support of new-generation aircraft. Strategically located in Singapore, the state-of-the-art facility will enable airlines in the Asia-Pacific to benefit from one-stop total solutions and OEM support.

[Musicwhiz]

Dear all, Part 5 (final part) of my Analysis of Purchase for SIA Engineering is now up on my blog! Please feel free to visit and leave comments, thanks!

A snippet as follows:-

"SIAEC has a long history of aggressively pursuing and concluding joint venture arrangements with internationally renowned partners; with Safran Group being the latest addition, as well as Gulf Technics of Bahrain. It will be fair to assume that Management will continue to focus on developing and extending their reach through such lucrative arrangements into the mid-term, as it allows them to grow and expand without high capex requirements."

[FFNow]

The Qantas A380 engine problem has been linked to SIAEC's JV company - SAESL. How will this affect SIAEC?

[Jon-san]

That depends on whether the blame can be placed squarely on SAESL's shoulders. In such cases, investigations take quite a long while to be completed. Sometimes as long as a year. Moreover, it is very hard to really pinpoint a specific failure as, by the time the defect is discovered, generally, damage would have occurred to the point where a number of factors would be suspected. So it is hard to really foresee it's effect on SIAEC's reputation until investigations are completed. Moreover, the duration of the works carried out on the engine were quite awhile ago, so it could be also due to material failures from defective components, in which case, the ball would then again land back in RR's and it's suppliers' goalmouth, since spares are provided by them.

[Musicwhiz]

Hi Jon-San,

Thanks for the succinct explanation. Of course this news worries me but then again it's just one of SIAEC's JV companies out of the 25 they have, so the impact would not be so severe. The most important thing is their cash flow generation which is paying for my dividends, so I do not see that ability being impaired permanently anytime soon.

That said, I will still be monitoring developments on an ongoing basis.

Cheers!

[Jon-san]

I'll be watching quite carefully myself as personally, I have yet to witness any aircraft incidents as severe as this happen to any aircraft serviced by a local MRO. Thus far, most of the incidents have been relatively minor, except the SQ006 and MI185, but in those cases, flight crew and ATC errors were the main causes, if I remember correctly? It will be interesting to see how the authorities will handle this if the fault is determined to be with SAESL, as SAESL services quite a large portion of SIA's engines and is also one of the larger JVs SIAEC has.

[Musicwhiz]

I'll be watching quite carefully myself as personally, I have yet to witness any aircraft incidents as severe as this happen to any aircraft serviced by a local MRO. Thus far, most of the incidents have been relatively minor, except the SQ006 and MI185, but in those cases, flight crew and ATC errors were the main causes, if I remember correctly? It will be interesting to see how the authorities will handle this if the fault is determined to be with SAESL, as SAESL services quite a large portion of SIA's engines and is also one of the larger JVs SIAEC has.

Yes, this incident is pretty worrying as it sounds like it may stir up a storm as it involves aircraft engines. Then again, I guess that's the risk of investing in businesses - the unforseen can occur and shareholders must be ready for such events.

This is similar to events such as the warehouse fire which occurred at Kingsmen Creatives' factory; and the unforseen problems which occurred for Boustead's Al Marj Township Project in Libya.

[Musicwhiz]

Business Times - 27 Nov 2010

SIAEC-Vietnamese venture starts ops

By VEN SREENIVASAN

SIA Engineering Company (SIAEC) yesterday announced the official opening of its sixth overseas line maintenance joint venture (JV) - at Ho Chi Minh City's Tan Son Nhat International Airport, the largest and busiest airport in Vietnam.

The JV company - Southern Airports Aircraft Maintenance Services Co (SAAM) - is 49 per cent owned by SIAEC and 51 per cent by Southern Airports Corporation (SAC), a state-owned enterprise under Vietnam's Ministry of Transport.

SAC operates nine international and domestic airports in the south of Vietnam. Its subsidiary Saigon Ground Services (SAGS) is the dominant ground-handling service provider at Tan Son Nhat International Airport, with a market share of more than 50 per cent.

SAAM started operating this month, servicing a strong base load of nine airlines - Singapore Airlines (SIA), Cathay Pacific, United Airlines, All Nippon Airways, Qatar Airways, Turkish Airlines, Philippine Airlines, Cardig Air and Neptune Airlines.

SAAM has taken off well, said SIAEC chief executive William Tan. 'This joint venture will raise the bar for line maintenance services in Vietnam, and is poised to expand its customer base and service offerings at Tan Son Nhat Airport.'

SAGS director Nguyen Dinh Hung said SIAEC was chosen as a JV partner because of its experience and excellent track record.

'The JV will enhance the level of airline support provided at the airport, giving added confidence to the 40-plus international airlines and domestic airlines flying here,' he said.

The new line maintenance facility extends SIAEC's global network of such stations - which covers more than 20 airports in Singapore, Australia, Hong Kong, the US, the Philippines, Indonesia and Vietnam. The network across these seven countries handles about 800 flights daily around the clock for more than 60 airlines.

SIAEC said the start of the Ho Chi Minh operations is not expected to have a material impact on its financial performance in FY2010/11.

The company has a client base of more than 80 international carriers and aerospace equipment manufacturers, and provides line maintenance services at Changi Airport for more than 50 international carriers, as well as air-frame and component overhaul work on some of the world's most advanced and widely used commercial aircraft. It achieved a revenue of more than $1 billion in FY2009/10.

[Musicwhiz]

SIA Engineering signs $300m services agreement with SilkAir
Posted: 09 December 2010 2011 hrs

SINGAPORE : SIA Engineering (SIAEC), a unit of Singapore Airlines, said it has signed a five-year services agreement with SilkAir worth $300 million, renewing an existing pact that will end this year.

Mr William Tan, Chief Executive Officer of SIAEC, said: "The renewal of the Services Agreement affirms the strong synergies and excellent commercial relationship with SilkAir, as we work closely to uphold its engineering excellence."

The engineering unit said the agreement covers maintenance, repair and overhaul as well as fleet management services for the SilkAir fleet.

Currently SIA's fleet management programme services eleven airlines, covering a fleet of more than 200 aircraft.

With more than half of the fleet operated by non-SIA airlines, spanning across Asia, Middle East, Australia and the United States, the Company is focused on growing the third-party content of its business and extending the global footprint of the SIAEC Group.

SIAEC said the agreement is not expected to have an impact on its financial performance as it is a renewal of a similar contract.

SilkAir, a full service premium airline, currently flies to 33 destinations across 11 countries and is the regional wing of Singapore Airlines.

It will launch operations to its 34th destination, Pekanbaru, in February next year. - CNA/ch

[Musicwhiz]

Business Times - 10 Dec 2010

SIAEC renews deal with SilkAir

Five-year, $300m agreement covers broad range of MRO, fleet mgt services

By VEN SREENIVASAN

SIA Engineering Company (SIAEC) has renewed its five-year $300 million comprehensive services agreement with Singapore Airlines' regional carrier SilkAir. The existing services agreement with SilkAir expires this year.

The new five-year agreement covers a broad spectrum of maintenance, repair and overhaul (MRO) and fleet management services for the SilkAir fleet, and is expected to add $300 million in labour revenue to SIAEC's order book.

William Tan, CEO of SIAEC, said the renewal of the services agreement affirmed the strong synergies and excellent commercial relationship with SilkAir.

'SilkAir is a valued partner of SIAEC's fleet management programme (FMP), which has seen impressive growth in recent years and, today, places SIAEC as one of the world's largest FMP providers.'

He added that an expanding base of airlines were attracted by SIAEC's integrated total care services offered under its FMP, which bundles MRO services with 24/7 fleet management support.

'Indeed, the economies of scale derived from our high-volume operations enable us to provide SilkAir with high despatch reliability and seamless technical support across our global network of line maintenance stations,' Mr Tan added.

SIAEC's FMP business currently services 11 airlines with a fleet coverage of more than 200 aircraft, with 130 in service and the remaining to be delivered over the next three years.

With more than half of the fleet operated by non-SIA airlines, spanning across Asia, Middle East, Australia and the United States, the company said it was focused on growing the third-party content of its business and extending the global footprint of the SIAEC Group.

Marvin Tan, chief executive of SilkAir, welcomed the renewal of the services agreement.

'Safety and reliability in our flight operations is a vital part of our mission at SilkAir and engineering support of the highest quality plays a key role in delivering this promise to our passengers,' he said.

As the new services agreement is a renewal of the existing agreement, it is not expected to have a material impact on SIAEC's financial performance in FY2010/11.

SIAEC, which is a subsidiary of Singapore Airlines, has a client base of more than 80 international carriers and aerospace equipment manufacturers.

It provides line maintenance services at Changi Airport for more than 50 international carriers, and achieved a revenue of just over $1 billion in FY2009/10.