~ Taking a look back at the Aerospace & Defense Industry in 2008 and its market outlook for 2009 ~

SINGAPORE, Feb. 10 /PRNewswire/ -- Current sentiment on the global economic crisis is that it has reached its lowest ebb and can only head for a full fledged rebound within the first half of 2009 that will continue to spur growth, driven primarily by a massive government fiscal stimulus package. Strong demand from emerging nations will be a factor in reviving the global economy. For the MRO industry, coming out of a tumultuous year in 2008, its economic outlook in 2009 in the short term and long term remains bullish.

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According to Frost & Sullivan's Asia Pacific Research Associate for Aerospace & Defense Practice Nagib Ramli, investments on MRO activity in the interim will hinge on a case by case basis, while studies suggest that the Asia Pacific MRO revenue forecast would decrease by 3% due to slowdown in air traffic.

Nagib adds that relative to its counterpart in most regions however, Asia Pacific will still record a comparatively higher growth stemming from all maintenance segments, the bulk of which will be driven by the engine segment. This is in part due to long term demand emanating from major economies in the Asia Pacific region that is expecting new aircraft deliveries from major OEMs such as Boeing and Airbus.

"However, expected growth may very well differ by countries. It is expected that deliveries in 2009 would be close to some 500 adding backlogs from 2008 with 450 aircraft that are scheduled for delivery in 2009. On a different note, since MRO operators in Asia are typically involved in the maintenance of wide-body aircraft coming from its western neighbors, it is estimated that more long term MRO contracts will be put in place adding to the drifting trend of maintenance provisions onto Asia," he says.

"In the long run," he continues, "MRO activity will be shifted towards the Asia Pacific region as China, India and the region at large are slated to establish its importance as MRO centers. A new engine MRO facility is being established in Shanghai, a joint venture between Pratt & Whitney and China Eastern Airline, and is expected to open its doors within the first half of this year. The facility will be designed to handle CFM International CFM56 engines and the carrier's fleet includes CFM56- powered Airbus A320 family aircraft and Boeing 737s."

Helping to spur on this growth is the continued MRO infrastructure development in Singapore which is the largest MRO hub in the Asia Pacific region. As noted by its respective Senior Minister of State for Trade and Industry, the country remains committed to developing the aerospace industry. "Currently, Singapore is developing the 300 hectors Seletar Aerospace Park as an integrated aerospace facility which, besides MRO, will play host to manufacturing and other business activities. Companies such as Rolls Royce, Pratt and Whitney and ST Aerospace are among those that have put forth their commitment to invest," says Nagib.

Similarly, MAS Engineering & Maintenance and GMR Hyderabad International Airport Ltd have also entered into a joint venture. A world class MRO facility is currently under construction at the Greenfield Rajiv Gandhi International Airport in Shamshabad, Hyderabad. This investment worth between US$50 million and US$70 million that will include training, maintenance services for both narrow and wide body aircraft is due to open by the end of the third quarter.

In terms of revenue, according to Nagib, the global commercial MRO market is experiencing an annual steady growth at a circa 4 percent range with its market value that is expected to exceed US$65 billion within the next decade. "Over the next few years, it is estimated that North America will see a decrease in its market share. Reasonable growth in the Low Cost Carrier (LCC) passenger traffic within Asia Pacific on short flights and even in the long haul segment could potentially provide stimulus for increase in MRO activities," he continues.

He adds, "Furthermore, labor cost in the region is relative cheaper and as the MRO industry adopts cost-cutting measures to minimize operational and maintenance expenditure to provide the necessary cash flow for sustainability and growth, the labor aspects of the business on a whole should not be discounted." The establishments of MRO facilities across Asia will also bolster standard competencies of aircraft technicians and hence produce a strong demand for engineering talents.

Despite reports of a global economic slowdown, Frost & Sullivan remains bullish that worldwide sentiment on the economy is beginning to taper and recovery will soon start to set in. MRO outlook for 2009 will be positive based on macro influences which will be dictating industry's trajectory in the short term.

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SOURCE Frost & Sullivan