Carriers moving MRO work outside China even before tariff chaos: SIA Engineering
[SINGAPORE] There has been little to no impact from tariffs on SIA Engineering Company's (SIAEC) operations for now, but these are still early days, said chief executive officer Chin Yau Seng in a briefing on Tuesday (May 13).
It has been just 42 days since the 'Liberation Day' tariffs were launched and the company is monitoring the tariffs and their impact. SIAEC will be looking into the structure of contracts with the view of passing on the costs to its customers.
'We are monitoring the situation, I think no one really knows how all these things will finally play out in what form,' he said.
As the tariffs have yet to make a price impact, SIAEC has yet to see airlines moving their maintenance, repair and overhaul (MRO) work in China to other Asian markets. But carriers have been seeking to diversify their MRO bases overseas even before the tariffs, said Chin.
'We have been in conversation with some of them over the course of the past few years, we do have US carriers among our customers, so perhaps that's one opportunity, but we will continue conversations to see where they take us,' he said.
For financial year 2025 ended Mar 31, the increase in SIAEC's expenditure was driven mainly by material and subcontract costs. Material costs have increased 32.8 per cent to S$272 million for FY2025 from S$204.8 million in FY2024. Subcontract costs have increased 36.6 per cent on the year to S$150.1 million from S$105.9 million.
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While material costs are passed through to customers, subcontract costs might not be passed through to customers depending on the contract. While material costs have been affected by inflation and supply chain issues, the rise in subcontract costs stems from the increase in volume and a rate increase that occurred in FY2025.
'We've taken the hit this past financial year, but going forward, we've locked in the contract for the three years, if there was one big jump it was in the past year already,' said Chin.
Looking ahead, SIAEC is implementing a new enterprise operating system (EOS), which will increase efficiency and consistency across its MRO operations. With demand from airlines maxing out the capacity at the company's hangars, this EOS is expected to aid in forecasting and planning to eke out spare capacity to sell, among other improvements.
SIAEC will work closely with its customers as part of the EOS to plan for aircraft checks. From the predictability of check induction to the availability of spares, these are some factors the EOS will consider in ensuring that the company can be more efficient in delivery timelines for maintenance checks.
'The more predictable you are, the better you are in knowing there's spare capacity that's freed up that you can sell, that will translate to revenue,' said Chin.
As airlines operate their aircraft for longer, SIAEC will be leveraging its knowledge gained from maintaining airframes such as the A350 and A380, as well the Boeing 787 and 777. The company has moved up the learning curve, with Chin pointing out that the A350 checks go out on a timely basis.
'You're actually getting deeper and deeper into the aircraft life cycle and therefore you expect to have a higher work content and more things to do on the ground, and that we will continue to be at the forefront to try keep developing capabilities and making sure we are among the best MROs handling these aircraft,' he said.
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