Who are the primary customers?
The AirAsia Group, but not only AirAsia Malaysia, we also have Air Asia Indonesia, AirAsia Thailand and AirAsia India for base maintenance or C checks. We have customers from Singapore, Tigerair and Scoot (which is turning to Scoot now), for which we perform C checks and base maintenance. We also are painting the aircraft into the new yellow livery.
In addition, Sepang also does work for Indigo, which is returning some aircraft, so we complete delivery checks, painting and cabin refurbishment. But we are also discussing a contract for 2018 for C checks. Some of our other customers include VietJet Air, Air Caledonie, MASWings, Jetstar and Firefly. We also provide engineering support for Royal Malaysia Air Force’s A400Ms. We also provide warehousing, consumables and expendables material for them. We have about 15 regular customers now—and we intend to grow this customer base.
We also are developing capability for the A330. Today we are mostly doing A320 and ATR base maintenance, but we are considering doing some A330 MRO for AirAsia X.
How big is the new hangar? How many bays does it have?
We have two positions for A320 C checks and we have one paint bay, which is a very nice paint bay because it has a door—it’s enclosed. This is the only one in Asia that has a door, which in terms of quality is much better. It also has controlled air circulation and temperature, so it’s a state of the art, eco-friendly bay, which I think is probably the only one in Asia. We invested a lot of money in the new hangar and the paint bay, and it turned out to be a success because since I arrived on July 1, I think the paint bay has been full, nose-to-tail, with customers for aircraft painting—A320s mostly.
So in total, we have eight positions for A320s; six in the first hangar and two in the new hangar, plus one paint bay, which makes nine total. And we are running at about 80% capacity--almost full until the end of this year and next year we’re pretty much booked until June, so it’s going quite well.
There are lower cost places, but we’re seeing a lot of demand because we have high quality, meet all the delivery dates, and have respectable turnaround times, so our planes are never delivered late, which is very important for the customers.
There is more MRO competition in the region, such as from Lufthansa Technik, LionAir and GMF, so how does this affect Sepang and what is your differentiator?
Our main differentiator is that we provide high quality work. All the customers give us testimony about quality and on-time delivery. One of our competitive advantages is our cost base. Malaysia is cheaper to operate in than in Singapore, so we can provide very competitive offers to the MRO market. And you know that all of the airlines, especially AirAsia, are looking for price—and the rest (quality, respectable turnaround times etc) is supposed to be there. We’re renegotiating the contract with AirAsia and the price is a key driver for the decision. But so far it looks good. I think we are aligning with their expectations, so we will continue with AirAsia in the coming years.
Do you have a plan—and space—to add another hangar if the business warrants it?
There is a place to expand next to the hangar, so we could build another one if we wanted to. This is not on the agenda now because we need to strengthen, and although we have been making money the last two years and 2018 looks good, before spending another 50 million ringgit, which is about $12 million, on the new hangar, we need to make sure that we have a bigger customer base and longer contracts so that we can really invest. Now that we’ve opened the new hangar, we have 25-30% capability to acquire more customers. We also are working on efficiency and productivity to reduce the duration of the checks, which would enable us to accommodate more without having to invest in a new hangar. Really focusing on efficiency and quality are drivers of our leadership team. We still have some margin to improve.
In terms of the productivity improvements and how you’re going to continue decreasing turnaround time, are you doing that internally?
At this stage, we are doing this internally. I don’t want to say that the solution is obvious, but I’ve been in aircraft maintenance for 35 years (include Air France and Sabena) and have some ideas from experience. To gain the last percentages, it might become trickier; then we might need some outside support.