South Korea’s government and aviation industry are striving to boost the country’s aircraft heavy maintenance sector, which could result in new facilities and the return of at least some work currently outsourced overseas.
The government has made it a strategic objective to increase maintenance, repair and overhaul (MRO) operations in South Korea. It wants to do this not just to stimulate the local aerospace industry but also to gain better oversight of low-cost carrier (LCC) maintenance in particular. In parallel with this effort, Incheon International Airport has launched an ambitious expansion plan for MRO operations at the country’s largest hub.
South Korea’s MRO market is worth about $1.5 billion a year, said Yeun Jeung, president of the Korea Institute of Aviation Safety Technology (KIAST), at Aviation Week’s MRO East Asia conference. While this represents the third-largest MRO market in the Asia-Pacific region, behind only China and Japan, there are no major independent MRO operations in Korea, Jeung notes.
The country’s nine national carriers conduct their own line maintenance in Korea, but a large proportion of heavy maintenance and almost all engine work is sent overseas. Korean Air conducts its own heavy maintenance, mostly at its extensive facilities near Busan. Most of Asiana’s is outsourced, although it does conduct some at its hangars in Seoul’s two airports. The seven LCCs generally have their heavy checks performed overseas.
Developments at Incheon could help shift the dynamics of the local MRO sector. A new LCC hangar has just been built, and the Incheon International Airport Corp. (IIAC) is planning a much larger MRO complex.
The LCC hangar was completed in November by a joint venture comprising Sharp Aviation K and airlines T’Way, Jeju Air and Eastar Jet. It is expected to begin operations in April, says Kwang-Yeol Kim, deputy director of IIAC’s aviation facilities team. The hangar has two narrowbody bays, and will be able to perform some C check functions.
Incheon’s current MRO area includes the LCC hangar and three larger hangars—one for Korean Air and two for Asiana. There is limited scope for further growth in this area, however, so IIAC plans to create a more extensive MRO complex on the airport’s western edge.
While the existing facilities may eventually move to the proposed MRO complex, it is primarily intended for new operations, says Kim. The 1.1 million-m2 (11.8 million ft.2) site has room for up to five large hangars and other associated facilities. It will require taxiways and aprons to be constructed as part of IIAC’s fourth runway project, due to start by the end of this year.
The first stage of the complex will include a four-bay maintenance hangar and a paint hangar. IIAC will lease land to the maintenance hangar tenant, who will be responsible for its construction and operation. The airport will not charge fees until the business becomes profitable, says Kim. IIAC intends to help with financing for the paint hangar, since it can be difficult to attract investment for such a facility.
Discussions are underway with potential investors in the MRO complex, Kim says. IIAC wants to have a large, overseas MRO provider as a tenant. One such company is considering establishing a joint venture with a major South Korean carrier to operate the first four-bay hangar.
IIAC is hoping to have a memorandum of understanding signed with the operators of the first hangar, allowing design work to begin by the end of this year. Administrative and office buildings will also be built in the MRO complex.
The government views expanding MRO capability as an important goal, says KIAST’s Jeung. For this reason it is offering a range of financial incentives to encourage major MRO companies to enter joint ventures in South Korea. Another objective has been to establish more MRO operations in Korean regional centers.
Foreign ownership limits for MRO businesses were removed last year, but the initiative has yet to result in new development by overseas players. Efforts to develop new civil MRO bases in two regional cities have also stalled. One of these was to be in Cheongju (Inside MRO, September 2016, p. 20). The government’s approach to its MRO objectives may be revised when a new administration takes over in South Korea this year following presidential elections in May.
Meanwhile, the government is also interested in improving MRO safety through data collection and sharing. Transportation officials recently held a meeting with the maintenance heads of the nine carriers, Jeung says. As a result of this meeting, KIAST has been tasked with developing proposals for data sharing.
Jeung notes that competition would not be compromised by the pooling of safety information. Such an approach would be particularly useful for South Korea’s LCCs, as most operate the same type of aircraft—Boeing 737-800s. Jeung said KIAST is researching required next steps for this process. Aircraft manufacturers will also be invited to participate.
The collective fleet of South Korea’s airlines reached 349 aircraft in 2016, Jeung says. This was almost double the total from 2006. While full-service airline fleets grew by an annual average rate of 6.4%, the LCCs’ annual increase was 42.6%. The two largest carriers—Korean Air and Asiana—accounted for 98% of the overall fleet in 2006, but now their share has dropped to 68% due to the rise of the LCCs.