Low-cost airlines in China? - Orient Aviation

special report
TAECO’s success story contin-
As a third hangar prepares to open,
conversions could prompt further expansion
By Charles Anderson
March 24 is a date P.K. Chan,
chief executive of HAECO
(Hong Kong Aircraft Engineering
Co) and its sister
company, TAECO (Taikoo
Xiamen Aircraft Engineering Co), has
firmly underlined in his diary.
On that day the industry veteran
is throwing a giant party in Xiamen to
mark the 10th anniversary of TAECO’s
founding. The gala gig will also celebrate
the opening of a new hangar at the East
Gaoqi International Airport complex in
the southeast coastal Chinese city.
The hangar, TAECO’s third, has
taken two years to build and will allow
for growth in both heavy maintenance
and freighter conversion capabilities at
the company.
At present TAECO, which has facilities
for repair, maintenance and overhaul
(MRO) of Boeing 747s, 737s, 757s
and 767s and Airbus A330s and A340s,
can work on four wide-body and two
narrowbody aircraft simultaneously.
The new building will add two widebody
bays and one narrowbody bay to
this capacity.
Chan, as ever, is looking for opportunities
for his companies to expand.
Already TAECO, a joint venture in
which HAECO has a 49.55% share, is
the only company globally authorised
to perform B747 passenger to freighter/
combi conversions on the -200 and -300
series under the Boeing Supplemental
Type Certificate (STC) since Boeing’s
closure of its own conversion workshop
in Wichita in the U.S. HAECO handles
B747-200 combi conversions at its base
at Hong Kong International Airport.
Now Chan is hoping to receive certification
to carry out B747-400 series
conversions in Xiamen, which may mean
further expansion of the southern Chinese
MRO complex.
“That is waiting on Boeing’s decision,”
he told Orient Aviation in January.
Boeing holds a 9% share in TAECO. If
the – 400 conversion programme was
confirmed work could fully occupy one
of the TAECO hangars in the long run,
said Chan. “I may be required to build
another hangar at Xiamen,” he added.
“This year we are full [at Xiamen],
despite the events of 9/11, and we are
still meeting our original budget.”
All that is cause for celebration,
Chan believed, although the size of the
anniversary party is something of a
problem for him. “We started TAECO
from scratch. We trained our staff ourselves.
The people have grown with the
company and the company has grown
with the people.”
Now TAECO has 1,800 employees
and Chan, who is company chairman
and has been there from day one, wants
to invite them all on March 24. “Where
are we going to put all those people? I
don’t know yet. That is my headache.”
Chief executive of TAECO and HAECO, P.K.
Chan: celebrating 10 years in China
TAECO trains its workers at HAE-
CO’s extensive facilities in Hong Kong.
It takes four years to bring an engineer
to Hong Kong Civil Aviation Department
standards and two years to train a mechanic.
In the last 10 years, 120 qualified
engineers and 1,000 mechanics have
returned to work at TAECO after their
HAECO education. Thirty engineers
and 120 mechanics are currently under
training in Hong Kong.
At HAECO, which is part of the
Swire Pacific group as is HAECO’s main
customer, Cathay Pacific Airways, Chan
feels business is doing as well as can be
expected.
“We are all right this year. HAECO
has done well. We have seen a slight
growth in line maintenance, but we are
facing difficulties with airlines as they
are reducing their costs,” he said.
A restructuring in 1999 has helped
HAECO. “We have fewer overheads
and we are more cost effective. That has
compensated for the airlines’ cost-cutting,”
said Chan.
“Hong Kong’s cost base is high. We
have a lot of competitors in the region
whose costs are lower than ours. That’s
why we must do things smarter. We need
to maintain the quality of our work and
provide better service to attract more
customers.”
The core of HAECO’s work is provided
by most of the 66 widebody
aircraft of its sister company, Cathay
Pacific (TAECO also services a number
of the carrier’s jets), the three B747s of
Cathay’s all-cargo subsidiary, Air Hong
Kong, and Dragonair’s 21 aircraft Airbus
fleet.
Chan is cautiously optimistic about
business in the coming year for HAECO,
TAECO and the smaller Shandong shop
in China, Shandong TAECO Aircraft
Engineering Co (STAECO), in which
HAECO and TAECO have stakes.
“I predict all three companies will
be relatively healthy, although there
are certain areas we can’t predict, like
whether there will be a Gulf war,” he
said.
At HAECO, a US$4 million joint
venture with EADS Sogerma Services
was signed early last year providing
Aerospatiale ATEC 6 equipment to test
a range of avionics computers on new
generation aircraft at the Hong Kong
facility. Wider cooperation with the
French maintenance company is still on
the cards.
“That is under discussion,” said
Chan. “Not just over MRO services, but
something wider. We are working very
hard to achieve that.”
Expansion is also planned at STAE-
CO, based at Jinan in China’s Shandong
province. Another hangar is being built
alongside the existing single-bay hangar
that handles narrow-bodied aircraft such
the Boeing 737 and Bombardier series. It
is due for completion in mid-2003.
This time last year Chan was hoping
to make TAECO a dedicated Boeing
MRO facility and establish a joint Airbus
MRO in China. Expansion outside Asia
was also being mooted.
Now he prefers to talk more generally
in terms of breadth of services that the
40 Orient Aviation, February 2003