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JAKARTA (TheInsiderStories) – The Indonesian Ministry of Industry has projected the value of national maintenance, repair, and overhaul (MRO) business to rise to US$2.2 billion by 2025, from only around $970 million in 2016. The figure reveals huge potential as well as opportunities for companies and investors engaging in the sector.

The phenomenon is in line with a move by the government to stimulate MRO business development, which is currently dominated by GMF AeroAsia (IDX:GMFI), a subsidiary of flag-carrier Garuda Indonesia.

Meanwhile, several major airline operators, such as Lion Group, have also developed their MRO business, both to service their own aircraft and those of other airlines.

“The MRO business is growing as competition intensifies. Domestic MRO providers already have the capacity to provide professional airframe, instrument, engine, radio, emergency equipment and line maintenance,” said Harjanto, Director General for Metal, Machinery, Transportation Equipment and Electronic Tuesday (19/12).

Harjanto mentioned that in 2016 global airliner operators spent US$72.81 billion for aircraft maintenance and service. Of this amount, North American airline operators contributed US$21.2 billion, European Union ones contributed US$20.7 billion and Asia Pacific airline operators contributed US$13.3 billion.

“By 2025, global aircraft maintenance is projected to increase by 3.9 per cent to US$106.54 billion. The Asia Pacific region is projected to record growth of 5.8 per cent, North America 0.9 per cent and the European Union by 2.45 per cent,” he said.

Harjanto said companies engaging in MRO business in Europe and North America have started to focus on high-technology and capital-intensive services while those that require human capital are being farmed out to other parties. ‘This provides business opportunities to MRO industry players in Asia Pacific, including Indonesia,’ he said.

At present, there are a total of 32 companies engaged in the MRO business, counting members of the Indonesia Aircraft Maintenance Service Association (IAMSA). Harjanto therefore called on industry players to collaborate in order to increase their competitiveness in this MRO business.

At present, the domestic MRO industry is yet to fully meet the needs of aircraft operators; therefore, they need to send aircraft to neighboring countries to be repaired or overhauled.

In addition, not all type of services, repair or overhauling can be provided by MRO providers. They have to secure certificates from international agencies as well as aircraft makers to provide certain services.

The other problems encountered by domestic MRO business players are lack of human resources capacity as well as aircraft spare parts. ‘We will therefore discuss this issue with aircraft manufacturers, in particular Airbus and Boeing, in the hope they will set up an Aircraft Engineering Center in Indonesia,’ Harjanto said.

The Indonesian government has decided to develop an Airport and Aerospace Industrial Park in Bintan, on 4,000 hectares of land. The area is projected to become the most integrated aviation industry in Indonesia, as it will be equipped with an airport, aircraft MRO facilities, an aircraft training center as well as industry, business, and residential areas.

In addition, the Industry Ministry and IAMSA also plan to develop an education center that will provide opportunities for students to improve their aviation skills.

The Industry Ministry projects the MRO industry as needing around 12,000-15,000 engineers in the aviation industry over the next 15 years. This will provides great opportunities for young people interested in pursuing careers in the aviation industry. The increase is in line with the growth of our domestic airline industry.

GMF Flutter of Wings

PT GMF AeroAsia Tbk continues to build more MRO facilities in Indonesia. The company has finalized its plans to establish a new maintenance, repair, and operations (MRO) facility at Hang Nadim International Airport in Batam, Riau Islands, in collaboration with KLM Engineering & Maintenance and Japanese Mitsui Corp., as partners next year, in the effort to secure market share in the region.

As previously reported, GMF plans to invest up to US$100 million to build a domestic and foreign aircraft maintenance center at Hang Nadim International Airport area in Batam. If realized, the investment will be able to absorb up to 10,000 workers.

GMF is determined to become one of the world’s top 10 aircraft maintenance companies by 2021. This target is considered realistic as the company is in the midst of a market with significant aircraft growth.

GMF’s market potential is very wide open because every year aircraft industry growth in this country reaches 11 percent. Furthermore, the location of GMF is strategic and it is thus able to absorb potential service work from neighboring countries, such as our Southeast Asian neighbors and Australia.

According to Iwan, GMF has occupied third position in Southeast Asia, fifth position in Asia, and on a world level, it is placed in 13th position.

Lion Air Group, the owner of Indonesia’s largest budget airline, has construction a 29-hectare maintenance facility at the same airport. It will have the capacity to handle up to 50 passenger jets simultaneously.

GFM Aero Asia only managed to raise Rp 1.1 trillion ($77 million) in fresh capital from the sale of 10 percent of its enlarged ownership stake in an initial public offering – far less than the expected Rp 4 trillion.

The company is now in talks with three strategic partners in Europe and Asia for the sale of another 10 to 15 per cent to raise additional capital, Iwan said.

GMF AeroAsia expects to conclude a deal by the end of January. As part of the arrangement, parent company Garuda Indonesia will relinquish 10 percent of its stake in GMF Aero Asia to a strategic partner. Investment bank BNP Paribas is advising GMF Aero Asia on the deal. (*)

Written by Roffie Kurniawan, email: roffien@theinsiderstories.com