Relocating Firms To Double Exports Of Aerospace Components To $6B

Exports of locally manufactured aerospace parts and components are expected to double in about five years from the current $3 billion annually as more foreign firms are looking at relocating production and sourcing of parts in the country, which has already a relatively wider base of players to vie as a regional supply hub for aerospace parts and components.

John Lee, president of Applied Machining Corp., a pioneering firm in Aerospace precision machining in the country, made this projection after the industry players convened themselves to form an association Aerospace Industries Association of the Philippines (AIAP) as a channel for their advocacies and more collaboration and synergy between players and the government. There are a total of 36 aerospace parts producer companies, mostly foreign-owned, in the country today.

"The Philippine Aerospace industries presently project a double phased growth over the next five years especially having now the catalyst for growth," Lee said. The domestic aerospace parts producers export their products entirely.

Lee cited the scheduled huge volume of aircraft production being lined up for delivery by the world's biggest aircraft manufacturers Boeing and Airbus for 2014 alone while China is producing 5,000 planes for its own use only. This would entail strong demand for more aircraft parts and components, which Lee expected to double in less than five years.

Airlines are also changing aircraft like local carriers Philippine Airlines and Cebu Pacific into the more efficient aircraft models. The fuel cost of the old aircraft accounts for 26 percent of an airline's total cost while the fuel cost for new models is only 18 percent.

"We cannot become an aircraft manufacturing hub because we don't have huge investments for such unlike Malaysia which invested 15 billion ringgit, but we can become an aircraft parts and components production hub because we have very good aircraft engineers," Lee said.

At the inception of the industry association, Lee suggested four focus areas that they must work on - supply chain, marketing efforts, government policy support and technical capability.

Lee has called for the building the capability of other suppliers in order to fill up the gap in the supply chain noting that an, "industry that has a lot of gaps will not be agile and competitive." He also pushed for a Big Brother-Small Brother concept to support marketing efforts.

One of the country's major aircraft parts supplier in the country is Moog, located in Baguio Economic Zone. There are also other maintenance, repair and operations firms in the country including Lufthanza Technik and those in Clark Special Economic Zone.

"The finishing requirements for the aerospace industry is so huge that even if we can just get a fraction of it would be very substantial for us already. There is no way to go but up," he said.

Other countries have are also encountering excess capacity that they are now looking at expanding abroad, including the Philippines.

Since most aviation parts manufacturing projects have long gestation period, the industry has urged for government policy reforms and formulation of support structures.

Improvement on the technical base capability of the domestic sector is also needed for the Filipino workers by providing more training and technology upgrading of systems and processes.

For instance, he said, all the aerospace parts and components should pass through special quality systems of the manufacturers. This would need more investments. In the case of his company, they would need a million dollar investments annually for the next three years.

Aerospace industry development is one of the strategic and high technology area identified in global economic radar to remarkably zoom in within the immediate next decade, he said. This development is supported by market growths in phenomenal scale happening in the emerging strategic regions globally, the ASEAN included.

In the local set up, the Philippines boasts of a growing aerospace industries gearing up high in activities like precision machining of high technology parts and components, and of other quality processes that supports directly and indirectly the aerospace and aviation demands involving parts manufacturing and MROs.

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