Positioning Malaysia as Asia’s Aviation Engineering Hub

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Airbus’ involvement in Malaysia dates back to 1978 (photo credit: Airbus).

By Shahjanaz Kamaruddin

On 2 October 2013, it was announced that Airbus would further develop its presence in Malaysia by expanding its joint-venture maintenance unit, Sepang Aircraft Engineering (SAE), and setting up its new wholly-owned Airbus Customer Services Centre adjacent to the SAE facility at KLIA.

This is expected to be the first in a series of projects that will see this leading European aircraft manufacturer increase its footprint in the rapidly-growing South East Asian region and improve its service capability for its customers worldwide 24/7 close to their home bases. Its existing customer service centres offering specialised major aircraft engineering and repair services are currently based in Toulouse, Wichita and Beijing.

The significance of this investment can be lost on the general populace without the historic perspective.  Airbus’ involvement in Malaysia dates back to 1978 when the national carrier, Malaysia Airlines (MAS), became among its earliest customers. Fast forward to 2013 – both MAS and AirAsia are today its major customers operating the A380s, A330s and A320s.

So why did Airbus choose Malaysia over other locations in Asia?

Under the Economic Transformation Program, six Entry Point Projects (EPPs) are identified in the Business Services National Key Economic Area (NKEA); they include EPP1 for the aviation Maintenance, Repair & Overhaul (MRO) sector and EPP5 for Pure-Play Engineering services which, when combined, are projected to create an estimated 23,000 jobs by 2020. The presence of Airbus in Malaysia would contribute significantly to both sectors given the various services it plans to undertake.

Unknown to most Malaysians, the nation has over the last three decades seen a growing aerospace industry develop. CTRM is the fifth largest supplier in the world to Airbus of composite structures and manufactures wing components even for the A380.

Another company, Spirit Aerosystems Malaysia, is a key component supplier and assembler for Airbus and is also among the largest aircraft component manufacturers in the world.

Meanwhile, Strand Aerospace Malaysia (Strand), a relative newcomer in Malaysia, provides pure-play engineering services and also beyond the aerospace industry. Strand’s work is focused on design and certification analysis and is the only company of its kind providing pure-play engineering services to Airbus in Malaysia.

Solid proof of Malaysia’s capacity to grow aerospace industry further

Collectively such companies are solid proof of Malaysia’s capacity to grow its aerospace industry further not just in terms of component manufacturing but also in terms of pure-play services which are higher up the supply value chain.

With the vision and goals clearly set, concerted efforts had to be made to draw attention to Malaysia’s attractions for an Original Equipment Manufacturer (OEM) such as Airbus to set up a base here.

PEMANDU had approached selected stakeholders from the public and private sectors specifically to address this agenda, namely MATRADE, MIDA and Strand Malaysia. Each of them had brought their own unique contribution to the process including Strand Malaysia’s sound understanding of Airbus’ business needs.

An added advantage is the fact that Malaysia offers the right critical mass of engineers ready to scale up its numbers and competencies, and whose employers like Strand Malaysia had established strong reputations within the industry in Europe and elsewhere. Worth noting is Strand Malaysia’s strengths in engineering design and innovation activities.

Over a period of about two years, the parties jointly worked on a strategy that would prepare the landscape which the OEM would find desirable and engagements took place to ensure the right messages were conveyed. Meetings with Airbus’ management in Toulouse were organised by MATRADE from the onset of the ETP in late December 2010 to ensure that Airbus was aware and abreast with Malaysia’s program.

In showcasing Malaysia’s aerospace capability, it was demonstrated that the cost and skill base here is compelling compared to other countries in the region, and the existing aerospace ecosystem can be developed relatively rapidly to suit the OEM’s requirements over the long term. These proved to be attractive selling points compared to mere fiscal incentives. The scene was therefore set for the choice to be made.

All these were material contributions to the 2 October announcement, thus illustrating the importance of setting a clear vision and the detailed groundwork needed for such endeavours. The new Airbus Customer Services facility at KLIA has the potential to put Malaysia on the international map as a centre for specialised aerospace engineering services.

The Asia-Pacific region is a core market for Airbus as it accounts for 31 per cent of all orders recorded by the company to date. Today, there are more than 2,270 Airbus aircraft in service with 98 operators across the region, with another 2,000 on order for future delivery. This represents 36 per cent of the company’s total backlog.

Although the announcement might be regarded as a small step towards positioning Malaysia to become the aviation engineering hub in Asia, it is nevertheless a step in the right direction.

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