Giving old planes new wings to soar

As business ideas go, ripping apart old planes and rebuilding them for further flight does not sound like one that will fly.

After all, there are plenty of new and more fuel-efficient planes around to buy.

But there is a market for older aircraft that are cheaper to rent and sometimes less expensive to maintain. Such a business is starting to take off for Singapore-listed aerospace engineering firm A-Sonic Aerospace.

The company leased its first re-assembled McDonnell Douglas aircraft to an airline customer in South Asia earlier this year, said chief executive Janet Tan.

Two more planes have since been leased, a fourth is in the factory, and by the end of next year, A-Sonic expects its fleet to grow to 12 aircraft.

The firm picks up aircraft typically about 20 years old and instructs engineering firms it works with in the United States and Europe to rip out and replace the engines and other flight and avionics components to make new flying machines. The work takes up to three months and the planes are then leased to airlines.

Ms Tan did not divulge details but said the margins make the exercise worthwhile.

Not many firms, and hardly any in Asia, do this. But A-Sonic is confident the niche sector has good potential.

The firm also leases out engines and other parts to customers mainly in eastern Europe and other developing markets where older planes are more common.

A-Sonic, which also has a cargo and logistics arm, ventured into the retrofit-and-fly business after being hit by a "double whammy", Ms Tan, 52, said.

First, Malaysian long-haul low-cost carrier AirAsia X prematurely terminated A-Sonic's maintenance contract.

A year or so later, in 2010, GE Aviation ended an aircraft parts distribution agreement.

Ms Tan, who started A-Sonic in 1996, said: "It was a big blow... We looked for a new business, one we could control and grow, while using our capabilities."

After about a year of research, A-Sonic decided there was a market for redoing old planes and leasing them out. "But not in Asia," Ms Tan said, despite the region being the strongest growth market.

"...The competition in Asia is intense. The McDonnell Douglas is also not typically flown in this part of the world. When we are ready to grow our business, we will move to Airbus and Boeing planes and take on this region..." A-Sonic is currently focused on eastern Europe, South America and other developing markets.

Like other aerospace firms, it has not been spared the impact of crises such as the 2008 global financial meltdown, high manpower costs and the current slowdown in Europe. After years of losses except in 2010, the firm turned in a small US$1.6 million (S$2 million) profit in the six months to June this year. But the outlook remains challenging, especially for the cargo and logistics business, Ms Tan said.

The International Air Transport Association said total global air freight volumes grew by an "encouraging" 1.2 per cent in July compared with the same month last year. But the association's director- general and chief executive Tony Tyler warned: "It is premature to say that air cargo may be emerging from the doldrums of the past 18 months."

A-Sonic is prepared for future challenges, said Ms Tan.

The second of six siblings, who left school at 16 and grew up in a three-bedroom flat, said: "Life has always been challenging but it's not in my nature to give up."

karam@sph.com.sg

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