Aerospace Industrial Development Corp (AIDC, 漢翔航空工業), the nation’s largest civilian and military aircraft manufacturer, yesterday said that it has decided to improve ties with its 123 domestic suppliers in the face of more stringent requirements set by major clients.
“Since 2013, Boeing has adopted a policy that requires suppliers to cut prices by at least 10 percent before 2019 or risk being dropped from its list of suppliers for the A320 aircraft,” AIDC president Butch Hsu (徐延年) told an investors’ conference in Taipei.
Instead of pursuing redundant investments, AIDC plans to bolster partnerships with its domestic peers, and source materials and parts locally, Hsu said.
“We do not fear competition, but the lack of a consolidated effort with our peers,” AIDC chairman Anson Liao (廖榮鑫) said, adding that he has been in talks with EVA Airways Corp’s (長榮航空) aersospace manufacturing affiliates hoping to establish an “A-Team” in Taiwan’s aviation industry, similar to that among the nation’s top bicycle manufacturers.
AIDC is also positive about China’s order of 250 narrow-body 737 aircraft and 50 wide-body aircraft that was announced by Boeing after Chinese President Xi Jinping’s (習近平) tour of its Everette, Washington, plant last month.
“About 90 percent of the world’s aircraft contain AIDC-made parts and we are happy to see that number rise,” Liao said.
Parts sold by suppliers such as AIDC are shipped to aircraft manufactures such as Boeing and Airbus, which tend to resell those parts as certified originals to airline companies at much higher prices, Liao said.
The company’s military contracts are progressing as expected, such as the air force’s NT$69 billion (US$2.11 billion) training aircraft upgrade program slated to take place between 2017 and 2022, and upgrade programs for the F-16 A/B jets and the AIDC-developed F-CK1 jet, Hsu said.
As Taiwan’s military continues to streamline, more opportunities might arise for civilian contractors, he said.
Overall, the company remains positive on the global civilian aviation sector amid low fuel prices, citing Airbus and Boeing’s estimates that passenger revenue per kilometer is set to grow at about 5 percent annually for the next two decades.
In the first half of the year, the company reported net income of NT$868 million, or NT$0.96 per share, in line with expectations and compared with net income of NT$839 million, or NT$0.92 per share, in the same period last year.
Sales in the first three quarters of this year rose to NT$20 billion from NT$16.97 billion last year.
From January through last month, the Ministry of Defense remained the company’s largest client, representing 42 percent of sales, followed by General Electric Co (7 percent), Bombardier Aerospace (9 percent), and Rolls-Royce PLC (6 percent), while Airbus and Boeing contributed 3 percent and 4 percent in sales respectively.
AIDC shares gained 0.24 percent to NT$41 in Taipei trading yesterday.
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