Haeco results likely to be hit by labour shortage in Hong Kong

A shortage of labour is limiting Hong Kong's position in the aircraft maintenance industry even though it is home to the world's No 2 service provider.

Swire-controlled Hong Kong Aircraft Engineering Co (Haeco), due to announce its first-half performance this week, has warned results are likely to suffer from a sustained labour shortage.

Haeco and its subsidiaries, with a market capitalisation of HK$14 billion, run second only to Lufthansa Technik, owned by German flag carrier Lufthansa, in the aircraft maintenance business.

But the stiff competition for skilled staff at home is arguably the tougher competitive threat for Haeco, which has been losing its technicians to MTR Corp.

"The MTR pays similarly but has more friendly working locations, not to mention the added benefit of free MTR rides," said Ip Wai-ming, a deputy general secretary of the Staff and Workers Union of Hong Kong Civil Airlines.

The nature of the aircraft maintenance, repair and overhaul (MRO) business requires a specially trained workforce that is ready around the clock.

It takes five to 10 years for university degree holders or school leavers to become aircraft engineers or technicians, who will then be licensed to work on no more than five types of aircraft each.

The company first highlighted the labour shortage problem in March last year.

"Haeco was not able to meet the demand for airframe maintenance in the second half of 2012 because of a shortage of skilled and semi-skilled labour," it said in its 2012 annual report.

Haeco sold 13.5 per cent fewer airframe maintenance manhours last year than in 2012.

"Lack of skilled labour is the main factor hindering the development of MROs in Hong Kong and in [mainland] China," said Alex Wai, a vice-president of Polytechnic University and head of its Aviation Service Research Centre.

Wai blames the labour shortage on a combination of factors centred on pay, an inconvenient working location and the frequent need to work overtime.

Ip said that while pay at Haeco had risen, "we think jobs at the airport should be paid 20 per cent more than jobs in town".

Haeco Group employed 14,116 people at the end of last year, of which 6,690 were in Hong Kong.

It has said it is working with the government to train young job-seekers and was short of 1,000 workers in 2012.

Wai said importing foreign labour would be a solution, but there were great political obstacles in its way.

"Socially, people are not willing to do the job and importing labour is not something the government can get through easily, so they are stuck," he said.

A Haeco spokeswoman declined to comment on whether it had managed to alleviate the labour shortage.

Swire dominates Hong Kong's aviation landscape, owning Cathay Pacific Airways, Haeco and its engine maintenance sister company Haesl.

Two smaller firms focusing on line maintenance are also in the MRO business - Chinese Aircraft Service and Pan Asia Pacific Aviation Services.

But Hong Kong's position as a regional aviation hub and service provider is being threatened by various competitors.

In July, Boeing and Singapore Airlines' engineering subsidiary, SIAEC, agreed to establish Boeing Asia Pacific Aviation Services, a Singapore-based joint venture providing fleet management services to more than 80 aircraft from the Singapore Airlines family and some third-party aircraft.

Boeing forecasts 224,000 technicians will be needed in the next 20 years in the Asia-Pacific region, making up close to 40 per cent of global demand.

Meanwhile, Haeco said its line maintenance subsidiary in Singapore, SHaeco, which made a loss last year, had been reduced in size and was looking "for new business opportunities".

Yeoh Keat Chuan, the managing director of the Singapore Economic Development Board, said at the signing of the SIAEC-Boeing deal that it would "further strengthen Singapore's position as the leading aerospace hub in the Asia-Pacific".

Haeco reported revenue of HK$7.4 billion last year, HK$4.65 billion of which was derived from the mainland, a market growing at an annual rate of 25.3 per cent. Its mainland joint ventures were the only businesses with improving results.

This article appeared in the South China Morning Post print edition as Haeco held back by lack of labour

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