airfoil services 25 years of business in malaysia -...

Airfoil Services – 25 years of business in MalaysiaSharing of Experience and Personal Account

H. Neuper, Malaysia, 04 April 2016

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Erfahrungsbericht Malaysia – 1. GMRT Hamburg7. April 2016 2

A bit about Myself1

2

Agenda

4

3

A bit about MTU Aero Engines

A bit about ASSB

Why Malaysia?

Q&A and Discussion5



A bit about Myself1

2

Agenda

4

3


A bit about ASSB

Why Malaysia?

Q&A and Discussion5



1. A bit about myself

From: http://linkedin.com

How I’d like the world to see me…



1. A bit about myself

How my friends and family seem to see me…



A bit about Myself1

2

Agenda

4

3


A bit about ASSB

Why Malaysia?

Q&A and Discussion5



MTU’s history from 1934 to date

1934BMW Flugmotorenbau

GmbH is founded

1957 BMW

Triebwerkbau1945BMW

Siemens & Halske

Daimler Benz

1965MAN takes over

BMW Triebwerkbau

1989MTU becomes an

affiliate of Deutsche

Aerospace, later

renamed

DaimlerChrysler

Aerospace (DASA)

2000MTU becomes a

directly managed

DaimlerChrysler

company

2005MTU goes public

1969 MTU

50% Daimler Benz

50% MAN

TodayShareholder structure:

91% Institutional investors

7% Private shareholders

2% MTU-owned shares

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020



MTU Aero Engines’ business model

COMMERCIAL

ENGINE BUSINESS

MILITARY

ENGINE BUSINESS

COMMERCIAL

MAINTENANCE

Share in sales: ~ 53%

Balanced portfolio of

products in all

thrust categories

Partnerships with OEMs

going back decades


European and U.S. engine

programs

Lead industrial partner to the

German Armed Forces


Access to high-growth

segments

Provider of services to

airlines worldwide



Major company locations worldwide



A bit about Myself1

2

Agenda

4

3


A bit about ASSB

Why Malaysia?

Q&A and Discussion5



Shareholder50:50 between Lufthansa Technik and MTU Aero Engines

Founded 19911

Core competency

Repair of High Pressure Compressor (HPC)

and Low Pressure Turbine (LPT) airfoils

Main products

CF6-50/-80C2, CFM56-3/-5A/-5B/-5C/-7B,

V2500-A1/-A5/-D5,Select One,GP7000

Repair capacity p.a.

600,000 parts/year maximum

Production area

6,000 sqm.4

CustomersJV partners (MTU, LHT)More than 50 3rd Party Customers

Projects3rd Party business growth, capacity and portfolio expansion

Company facts at a glance

Key figures 2014

Shop output2 400,000

Staff capacity3 440

1 as JV with Malaysian Airlines; JV with LHT has been in place since 2003; 2 # of parts repaired; 3 per 31.12.2015; 4 Greenfield facility inaugurated in 2007



Shareholder structure – best of two worlds

49%

51%

Airfoil Service

Sdn. Bhd.

1991

61%

39%

MTU Maintenance

Malaysia Sdn. Bhd.

1998

100%

2002

Airfoil Services

Sdn. Bhd.

50%

50%

2003 until today

100%



Center of Excellence for Airfoil Solutions

• Establish a Center of Excellence for airfoil repair

• Creating synergies and economies of scale by combining

LHT and MTU parts volumes - reducing overall cost

• Broadening of repair portfolio

• Offer competitive Services to 3rd Party market

Joint venture goals

• Repair development and licenses

• Technology transfer and training

• Lean manufacturing

• Tool design

• Quality standards

• Base volume

• Marketing & sales organizations

Partner contributions

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=Aj0u0JIUwz98xM&tbnid=Ywf2bOkbLuJTkM:&ved=0CAUQjRw&url=http://www.forbes.com/sites/actiontrumpseverything/2013/01/02/how-to-come-up-with-a-good-idea-for-a-great-business/&ei=PXNWU826BIOTtQagy4HQBQ&bvm=bv.65177938,d.Yms&psig=AFQjCNHWX2AyM0LeMbDYdIVoNSWmklOrEQ&ust=1398260846357939

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=Aj0u0JIUwz98xM&tbnid=Ywf2bOkbLuJTkM:&ved=0CAUQjRw&url=http://www.forbes.com/sites/actiontrumpseverything/2013/01/02/how-to-come-up-with-a-good-idea-for-a-great-business/&ei=PXNWU826BIOTtQagy4HQBQ&bvm=bv.65177938,d.Yms&psig=AFQjCNHWX2AyM0LeMbDYdIVoNSWmklOrEQ&ust=1398260846357939



Continious Growth

Workload ASSB Parts per year

0

100,000

200,000

300,000

400,000

500,000

600,000

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

2015



Investment in qualifying our future staff

Employee Split

69 90 93 112 142227

295 326 333 343410 429 441 415 440

51

6778 78 84 95

126 103 12370

110

0

100

200

300

400

500

600

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Permanent Staff Apprentices

Employee split by function*

Employees

2001-2014

Eng.5%

Prod-uction78%

Mgt/Admin.

17%



CFM56-3

CFM56-5A/-C/-B/P

CFM56-7B/P

CF6-50

CF6-80C2

GE Engines CFMI Engines IAE Engines

V2500-A1/-A5/-D5

Engine Alliance

GP 7000

HPC

Blades

HPC

Vanes

LPT

Blades

HPC

Blades

HPC

Vanes

LPT

Blades

-

HPC

Blades

HPC

Vanes

LPT

Blades

HPC

Blades

HPC

Vanes

LPT

Blades

- -



A bit about Myself1

2

Agenda

4

3


A bit about ASSB

Why Malaysia?

Q&A and Discussion5



Why Malaysia?4

I

Agenda

III

II

Why Malaysia in the first place?

What has changed in the 25 years since?

Is Malaysia still a good place to invest?



Why Malaysia?4

I

Agenda

III

II






Basic P.E.S.T. Analysis (1990s)

• Developing country

with focus on

manufacturing sector

+/-• Strenght of economy

is mostly based on

natural resource (oil)

-

Technologial T

• Low labour cost +

• Low skill level –• „Brain Drain“ to

Singapore -• Ethnically diverse

country with 60%

Malay, about 20%

Chinese and 15%

Indian population

+/-• „Bumiputra“ policy

-

Social S

• Strategically located in

a fast growing market

+• Good Infrastructure

with fast access to

global markets

+• Beginning in the 1970,

Malaysia has

undergone a

transformation from

mainly agricultural to

one of the fastest

growing economies in

the ASEAN region +

Economic E

• Stable political climate

+• Ruling party has been

in power since

independance in 1957

+/-• Welcoming of foreign

investors

+• Low tax rate and

strong financial

incentives

+

Political P



Basic P.E.S.T. Analysis (1990s)

• Developing country

with focus on

manufacturing sector

+/-• Strenght of economy

is mostly based on

natural resource (oil)

-

Technologial T

• Low labour cost +

• Low skill level –• „Brain Drain“ to

Singapore -• Ethnically diverse

country with 60%

Malay, about 20%

Chinese and 15%

Indian population

+/-• „Bumiputra“ policy

-

Social S

• Strategically located in

a fast growing market

+• Good Infrastructure

with fast access to

global markets

+• Beginning in the 1970,

Malaysia has

undergone a

transformation from

mainly agricultural to

one of the fastest

growing economies in

the ASEAN region +

Economic E

• Stable political climate

+• Ruling party has been

in power since

independance in 1957

+/-• Welcoming of foreign

investors

+• Low tax rate and

strong financial

incentives

+

Political P

Conclusion:

HPC/LPT airfoil repair is an ideal product to be transferred to Malaysia;

high-volume, labor-intensive, low- to mid-tech, small size (easily shipped)



Why Malaysia?4

I

Agenda

III

II






Recent Developments (basic SWOT analysis)

• Malaysia continues its transformation from a „mid-tech“ to high-tech country, as

evidenced by the government‘s „vision2020“

• One supporting initiative, relevant for the aviation sector, is MITI‘s (Ministry of

International Trade and Industry) Aerospace Blueprint 2030

• Malaysia has been ranked in the top ten percent (18 out of 189 economies) and

2nd in ASEAN (behind Singapore) in this year‘s World Bank list of best places to

do business*

• Malaysia is ranked 18, and highest amongst developing Asian countries, in the

World Economic Forum‘s 2015-16 Global Competitiveness Report**

But

• According to German business leaders in Malaysia,

• shortage in skilled labour is still a major challenge,

• as well as the bureaucratic process with local offices

Source *) Malaysia in Doing Business 2016, report by PEMUDAH secretariat

**) Malaysia in the Global Competitiveness Report 2015-16, available on

www.mpc.gov.my

***)Malaysia – kleines Land, grosser Industriestandort, Dezember 2014, MGCC

S/W

Internal factors: Strenghts & Weaknesses

http://www.mpc.gov.my/



Recent Developments (basic SWOT analysis)

• Global airline industry returned to profitability, driven by low oil price*

• Aircraft OEM production backlog at very high level, indicating strong confidence

in future growth*

• Asia fleet predicted to have second-highest growth globally, adding 4,000+ A/C

over the next decade*

• Air Transport MRO growth predicted at 3.8% CAGR globally, mainly driven by

Asia Pacific and China*

But

• OEMs increasing focus on MRO business and will gain market share

• Increasing complexity of next gen engines combined with decreasing

manufacturing cost will make it almost impossible for MRO providers to

compete outside the OEM networks

• For mature Aircraft and engine types, growing volume of retiring A/C will create

surplus of parts

Source: *) ICF webinar on Aerospace in Asia Pacific, November 2105

O/T

External factors: Opportunities & Threats



Why Malaysia?4

I

Agenda

III

II






Is Malaysia still a good place for German aviation industry to invest?

Probably more than ever, Malaysia is well positioned to play a major role in the

growing aviation sector…




IF in the right product/business segment is chosen:

When MTU entered Malaysia in 1992

Today

Source: ICF webinar on Aerospace in Asia Pacific, November 2105




And IF some of the still existing challenges can be overcome:

• Reliable decision making process from federal and local government agencies

Source; The Straits Times online, accessed at http://www.straitstimes.com/asia/in-malaysia-no-to-having-more-foreign-workers.





• Reliable decision making process from federal and local government agencies

Source; The Sun Daily online, accessed at http://www.thesundaily.my/news/1397063.





• Latent racial tension needs to be addressed. Affirmative action in favor of the

majority is still in place.

Source; Free Malaysia today online, accessed at http://www.freemalaysiatoday.com/category/nation/2012/11/21/%E2%80%98affirmative-action-for-malays-dangerous%E2%80%99/.





• Latent racial tension needs to be addressed. Affirmative action in favor of the

majority still in place.

Source; Forbes Asia online, accessed at http://www.forbes.com/sites/greglopez/2015/07/17/low-yat-riot-in-malaysia-racial-or-something-else/#d3ce7761ac32.





• Education and vocational training to improve the skill-level of local workforce:

Example 1: “permanent re-set” of error message during coating run

1

2

3





• Education and vocational training to improve the skill-level of local workforce:

Example 2:

A supplier’s car, that I found in my parking

spot while he was working in our facility



Thank you for your attention -

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