ST Engineering Annual Report 2020

CORPORATE OVERVI EW PERFORMANCE REVI EW SUSTAINABI L ITY CORPORATE GOVERNANCE F INANCIAL REPORT in Pensacola, Florida, to better serve the markets in North America. In Asia-Pacific, we operationalised our third hangar in China in early 2020. The new hangar, which has 400,000 labour hours capacity at steady state, has two widebody bays, one of which is fully equipped with full painting capability. We remained focused on growing our MRO footprint in key growth regions through collaborations with potential airline partners. In this aspect, we strengthened our partnership with Vietnam Airlines, our component MRO (JV) partner, by entering into an agreement to explore establishing an airframe MRO JV in Vietnam. Component/Engine Repairs & Overhaul To expand our service offerings and capabilities in engine MRO, we signed an agreement with CFM International to perform MRO work on the LEAP-1B engine, the exclusive engine for the Boeing 737 MAX. We are monitoring the pandemic situation closely and will calibrate the pace of LEAP- 1B setup to match Boeing 737 MAX return to service. Further to LEAP-1B, MRO capability setup for A320neo's LEAP-1A engine is also in our pipeline, which will greatly expand our suite of offerings in CFM engines to better support the global fleet. For component MRO, we entered into a 10-year agreement with Honeywell Aerospace that will see us appointed as the only licensed MRO service provider based in the Asia-Pacific for Honeywell components installed on the LEAP-series engines. These component MRO services will play a complementary role to our MRO solutions for the LEAP-1A and LEAP-1B engine. In terms of new orders, we signed a heavy maintenance contract for up to 40 CFM56-7B engines with an Asian air carrier as well as multi- year engine and component MRO contracts with South Korea’s T’way Air for its Boeing 737 fleet. We also secured engine and component MRO contracts from a Southeast Asian airline for its entire fleet of Boeing 737 and Bombardier Q400. Among these are 25 Boeing 737 Max planes that the airline plans to add to its growing fleet. We also secured a three-year landing gear overhaul agreement from another Southeast Asian airline. In nacelle MRO, we secured a five- year contract to support Qantas’ Boeing 737-800 and A330 fleet, and another five-year contract from LOT Polish Airlines to support their Boeing 787 fleet. Engineering & Materials Services Our strong engineering capabilities place us in good stead to power through an economic downturn. Our design and engineering expertise differentiates us from pure MRO service providers and diversifies the solutions and offerings we can provide to customers. This stood out especially when we were able to quickly help airlines design and certify passenger aircraft that were temporarily modified to increase cargo carrying space, as well as to address the operators’ needs to disinfect their cabin interiors for safe travel in the most efficient manner possible. Engine Nacelle Solutions Due to the drop in production rates by aircraft OEMs, our nacelle manufacturing output dipped correspondingly. Production of our biggest nacelle programme, the A320neo, fell by about a third to match Airbus’ aircraft production volume. Notwithstanding the current slowdown, we expect the total order book for nacelles to remain strong in the longer term. As part of our long-term growth plans, our nacelle manufacturing subsidiary in the U.S., Middle River Aerostructure Systems (MRAS) added CFM56-7B and V2500 engine nacelle MRO to its offerings to grow its aftermarket services and allow it Newly opened hangar at our Guangzhou facility 39 ANNUAL REPORT 2 0 20 /