ST Engineering Annual Report 2020

OPERATING REVIEW & OUTLOOK Flight demo for foodpanda as part of a collaboration to trial the use of unmanned solutions for food delivery AEROSPACE Through Keystone Holdings, a joint venture with Sojitz Corporation, we clinched an agreement with Qantas for the conversion and leasing of an A321P2F. The aircraft, to be converted at our facility in Singapore and scheduled to be delivered in end-2021, was on lease for passenger service to Qantas Group at the point of signing. The conversion and leasing of a freighter that meets an operator’s specifications leverages the synergy the Group has in innovative asset management and freighter conversions, reflecting our ability to provide integrated, bespoke solutions. OUTLOOK As we enter into 2021, the aviation industry continues to face significant uncertainties in the pace and timing of recovery in passenger traffic. Industry analysts believe that passenger traffic volumes will only return to pre-COVID levels in 2024 or beyond. Unless major travel restrictions are lifted, the low level of aircraft in service will continue to have repercussions across the aviation ecosystem as experienced in 2020. Investment appetite for new aircraft is likely to remain subdued, although narrowbody aircraft types are still attractive investments from a long-term perspective. With airlines turning to the sale of aircraft assets as a way to manage their non-operational fleet, the freighter conversion market can take advantage of the rise in feedstock availability to meet the resilient growth in demand for dedicated freighters. As for the MRO sector, we expect further consolidation within the industry. Airlines may also outsource MRO services more in order to focus on their core business. These airlines would want to work with trusted service providers that can provide integrated and quality maintenance support as they adapt their operations to the evolving situation. Given the breadth and depth of our MRO services, as well as our broad customer base, we are ready to seize opportunities that may arise. Rationalisation and New Growth Areas In 2020, we exited a number of businesses including VIP aircraft completions, aircraft seats as well as pilot training. These were businesses assessed to lack sustained viability or deemed not a good fit with our growth strategy. We will maintain a continuous review of our businesses to align our portfolio with strategic goals so that we can better direct efforts and resources to our strategic growth areas. And as part of our investment into long-term growth, we will also maintain a lookout for opportunities to acquire new strategic capabilities and form strategic partnerships with major airlines, gain better access to key markets, and establish new distribution channels or new customer segments. Accelerating Smart Technology Applications Going forward, our MRO operations will be increasingly automated and paperless. Although our drive towards robotics and digitisation started a few years ago, the pandemic has given a fresh impetus to our Smart MRO initiatives so that we can be / ST ENG I NEER I NG 42