Haeco net drops 21.2pc despite 65.6pc revenue rise

PUBLISHED : Wednesday, 13 August, 2014, 1:11am
UPDATED : Wednesday, 13 August, 2014, 1:11am

Hong Kong Aircraft Engineering Co (Haeco) reported net profit dropped 21.2 per cent in the first half even though revenue surged 65.6 per cent, reflecting the continued shortage of skilled labour and declining demand for engine services.

Revenue of the aircraft maintenance company controlled by Swire Group rose to HK$5.34 billion with its acquisition of US service provider Timco in February.

Net profit fell to HK$283 million from HK$359 million a year earlier.

Haesl and Saesl, the group's partly owned engine maintenance service providers in Hong Kong and Singapore, contributed HK$136 million of the profit, 46.7 per cent less than the amount last year, which the company blamed on waning demand for engine overhaul services with the retirement of older engine types.

Chief executive Augustus Tang Kin-wing said the shortage of skilled labour, from which the company had been suffering since 2012, was alleviated with the churn rate a third lower than last year.

Tang declined to reveal the actual rates, but said the figure for aircraft mechanics was now in the "lower single digits" with improvements in pay and training.

Owing to the long lead time required in training new staff - three to seven years, according to Tang - labour would continue to be a constraint on capacity even though the company expected to be able to recruit more trainees this year, he said.

"Labour supply is key in deciding the development outlook of our operation in different locations," Tang said. "After all, aircraft maintenance is reliant on skilled and semi-skilled labour … but at the moment we do not see ourselves leaving Hong Kong."

Haeco's Hong Kong operation contributed HK$1.55 billion to revenue, a drop of 1.1 per cent, while its Xiamen-based subsidiaries aircraft maintenance service provider Taeco and engine maintenance service provider Texl increased their shares 3.5 per cent and 135 per cent, respectively.

Taeco contributed revenue of HK$1 billion but profit dropped 17.7 per cent to HK$51 million due to higher labour costs.

Texl made a net profit of HK$68 million, from a net loss of HK$13 million, making it the best-performing unit.