Hong Kong Aircraft Engineering Co (Haeco), which maintains and overhauls aircraft and aircraft engines, says it expects to construct a new aircraft hangar in Xiamen this year as part of its China expansion. Haeco would not take a final decision on the project until later in the year but said it was looking to build a two-bay hangar next to the one which opened last March in its Xiamen joint venture. Managing director John Slosar said the new hangar would be built using an identical plan to the first, which cost US$55 million. The second hangar should take about 18 months to complete. Haeco's operations in Xiamen are part of Taikoo (Xiamen) Aircraft Engineering Co (Taeco), a 50 per cent joint venture with Lucas Aerospace. Taeco lost money last year but Mr Slosar said he hoped the company would break even this year. 'If Taeco can break even, that will be a good result for the company,' he said. Mr Slosar said part of the reason for last year's performance was that the existing hangar only operated one bay for the first six months after its opening. The second bay was put in service in October. Mr Slosar said he was cautious about Haeco's outlook for the rest of the year despite signs of improvement in the aircraft maintenance business. 'Airlines are still very cautious and they are being very cost-conscious,' he said. Haeco suffered declining earnings for two of the past three years as heavy competition among airlines led many to cut back on their expenditure. Mr Slosar said positive signs were now being seen in several areas, including an increase in rates for aircraft maintenance. The upgrading of Cathay Pacific Airways' fleet, for which Haeco receives the bulk of its business, meant less maintenance work was being required per aircraft. Cathay phased out its eight L1101 Tristars last year. Mr Slosar said: 'The Tristar's leaving was a very sad day for us. We loved Tristars, they needed lots of maintenance.'