On November 17th, Finline News (Reporter Hu Haoqiong) reported that during the 15th China Airshow, Honeywell (Nasdaq code: HON) signed multiple cooperation agreements. Finline reporters learned that many of the agreements signed are related to after-sales maintenance business in China.

"After the epidemic, there is indeed a significant shortage throughout the entire aviation industry chain. Honeywell has increased repair options in China, which can alleviate potential problems in the supply chain and mitigate adverse impacts on airline operations, while significantly reducing airline maintenance costs and time costs." Ai Qing, Vice President of Transport Business, Asia-Pacific Region of Honeywell Aerospace Hi-Tech Holding Group, said in an interview with Finline News reporters.

During the air show, Honeywell deepened cooperation with Hainan Airlines Group in key areas such as after-sales service of auxiliary power units, parts repair material support, and avionics equipment procurement; signed maintenance authorization agreements with Beijing Aircraft Maintenance Engineering Co., Ltd. (Ameco) under Air China (601111.SH), reached cooperation in the field of HGT1700 auxiliary power units; signed third-party maintenance authorization agreements with Guangzhou Aircraft Maintenance Engineering Co., Ltd. (GAMECO), making GAMECO the exclusive authorized repair center for Honeywell's Traffic Alert and Collision Avoidance System (TCAS) in China; signed a memorandum of understanding with Sichuan Airlines Huafeng to expand cooperation in third-party maintenance authorization for auxiliary power units.

Strengthening the after-sales market in China, some product capacity has been restored to pre-pandemic levels.

The recovery of the aviation industry chain after the epidemic still needs to be gradual. In this regard, Honeywell has made minor adjustments to its strategies for the after-sales market, especially in maintenance, repair, and overhaul (MRO).

"We hope to better utilize local engineers, industrial workers, and partners to provide more choices for the operations of Chinese airline customers." Ai Qing stated that Chinese partners, such as Ameco and GAMECO, have decades of maintenance experience. These partners also have highly skilled repair engineers. Developing MRO cooperation with them can make them an extension of Honeywell's global after-sales market repair service system in China.

At the same time, Ai Qing stated that expanding the after-sales market in China can also reduce the transportation costs and time required for maintenance equipment. If repairs need to be sent to another country, it may take 2-3 weeks just for customs clearance. The coordination and communication during the repair process will not be affected by time zones and language barriers.

From the business layout of honeywell in china, its aviation aftermarket sector has a high market share in China, the aftermarket model is mainly divided into three categories, including spare parts sales, MRO business, engineering consulting services, etc. Ai Qing stated that a significant proportion of the business comes from 'spare parts + repair'.

It is worth noting that honeywell also provides auxiliary power systems, landing gears and brakes, flight control systems, atmospheric data and navigation systems for the domestically produced large aircraft C919. Therefore, last year, the company signed a maintenance authorization agreement for the C919 auxiliary power unit with China Eastern Airlines Corporation to ensure the realization of the strategic 'local maintenance and support' for domestically produced aircraft.

Ai Qing further stated that from honeywell's perspective, the company hopes that the MRO market can be more open, alleviate potential problems that may arise due to the incomplete recovery of the supply chain industry chain after the epidemic, bring unfavorable effects to airlines, and enhance MRO support capabilities.

Regarding the repair of the industry chain, Ai Qing believes that it is difficult to predict how long it will take for the industry chain to fully recover. However, honeywell currently has several different product lines, including engines and auxiliary power units (APUs), avionics products, flight control systems, brake systems, and mechanical components, etc. Different product lines will have different timelines for industry chain recovery.

'Currently, the company's avionics product capacity has basically resumed normal deliveries and the capacity has returned to pre-epidemic levels. The expected number of undelivered products has also shown a trend of gradual decline, which means that the supply capacity has basically caught up with demand.' Ai Qing revealed to reporters.

In the past year, honeywell aerospace hi-tech holding group has added over 1000 factory employees worldwide and has essentially recovered to pre-epidemic levels.

'In fact, the shortage in the supply chain is largely due to the inability of upstream suppliers to operate normally, so honeywell has provided production support mechanisms for core suppliers, deploying a substantial number of engineers and manufacturing experts to help restore the upstream supply chain.' Ai Qing said, however, it is expected that a comprehensive recovery in industry capacity will still take several quarters, especially in the engine, APU, and machinery parts segments.

Continuous development of new products in line with three major trends

At the China International Import Expo and the China International Aviation & Aerospace Exhibition this year, Honeywell showcased a variety of solutions, including new ground alerting (SURF-A) software, connected aircraft, auxiliary power units (APU), IntuVue 3D weather radar system, as well as repair, modification, and upgrade (RMU) solutions.

Among them, the new ground alerting (SURF-A) software, referred to by Honeywell as the 'third eye' in the cockpit, can help pilots identify runway hazards in time - such as intruding aircraft on runways, enabling timely corrective measures to avoid potential fatal accidents, making it one of the world's first cockpit alert software solutions.

According to Ai Qing, after the aircraft collision incident at Haneda Airport earlier this year, the company urgently accelerated the product's development cycle. The investment in such products primarily focuses on initial development and validation costs. As the product is gradually applied on a larger scale in the industry, subsequent cost investments will be concentrated on continuously enhancing product functionalities.

"The company has launched another product, the 'IntuVue 3D weather radar system', which can detect and alert on hail and lightning that may appear along flight routes. By predicting the weather conditions along flight routes in advance, it can ensure safe aircraft operation while avoiding potential high-cost damage to the airframe," explained Ai Qing.

As for the future main R&D direction of Honeywell's aviation products, Ai Qing stated that it is to make the products safer, more efficient, and sustainable, aligning with three major development trends: future aviation, automation, and energy transformation. Additionally, around 60% of the company's new product R&D investment is sustainability-focused.

Looking at the products currently offered by Honeywell, according to Ai Qing, the efficient mode upgrade plan for the 131-9A auxiliary power unit can improve fuel efficiency by 1-2%, meaning an annual cost savings of around $9,000 per aircraft.

Regarding development in the Chinese market, Ai Qing expressed that domestic airline passenger numbers have rapidly recovered this year, with an increase in international flight frequencies gradually recovering as well. Most international city routes have been restored, leading to increased flying hours for products. Therefore, there is a continued bullish outlook on the Chinese market. 'Honeywell is a participant and beneficiary in the development of the Chinese civil aviation market, and the company will continue to invest in areas such as MRO, product spares, and further expand its maintenance and repair authorization network in China.'