TOKYO -- IHI will construct a jet engine facility in Japan for the first time in two decades to tap growing maintenance demand from low-cost carriers, as domestic rivals also ramp up investment in the aerospace industry.
IHI will invest about 10 billion yen ($89.8 million) to build an engine service center on a roughly 400,000-sq.-meter plot in the city of Tsurugashima, Saitama Prefecture. It plans to employ 200 to 300 people at the plant, which is expected to come online in fiscal 2018. IHI will both inspect engines, which will be removed from planes before being transported to the facility, and make necessary parts replacements there.
This will become the Tokyo-based company's largest domestic plant for its aerospace business. IHI's last domestic aircraft factory was constructed in Soma, Fukushima Prefecture, in 1998.
U.S.-based General Electric and Pratt & Whitney, as well as the U.K.'s Rolls-Royce, dominate the jet engine market. But IHI and compatriot Mitsubishi Heavy Industries produce turbines and many other components that require high precision. IHI hopes to win maintenance orders from both domestic and foreign airlines on its expertise in engine structure.
The number of passenger jets across the world is expected to soar 90% between 2014 and 2034 to about 37,000, according to the Japan Aircraft Development Corp. New orders in emerging economies, particularly in Asia, are expected to far exceed the number of planes that age out of service. And low-cost carriers have flourished on deregulation in many markets. They tend to outsource many of their operations, and could fuel a boom in maintenance and other fields.
Aircraft parts suppliers are expanding their focus to support services, since the growing number of planes in the world points to a steadily expanding market. Maintenance services currently account for about 40% of IHI's sales in its civilian jet engine business. Its goal is to raise the figure to 60% over the next decade.
Many Japanese manufacturers are holding back on domestic investment in anticipation of shrinking demand within the country. But those in the aerospace industry have positioned themselves as key suppliers of Boeing and Airbus and are expanding aggressively. Kawasaki Heavy Industries is investing 24 billion yen in a Gifu Prefecture plant for Boeing-related parts. Mitsubishi Heavy is pouring just under 30 billion yen into a Hiroshima facility.
Mitsubishi Aircraft, meanwhile, is developing the Mitsubishi Regional Jet, Japan's first passenger plane in half a century. Japan could soon have a full-fledged aerospace sector, complete with airframe builders, parts suppliers and support service providers.