Dornier Technology seeks financing for expansion

Dornier Technology, which recently secured its US FAA certification as a foreign repair station for heavy maintenance on the Airbus A320 aircraft family, is in talks with local and foreign banks, as well as possible equity investors, to finance its expansion plans for its existing facilities at the Clark International Airport (CRK) in Pampanga.

In an exclusive interview, Dornier Technology CEO Nikos Gitsis said that he is in talks with some local and international banks to secure as much as $42 million to finance the company's plan to expand its existing hangar in Clark to be able to accommodate more maintenance, repair, overhaul (MRO) work on Airbus aircraft following the US FAA certification.

Securing the US FAA certification, he said, was "the catalyst to realize the potential for growing the business, or for a reason to grow the business."

Based on Gitsis' timetable, he is negotiating to secure at least $16 million for the first tranche in the next six months to one year to expand the existing hangar, and an additional $26 million or more for the second tranche to fully develop and maximize the MRO facilities down the line.

According to Gitsis, Dornier Technology operates a single hangar measuring around 6,000 square meters, which can accommodate maintenance work on one to two aircraft inside and another one to two outside.

However, it intends to lease additional allocated land from CRK, which is operated by the Luzon International Premiere Airport Development (LIPAD) Corp., a special purpose company established to manage the operations and maintenance of CRK.

The members of LIPAD Corp. are Filinvest Development Corp., JG Summit Holdings Inc., Philippine Airport Ground Support Solutions Inc. and Changi Airports Philippines (I) Pte. Ltd., a wholly owned subsidiary of Changi Airports International. The consortium members each have vast experience in airport operations, air transportation and property development.

Gitsis pointed out, “In MRO, you have so many specialized people and teams — maintenance engineers, planners, warehouse people — all highly skilled. They each have their own expertise, and you need all these components to work together.”

To make an MRO a profitable and productive business, Gitsis explained, “It needs to reach a certain scale — but to grow that scale, you need to have enough work coming in.”

He added, "The business requires a certain economy of scale, and that would be like four to six lines or to be able to manage as many planes at the same time."

He acknowledged that as an independent MRO, “We need to source projects and jobs from many different customers and to do that, we need more space. That’s what will allow us to attract work not only locally but also from Southeast and Northeast Asian countries.”

Additionally, he said, "We are going to employ more people. We expect to grow our manpower complement. We're at about 250 now. We expect it to grow to about at least by 50 percent, if not more, over the next year because of the FAA accreditation, and then if we are able to realize the expansion, that could triple and quadruple our manpower as well."

Dornier Technology has been a pioneer locator in the Clark ecozone initially under South East Asian Airlines (SEAIR). “Dornier Technology has been in the Philippines for about 30 to 31 years now. It was an offshoot of our SEAIR project,” Gitsis said.

He continued, "We've been leasing in Clark since 1995. We were the first locator in Clark airport area. The space we have is a 6,000-square-meter hangar, and we have some land around. We could triple that with the land that's been allocated for us. We have enough room to grow further. The investment and funding we need will be for the expansion of the existing hangar, not just to lease out more land. We have the land allocated by LIPAD."

He recalled further that, "We did a lot of pioneering work. Our MRO is a developmental and pioneering facility here in the Philippines, and we're trying to grow it organically. It's a homegrown company."

Gitsis stressed though that "One thing that's important to highlight is that the Philippines is still playing catch up in the maintenance segment of aviation against other countries like Vietnam, Malaysia, Singapore, and Indonesia even. They have much greater investments and they get a much broader type of support, I think, from their governments.”

He also highlighted that, “It’s important for people to understand what the MRO industry can do for a country. It creates high-paying jobs, employs highly skilled technical workers, and strengthens the aviation ecosystem — which is important for a country like the Philippines, being a large archipelago.”

Gitsis was of the opinion that "We don't want to be sending our planes from the Philippines outside to third party countries and building up their MRO industry, while the Philippines is lagging behind."

As such, he said, “The Philippines as a nation should actively support this kind of industry. It’s also a service industry — a B2B service for airlines and even other MROs, because MROs also help one another.”