HiZ Aviation, Will It Soar Again Despite the Impact of Declining Air Passenger Demand?

The novel coronavirus infection (COVID-19) has grounded travelers, rendering passenger airplanes almost useless. Naturally, the workload for global aircraft manufacturers has sharply declined. The sense of crisis has extended to domestic aircraft parts companies as well. Although the defense industry is playing a supporting role, it is obvious that prolonged circumstances will bring significant difficulties. How long can domestic parts companies endure with their current strength? We looked into the management status of aircraft parts manufacturers such as Korea Aerospace Industries (KAI) and Astr Highz Aerospace.

[Asia Economy Reporter Park Hyungsoo] Highz Aerospace is a company that assembles aircraft structures and manufactures parts. It produces rear fuselage and wing structures of aircraft. In 2011, it was selected as a first-tier supplier to the US Boeing. It also received the highest quality grade, the 'Gold' certification. Highz Aerospace has secured sole supplier status for most of the aircraft parts it has won orders for. It holds the standard quality management system of aircraft companies at the factory level, and has obtained Boeing’s quality system certification and special process approvals for each process. It supplies Boeing’s B787 wings and fuel tank parts, airframe parts, and key internal structures of the rear fuselage.

Highz Aerospace has also established a foothold to enter the Chinese market, the largest demand country for aircraft. In April 2019, it was selected as a supplier to COMAC, China’s state-owned complete aircraft manufacturer, for the first time domestically. COMAC is an emerging strong player in the global aircraft market, which was previously dominated by US Boeing and European Airbus. It succeeded in producing China’s first small passenger aircraft ARJ21 and medium-to-large passenger aircraft C919. It receives full support under the Chinese government’s policy to foster the aviation industry.

Highz Aerospace is expected to target the Chinese market while maintaining a strategic partnership with COMAC. Supplies to Shanghai Aircraft Manufacturing Co., Ltd. (SAMC), a subsidiary of COMAC, are also continuously increasing. In addition to COMAC, BTC, a joint aircraft manufacturer between Boeing and China, is also a customer of Highz Aerospace.

One reason Highz Aerospace is trusted by global aircraft companies is that it has established an integrated production line including machining, sheet metal forming, surface treatment, assembly, and jigs and fixtures. The aviation industry mainly consists of mostly single suppliers per part. Operating under a dual supplier system can cause compatibility issues between parts due to duplicated investments in production jigs and fixtures and the precision required by the aviation industry. Highz Aerospace is gaining attention because it has integrated production facilities.

In the first quarter, Highz Aerospace achieved sales of 14.4 billion KRW and operating profit of 440 million KRW based on consolidated financial statements. Compared to sales of 16 billion KRW and operating profit of 560 million KRW in the same period last year, this represents decreases of approximately 10.6% and 21.0%, respectively.

Due to COVID-19, countries implemented border closures and two-week self-quarantine for entrants, shrinking global travel demand. As travel demand declined, airlines facing financial difficulties hesitated to invest in aircraft, impacting the aircraft industry as well.

Industry experts expect that even after COVID-19 subsides, it will take about three years to recover to previous levels. Even if tourism demand recovers, business demand such as for business trips may slow down due to the development of video conferencing systems.

Reflecting these concerns, Highz Aerospace’s stock price fell from a yearly high of 6,850 KRW on February 3 to 2,660 KRW on March 23, when the stock market plunged due to COVID-19. Recently, the stock price has rebounded, recovering to around 4,000 KRW.

With some countries lifting or planning to lift border closures, conditions are set for air passenger demand to increase again. Researcher Lee Bongjin of Hanwha Investment & Securities said, "the stock prices of domestic airframe parts companies have not yet recovered to the levels before COVID-19 spread worldwide,” adding, “Exports of airframe parts are expected to gradually increase from the second quarter of this year as the bottom.”

This content was produced with the assistance of AI translation services.