Korea Aerospace Industries (KAI), Hyundai Rotem, Hanwha Aerospace, and LIG Nex1 are expanding their military defense sectors to the maintenance, repair, and overhaul (MRO) market. MRO increases weapon operational rates in warfare and ensures stable revenue for a long period once established. The operational lifespan of weapon systems typically ranges from 20 to 40 years.
According to the defense industry on the 16th, KAI is currently pushing forward with an FA-50 MRO contract with the Polish government. KAI signed a supply contract for a total of 48 FA-50s and delivered 12 aircraft from July to December 2023. The remaining 36 will be delivered sequentially by 2028.
The warranty period for the FA-50 is two years. Consequently, starting in the second half of this year, the service lifespan for 12 FA-50s will gradually come to an end. KAI aims to push for an MRO contract with the Polish side before the service periods end.
The market size for aviation MRO business is 1.5 to 2 times the export value of the equipment. Since the supply contract for 48 FA-50s amounts to $3 billion (approximately 4 trillion won), the MRO market size is at least 6 trillion won. Additionally, KAI is performing MRO for various models, including domestic aircraft like the T-50, KT-1, and LAH, as well as the U.S. Marine Corps' CH-53 heavy transport helicopter and F-16 fighter jet.
Hyundai Rotem, which is on the verge of a second contract with the Polish government, has confirmed that the MRO expenses are included in the contract. Hyundai Rotem is expected to sign a second contract with the Polish Armaments Agency to supply an additional 180 K2 tanks, as early as the end of this month. The contract amount is projected to reach around $6 billion (approximately 9 trillion won).
Hyundai Rotem entered into the first contract to supply 180 K2 tanks in 2022. The contract amount at that time was approximately 4.5 trillion won. The supply quantity in this second contract is the same as in the first, but the amount has increased due to rising local production costs and the inclusion of MRO expenses.
Hanwha Group is focusing on the MRO market with its defense subsidiaries, including Hanwha Aerospace, Hanwha Ocean, and Hanwha System. Hanwha Aerospace signed export contracts for K9 self-propelled howitzers with European countries, including Poland and Romania, and also entered into MRO contracts that include maintenance, training, and parts supply.
In the aviation sector, the company has performed MRO for over 5,700 aircraft engines over approximately 45 years, along with producing engines for the Air Force's main aircraft. By this year, it plans to invest around 40 billion won to establish a smart engine factory in Changwon.
Hanwha Ocean is targeting the U.S. naval ship MRO market. According to global market research firm Mordor Intelligence, the global ship MRO market is expected to grow from 78.9 trillion won in 2024 to 86.9 trillion won by 2029. The U.S. Navy's MRO business is a massive market amounting to 20 trillion won annually.
LIG Nex1 is also making a significant entry into the MRO market by adding modification, maintenance, and upgrading to its business objectives during its regular shareholders' meeting in March.
A defense industry official noted, "Korea's defense sector has focused on exporting finished goods until now, but it is now expanding its ecosystem into service industries such as MRO. MRO has a locking-in effect on consumers, allowing us to secure a favorable position in the export of next-generation weapon systems."