After six years of arduous negotiations Taiwan finally signed a bilateral aviation safety agreement with the United States recently, clearing the way for local makers of interior-use products for aerospace craft to export to that huge market. According to a local government official, Taiwan is the thirty-second country to sign such an agreement with the U.S.

The results are already being seen. For example, the agreement has helped the Taiwan Fylin Industrial Co., a maker of air-cargo containers, pallets, and nets, to win an international bid for the supply of air-cargo containers to an air carrier in the U.S.



Without the agreement, industry sources say, local aircraft-interior parts makers could produce for American customers only on a contract basis, with consequent lower margins. Now, they are able to sell their own-brand products in the American market so long as these products are certified by the Federal Aviation Administration (FAA).

The agreement was reportedly signed in August, with negotiators on both sides keeping an extremely low profile and avoiding any media contact so as to keep from triggering possible interference from mainland China. Fylin obtained FAA permission to sell its cargo containers in the U.S. shortly thereafter.

The company received certification for its products from Taiwan's Civil Aeronautics Administration about two-and-a-half years ago, and its cargo containers are now used by local carriers such as EVA Airways and TransAsia Airways. Following the agreement with the U.S., it has also won trial orders from several international airlines and aviation-equipment companies.

Liu Hwa-chou, Fylin's president, says that his firm is now in talks with a large international buyer about an order worth tens of millions of New Taiwan dollars (US$1 = NT$34), with finalization expected soon. The president claims that his products have strong international competitiveness due to the firm's good quality, prompt delivery, and reasonable prices (about 10% to 20% lower than similar products supplied by big international brands). He concedes, however, that he is facing increasing competition in the international market from major international brands, including Hydro of Norway, which are cutting prices in order to consolidate market share.

A senior official from the Committee for Aviation and Space Industry Development (CASID), an agency under the Ministry of Economic Affairs (MOEA), comments that the signing of the agreement with the U.S. will give a strong boost to the development of Taiwan's aerospace industry by allowing local companies to brand their products globally instead of focusing on the contract-production business, as they have had to do in the past. It also means that the island's own air carriers will be able to procure more Taiwan-made aerospace products to cut costs and simplify repair and maintenance.

Brighter Future
Fylin was established in 1997 with a capitalization of NT$110 million (US$3.24 million) by Taoyuan Airport Service Co. (which holds a 39% stake), Hwaguo Electrical Machinery Co. (33%), and smaller shareholders. It was set up as a maker of air-cargo containers, but at first was able to survive, just barely, by turning out sheet-metal parts for machinery. The signing of the U.S. agreement has made its future much brighter, and prompted it to undertake a series of expansion projects in its aerospace business.

In fact, it plans to double its capitalization soon and to carry out an initial public offering (IPO) on the Taisdaq (over-the-counter) market next year to facilitate the raising of more capital for expansion.

The company recently won permission to set up a plant in the newly inaugurated Central Taiwan Science Park, and is cooperating with the Industrial Technology Research Institute (ITRI) in the joint development of aluminum-alloy composite-material air-cargo container products featuring light weight and superior structural strength.

According to president Liu, Taiwan Fylin is now in the process of planning a plant complex, including two plants, an administration center, and a testing facility, in the Central Taiwan Science Park. Construction is to begin next July, with mass production getting under way late in 2004. The new complex will enable the company to take big-volume orders, and the advanced equipment there will enable the development of more aerospace products in the future.

CASID reports that in addition to Fylin, other suppliers of aircraft-interior parts in Taiwan are also stepping up their R&D in response to the signing of the agreement with the U.S. The council notes that the island offers many aircraft-interior items and, with the new agreement, the suppliers are eager to compete in the international market for air-cargo containers, pallets, and nets; fabrics for aircraft seats and curtains; passenger blankets; aircraft plastic-injection parts, lighting, and life vests; seat-use foam materials; in-flight galley equipment and carts; passenger-service amenity packs; and passenger earphones, among other products.

CASID says that it will work more aggressively to integrate suppliers in the line and assist them in securing export orders so as to stimulate the island's aerospace products business.