The Hong Kong Aircraft Engineering Company (HAECO) is in talks with companies in South Asia and West China to form a joint venture (JV) to develop an aircraft maintenance business, HAECO Chief Executive Officer Chan Ping-kit said after the firm's annual meeting yesterday.

And since the company will be using most of its money on new projects such as acquiring new facilities, no special payout dividends will be given, Chairman Christopher Pratt said. It's a sharp contrast to the HK$2.50 special payout given for 2006.

The interim and final dividend per share is HK$3.08.

HAECO is controlled by Swire, an aircraft maintenance company.

Pratt declined to comment on the profit contributions of previous mergers and acquisitions.

In response to the surging oil prices, Pratt said that there are pressures for airlines to reduce costs, but HAECO will provide valuable packages to them, especially in China.

The oil price set a record of $121 a barrel on Tuesday, putting cost pressure on airlines. This may also slow down the growth of the industry and affect HAECO's business.

Meanwhile, the renminbi appreciation will become another concern to the company, as a great portion of its turnover is in US dollar terms.

Pratt said that this will put some pressure on the company's profits margin, but it should be able to protect the margin given the company's strong market position and position in Hong Kong.

The company has signed contracts to convert Boeing 737 passenger flights into cargo flights. Chan said the company has already transformed 12 aircrafts, and three additional aircrafts are in the works and expected within the next three years.

HAECO's 2007 turnover increased 20 percent to HK$4.62 billion, and its net profits increased HK$1.07 billion.

Its major customers include Cathay Pacific Airways, Japan Airlines and All Nippon Airlines.

(HK Edition 05/07/2008 page2)