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Battling Back

When the economy is bad, helicopters don’t get flown as much. And when helicopters are grounded, helicopter MROs suffer. After checking with operators and manufacturers from coast to coast, messages sound eerily similar.


October 1, 2010
By James Careless

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When the economy is bad, helicopters don’t get flown as much. And when helicopters are grounded, helicopter MROs suffer. After checking with operators and manufacturers from coast to coast, messages sound eerily similar.

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AMEs at Dorval, Que.-based Essential Turbines have helped combat the recession by working more flexible hours.
(Photo courtesy of Essential Turbines)


 

“We have seen a drop in our level of MRO activity in the range of 15 per cent in the last 18 months largely due to a decline in utility flight hours, which is a direct result of less exploration,” says Gordon Kay, director of Customer Service with Eurocopter Canada Limited (ECL). “A decline in the number of flying hours…[plus] our aggressive drive to reduce DMCs by increasing the TBO for many of our components has resulted in a decrease in available work.”

Mike Guntner (Senior), president and DOM of Essential Turbines in Dorval, Que., says the economic slowdown has negatively affected business. “Our customers haven’t been able to pick up contracts, so if they don’t fly, they don’t break or time out their engines. When they do fly, they have to wait to get paid. This trickles down to the overhaul shops who also have to wait for payment.  . .We are coming off two of the toughest years since we started our business in 1994.”
Two B.C. operators have similar stories. Hugh Andrews, president and owner of Aero-Smith Heli Service in Coombs, says the current economic reality means times are tight. Over in Abbotsford, Cathy Press, president/chief flight instructor of Chinook Helicopters, reports the firm was busy for six months after the recession hit, but things have slowed. “That’s how long it usually takes for a change in the economy to filter down to us,” she says.

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Fighting Back
The helicopter MRO business has never been one for the faint-hearted. Entrepreneurs have to raise millions of dollars in capital – much of it in the form of loans – to lease or buy hangars, obtain cutting-edge testing equipment, metal-working mills and tools, engine repair facilities, paint booths, the list literally goes on and on. Then there’s the never-ending task of finding and keeping qualified engineers, attracting clients, and staying in line with Transport Canada regulations. Even during boom times, meeting all of these requirements successfully is no mean feat.

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AMEs work on the Essential Turbines’ B15 Test Cell. (Photo courtesy of Essential Turbines)


 

In a business like this, a recession is like seawater eating into a sand castle. It threatens to erode – perhaps collapse – the result of much hard work and skills accumulation. Perhaps this explains why helicopter MROs are so dogged in their refusal to quit when the going gets tough. Because they don’t quit; even when things get as bad as Guntner says they are.

So, how has Essential Turbines coped with the recession? First, the company reorganized internally, to find economies. Next, they did not replace personnel when they left. “Rather than hire new staff, our employees are helping out by working overtime,” Guntner says.

This may seem strange – having existing staff work more hours rather than hiring new staff to work fewer – but the costs associated with hiring new employees (Workman’s Compensation, pension, and other related expenses) are substantial for any employer. By pitching in, Essential Turbines’ employees are helping the company rein in costs while boosting revenues. When both sides of a company work together like this, both sides win.

Essential Turbines has also done something new and different: It hired a professional to help market its services. “We have never had a salesman, because we never needed one,” Guntner explains. But with shrinking demand for its services, Essential Turbines knows it has to appeal to new prospects in order to keep going. The good news?: “Our overhaul shop is now busy,” he says. “The work is coming in from our core Canadian operators.”

Aero-Smith Heli Services is also seeing an upswing in business, due to a revival of the logging and mineral sectors in B.C. “After the recession hit, the logging companies stopped cutting,” Andrews explains. “Instead, they sold lumber from their existing inventories, in a bid to keep costs down. Well, the time has come when they’ve had to resume logging to restock those inventories. This has resulted in a resumption of heli-logging, which is good for us. Meanwhile, mining is big again – especially gold. So, between them, these two sectors are really helping us out.”

Eurocopter Canada is also betting on enhanced MRO capabilities to attract more business. These include the installation of an EC-120 test bench and offering structural repair for the AS-350 line of helicopters. “ECL has also introduced a customer loyalty program, Rotor Rewards,” says Kay. “Developed to meet our customer’s’ needs, the program includes tailor-made support programs, promotions and perks as well as a new range of discounts and rewards.”

Gambling Big
Chinook Helicopters’ Press has seen some improvement in her MRO business this year, compared to 2009. To conserve resources, she has also kept as much work in-house as possible; while bringing in third-party customers where she can. Things are looking better this year, compared to 2010: “It feels like a normal business period – albeit a slow one – rather than a crash,” she says.

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Eurocopter Canada has introduced a customer loyalty program, Rotor Rewards, to help offset the effects of the recession. Here, AMEs work on the airframe repair jig for the AS-350/355 series. (Photo courtesy of Eurocopter Canada)


 

So, how does Chinook Helicopters weather an economic storm? By moving into a bigger facility and buying aircraft, of course! Construction of the company’s shiny new hangar at the Abbotsford airport was started before the recession hit and by the time the hangar was ready for occupancy in October 2009, times were tough. But Press decided to go ahead with the move. “It was really too late to turn back, and besides, moving into a bigger, better space made us look prosperous,” she laughs. “That’s a good impression to make during a recession, don’t you think?”

Fortunately, Chinook Helicopters’ flight school succeeded in attracting a large number of European students, in addition to its local Canadian base. Subsequently, Press was able to keep paying the bills and hang in until the economy started to improve, which it has.

But why did she purchase two Robinson R22s and a Bell Jet Ranger? The short answer is that the deal was too good to resist. “I got them all below market value, when prices were depressed,” Press says. “I’m an optimist who believes that if you buy helicopters when things are slow, eventually the market will pick up and their value will increase.”

Not everyone agreed with Press’s decision. “My insurance agent thought I was nuts,” she admits. “But in fact, with the market reviving, the value of these aircraft has indeed increased since I bought them. So, they are an investment at the very least. At most, they help us keep up with our student demand, and give them flight experience in something besides our Bell 47s.”

Lessons Learned
Despite differences in their approaches, each company interviewed had some common elements in their recession-busting strategies.

They all decided not to take their ball and go home when things began looking really tough. Instead, each took a long, hard look at their strengths and weaknesses, and did what they could to maximize the first by minimizing the second. In practical terms, this meant looking for new areas where they could attract business, while doing what they could to keep costs down. Wherever possible, these companies worked to preserve jobs rather than slashing their workforce, demoralizing the survivors and then having to find new talent when things inevitably improve (as they always do).

A willingness to keep taking risks was another key component in the hopes of post-economic downturn growth – mindful, of course, that businesses either grow or contract, but never stay static. For Essential Turbines, the solution was breaking with company tradition and investing in a salesperson to drum up new business. At Chinook Helicopters, the gamble was to buy three helicopters and move into a new facility even when faced with a difficult economy.

Another commonality all four firms share is the ability to stay focused on the core business, and do whatever they can to improve quality and enhance customer satisfaction. “At the end of the day, what keeps you in business is people, not stock market quotes,” says Press. “Although I pay attention to what’s happening on Wall Street, I know my livelihood is here in Abbotsford, teaching pilots and repairing helicopters. That’s what pays my bills and keeps my people and me employed. That’s where my attention needs to be, and is.”

“We. . . are proceeding to better serve the market by focusing on our customers’ needs and reducing the cost of operation,” says Kay. “Although flying hours are down in general, we have also seen some bright areas during this downturn (i.e., corporate aircraft and para-public activity); we are optimistic about the future and are starting to see positive signs in these segments.”

There is a moral to this tale, and that’s the old cliché that when the going gets tough, the tough get going. In the case of these helicopter MROs, they didn’t just “get going”; they got tougher. That’s why these MROs are still in business today, and are destined to be in business tomorrow.


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