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Keeping the Blades Turning

WITH 2004 WRAPPING up, maintenance and repair organizations (MROs)
across the country are saying goodbye to a good news/bad news year: the
good news is that there weren’t as many large forest fires as the year
before – and the bad news is that there weren’t as many large forest
fires as the year before. That being said, the dominant strategy in the
industry is one of diversification, with many companies learning that
the best way to get ahead is to be ready for anything.

The
MRO scene in Canada is generally dominated by what happens in the
woods, and this year was no exception. “We had some pretty severe fires
last year,” said Garry Forman, president of Yellowhead Helicopters
Ltd.; but this year “the season came to an end rather abruptly.”
Similarly, CEO Mike Whitter of Heli-Lynx Helicopter Services Inc.
observed that although business increased overall, “the peaks and
valleys were higher and lower,” with summer being a lot slower and
winter being much busier.

For other companies such as Avialta
Helicopter Maintenance Ltd. and Chinook Aviation Inc., injections from
new clients were just what the doctor ordered to keep work steady.
“This year it’s been on par (with 2003),” said Avialta director of
maintenance Rob Pritchard, who noted that Canadian military contracts
meant a boost for the company’s paint shop. “We are still a growing
company,” said Chinook office manager Heike Meyer, “and this year we
got our first American customers.”

Greenbacks are always welcome
in Canadian pockets but with the loonie creeping up, the exchange rate
for Americans is much less favourable than in 2003. In response, many
MROs are playing it safe in the money game. “We trade in both
currencies and hedge our long-term rates,” said Acro Helipro president
Charles MacIvor. “(The dollar) would have to strengthen a lot to have
an effect,” added Yellowhead’s Forman.

But for those working
with US dollars, the dwindling exchange rate means smaller margins.
Heli-Lynx, for example, trades in US funds, meaning its operating costs
have gone up this year. CEO Whitter said this has had an effect on
paying both vendors and employees. For Avialta, which has only a few
American customers but buys from American suppliers, the opposite was
true. “It brought our costs down,” Pritchard said.

Fortunately
for Whitter and his company, tastes among his customers have changed
recently, meaning repair work has gone up, driving business for the
2004 season. “People are trying to rejuvenate their old aircraft
instead of flipping for a new one,” he said. Heli-Lynx did brisk
business in both avionic and electrical modifications this year, not to
mention supplemental type certificates.

Conversions were also
the order of the day at Essential Turbines in Quebec, where co-founder
Mike Guntner Jr. pointed to the C20R Plus as a proven winner for the
firm. “That’s probably the numberone modification,” he said. “It’s
taken off. It’s a very proficient and accepted mod.” The company was
also buoyed by a growth in European, foreign-government and major
national deals.

At Avialta, Pritchard sees good things coming
the way of his overhaul and paint shops. “This time of year it’s
picking up,” he said, also pointing to third-party field and line
maintenance and buying and selling aircraft as business boosters.
“We’re responsible for the major components, so that’s a major driver.”
Perhaps the most intriguing new development however, comes in the shape
of customer tastes in aircraft, where the AStar is facing competitive
challenges for the first time in a while. “LongRangers are coming back
into vogue,” said Pritchard. Not that the traditional stud aircraft has
too much to worry about. “People still want to ride in an AStar,” he
added. It just goes to show there’s plenty of room in the skies for
some friendly competition.

On the other hand, there is also
something to be said about the good old standbys. Acro Helipro’s
MacIvor said his big winners are “same as they always are: cost,
quality, turnaround time. Having lease assets is also a huge driver as
sometimes that determines whether you get the work or not.”

Another
aspect of the business that rarely seems to change is the work cycle
for MROs. For most companies, winter is the busy season, while summer
brings a natural lull. That often means creative scheduling by
management. “Summers tend to be quieter due to vacations,” said
MacIvor. “A large number of commercial operators have already performed
maintenance in readiness for the fire season in winter and spring and
are busy flying during the summer months.”

Chinook’s Meyer said
that “our summers are traditionally very slow and in the winter there
is a lot of overtime, so people are happy to take time off in the
summer.” Echoing that sentiment, Pritchard noted that “we try and get
people vacation time in the summer” and spend that time on internal
projects. “The overhaul shop has been busier this year,” added
Pritchard, pointing to rental components as big movers. “We want to try
and get the maximum utilization out of our components.” For Pritchard,
keeping those rentals busy is a key, as the realities of retirement
lives on certain parts loom ominously overhead. “Every hour you don’t
use, you’re throwing money away,” he said.

Not all companies
suffered from a summer drought. Defying conventional logic, Guntner
said that Essential Turbines in fact had a banner summer. “Normally I
would agree (about the summer lag), but this year has been a total
bizarro world. We’ve been going nuts.” Naturally, winter is still the
time for the heavy lifting at Essential, but the company has had good
luck with what could be described as ‘life by a thousand jobs’: “We
have bigger jobs in the winter; summer gets the smaller jobs, but ten
times the amount,” said Guntner.

At Yellowhead, diversity helps
in the summer season. “We’re a base-oriented company,” noted Forman;
oilpatch work and Prince George area surveys keep the fleet busy in the
heat. Not that any job will do: “We don’t chase seismic,” he said.

Another
way of beating the forest fire cycle is simply to not rely on it, as
MacIvor pointed out. “We no longer depend on fire business and look
upon it as a bonus if there is a busy fire season,” he said, adding
that “we do build up rotable stock to help our customers in the event
of an unplanned incident or removal during the fire season.”

With
companies such as Acro Helipro, full service for the fire industry
would seem to offer critical advantages over other firms, a fact
MacIvor is well aware of. “There is a lot of consolidation going on in
the industry and we expect that to continue and accelerate over the
next few years. The operators are looking for better ways of managing
their cash flows and reducing their costs. By consolidating their work
in a ‘one-stop shop’ the customer will be able to nego- tiate better
rates.”

One of the most contentious issues in the MRO business
is the status of aircraft maintenance engineers (AMEs), who have been
in short supply recently. Fortunately, it seems that the industry is
pulling out of that tailspin. “About four to five years ago, there was
a definite shortage before 9/11, because the airlines were busy,” said
Pritchard, noting that AMEs could look forward to nice jobs with the
likes of Air Canada or WestJet.

While Whitter of Heli- Lynx
agreed that poaching from the fixed-wing industry meant “a smaller pool
to draw off,” apprenticeship programs have turned things around and now
“we take guys out of the bush.”

Getting that young crop
initiated could be the key to stopping another shortage in the future.
As Pritchard noted, “The average age of our AMEs is 40 to 50, and in
the next ten years, there’s going to be an exodus.” Part of the problem
he sees as the specificities of the training now required for AMEs by
Transport Canada, with the M1 and M2 licences. “If I want to work on an
Allison AStar, I need an Allison course. If a company wants to run a
mixed fleet, the training requirements are enormous.”

For
Guntner, the apprentice approach has also paid dividends, not only in
strong new employees, but loyalty from those employees. “We have a lot
of people applying and we seem to be getting our pick. We can’t kick
people out of here at five o’clock.”