October 20, 2009 By James Careless
As we all know, 2009 has not been a good year for most Canadian helicopter companies and the MROs who serve them. In particular, a drastically reduced demand for oil, lumber and minerals has slashed the use of helicopters.
As we all know, 2009 has not been a good year for most Canadian helicopter companies and the MROs who serve them. In particular, a drastically reduced demand for oil, lumber and minerals has slashed the use of helicopters. Meanwhile, tight budgets have forced businesses in general to cut back where possible, including aircraft purchases, operations and charters.
|Ensuring the stability of its base business has been a primary focus for Vector according to Balkiz Sarihan. (Photo courtesy of Vector)|
The consequence has been fewer helicopter flights in Canada this year. This means fewer hours flown, and thus less need for helicopter maintenance, repair and overhaul services. The result is less money for Canadian helicopter companies overall.
“We have 30 helicopters in our leasing fleet: 10 are sitting in the hangar and the 20 that are flying are flying 20 per cent of the hours they flew last year,” says Paul Horvatis, sales manager for Avialta Helicopter Maintenance in St. Albert, Alta. “The reductions have hurt our MRO work as well. As a result, we have had to cut staff.”
“Yes, the recession has had an impact on our business,” says Hugh Andrews, president of AeroSmith Heli Service in Coombs, B.C. “With the housing slump in the U.S. and our strong Canadian dollar, logging has been hit hard. Also with the fire situation, the woods are closed to a lot of logging operations. As far as exploration mining, people have been extremely cautious with spending in this area. Obtaining funding from financial institutions for new projects has been challenging.”
“[We have been] definitely affected,” says Mary Robinson; VP Business Performance with Hayes Forest Services in Duncan, B.C. “The company was forestry-dependent for a number of years and was just beginning to provide services into a more diversified market in the two years prior to the recession. The logging industry was curtailed months prior to the official recession. The recession resulted in severe curtailment of opportunities outside of logging.”
|Less need for helicopter maintenance, repair and overhaul services. (Photo courtesy of Vector)|
Things have been so slow, that Hayes Forest Services was “placed under CCAA creditor protection in July 2008 to allow a period for restructuring the business,” Robinson tells Helicopters magazine. “The recession created an environment where restructuring opportunities became virtually non-existent.” In other words, Hayes has not been able to make a go of it after restructuring. So the staff have been let go and the company has been selling off its assets.
Not everyone has fallen by the wayside. Take Essential Turbines in Dorval, Que. “We understood that a new world economy was unfolding in ‘08,” says Mike Guntner Jr., Essential Turbines’ VP and QAD. “[So] we positioned ourselves to use profits from the ‘easy’ times and invest them into the ‘difficult’ times through an aggressive global expansion that included joint ventures, agents being appointed, company representatives being hired and exclusive partnerships in strategic regions we determined to be under serviced and/or up and comers.”
Vector Aerospace counts itself as “one of the good news stories of the Canadian and global MRO industry,” says Balkiz Sarihan, Vector Aerospace’s VP of Strategic Marketing & Development. “We’ve seen year over year growth in most of our segments and we believe this is due in great part to our continued focus on our customers.” This said, things have slowed down since the recession hit. Specifically, “Our commercial customers, especially those serving the utility and tourism sectors have been affected by the economic pressures of this past year,” she says.
All told, many Canadian helicopter MROs are taking a beating. But even the hardest hit are still doing good work for their clients “We haven’t seen any compromise of integrity,” says Mike Guntner. “What we have seen is difficulty with subcontractor lead times due to a reduced work force. We are all supposed to have patience and accept the fact that the world has changed and we must just deal with it. [But]…this has forced us to invest more heavily in areas we never had to in the past to combat this on-going problem.”
Coping with Economic Chaos
Different MROs are coping with the recession in different ways. For Hayes Forest Services, unfortunately the only response left was to liquidate the business. Meanwhile, Avialta is hanging tough by cutting staff, reducing costs, and putting helicopters up for sale. “The problem is that there are no buyers right now,” says Paul Horvatis.
At AeroSmith, “We have responded to the recession by reducing our overhead in the form of manpower, inventory and services that are non essential or redundant,” Hugh Andrews says.
Essential Turbines has expanded into other parts of the world, in order to “offset any severe turbulence from domestic markets,” says Mike Guntner. “However, we made a substantial investment in our local markets as well. We are servicing more Canadian operators and we continue to support them and assist with them achieving their goals. We have become more of a solution provider in the past year, and I expect this to expand into some very interesting programs and projects in the coming months/years.”
Vector Aerospace is taking a similar approach. “Ensuring the stability of our base business has been a primary focus for us,” Balkiz Sarihan says, “but we have also used this time to position ourselves for future growth opportunities; including expansion into new geographies and addition of new product and service offerings.”
“We believe that increased globalization will have a positive impact on the industry as a whole,” she adds. “Within our organization it creates opportunities for our people to share best practices across our global operations and move beyond the limitations of physical facilities and organizational structure. It also provides us the ability to deliver to our customers the service they require at the location which suits them best by leveraging a growing network of facilities.”
As for the trend towards continued outsourcing by helicopter owners/operators? According to Guntner, it is actually a good thing for aviation safety. “With competent management you can better manage the overall quality in most instances through increased competition,” he says. “It is a hungry world out there and we have been approached by many sub trade vendors who are reacting to the economic turmoil, thereby increasing our list of potential capabilities. Now is not the time to do things you are OK at. Now is the time to get better at what you do best!”
The MROs we spoke to expect the market to improve eventually. “We are optimistic about the future,” says Hugh Andrews. “Our economy is showing signs of improvement and interest rates have remained low. With the 2010 Olympics coming it may aid in kick-starting the provincial economy.”
In the meantime, Canadian helicopter MROs have to stay alive until times improve. In this regard, “The greatest challenges we face are maintaining a positive cash flow and keeping the receivables from aging too far,” says AeroSmith’s Andrews. Over at Vector Aerospace, “the greatest challenge facing our organization today is to sustain that rate of growth while ensuring we never lose sight of what is most important – serving the needs of our customers,” observes Sarihan. “We will only achieve this by continuing to build a customer centric organization and a consistent go-to-market identity.”
“It is one thing to expand, but to meet your objectives you need help,” Guntner adds. “And this help is always hard to find. Even if you have found good help, for it to be successful, you must share similar goals and vision.”
Still, he remains hopeful: “During challenging economic times, it’s human nature to get back to basics. But if you are in a healthy financial position, there has never been a better time to be in business.” Too true; now the hard part for Essential Turbines and other Canadian helicopter MROs is to stay healthy enough to take advantage of what opportunities exist today, and to expand upon them once the market rebounds. Only when this recession is truly over, will we be able to assess how well they actually did.