Swiss aerospace's maintenance, repair and overhaul providers are seeking to expand by increasing their international customers and exploring niche businesses
Although Switzerland has had a healthy maintenance, repair and overhaul (MRO) industry for many years, it is one part of aviation where quality cannot be stressed as a selling point, because all European providers follow the same strict rules. Instead, Swiss companies have to promote better delivery times, greater flexibility and deeper customer relationships as they seek to expand.
Switzerland has a long MRO tradition. Its largest maintenance provider is SR Technics, the former maintenance arm of defunct Swissair, which has prospered in independence. Similarly, Jet Aviation, which started life servicing the nascent private jet industry, has grown to be a world leader; and the country's large concentration of helicopters has driven the growth of Swiss Helicopter Maintenance (SHM). Meanwhile, manufacturers Ruag Aerospace and Pilatus have also entered the MRO market.
Much of the growth has been organic, driven by greater use of aircraft. But some companies, such as SR Technics, have seen the opposite effect, having to overcome the loss of its largest customer and still achieve growth. Also, Swiss MRO centres continue to build business despite the country's high labour costs, particularly acute for labour-intensive work such as heavy maintenance. So instead of focusing on D- and C-checks, Swiss MRO providers had to diversify to survive.
Take Jet Aviation, for example. Established in 1973, the facility in Basle was created to maintain the small fleet of Learjets the company then owned. In those days there were few other options for business jet servicing, says Jet Aviation senior vice-president and Basle facility general manager Rainer Albecker. As business aviation grew, there were not only more jets to service, but also increased competition, so Jet Aviation took the strategic decision to offer cabin interior design - an undeveloped market at the time.
"The first cabin completions we did were a Convair CV-880 and a Douglas DC-7 and we did about one a year initially, but revenues from MRO and completions reached parity around seven years ago when we started doing airliner-class types such as the Boeing 767 and 737," he says.
Business aviation MRO has distinct cycles, with checks requiring downtime scheduled for either around Christmas for corporations or Ramadan for many Middle Eastern clients. Jet Aviation found initially that offering completions ironed out some seasonal fluctuations, with workers engaged in cabin work during less intensive periods. Now, with three Boeing Business Jets, two Dassault Falcons and a 747SP having been completed in 2003, completions are half of the facility's business and act as a draw for maintenance work, with heavy checks taking place simultaneously to reduce aircraft downtime.
Jet Aviation was also quick to expand internationally, a move many Swiss firms have been cautious to make. Zurich-based SR Technics is understandably nervous of rapid overseas expansion, having lost a US subsidiary during the collapse of Swissair owner SAirGroup, which arguably tried to grow too fast. This measured approach can be seen in its strategy for the acquisition of Irish MRO provider FLS Aerospace, whose Dublin and London Stansted sites will be eased into company operations rather than given the SR Technics brand from day one, says Tim Taalat, SR Technics Switzerland president and chief executive. This illustrates the importance Swiss management places on excellence above brand-building.
Outward gaze
However, SR Technics has spent the past decade scouring the rest of the world for customers. Its geographical position, easily within narrowbody range for most of Western Europe, made it ideally placed to bid for contracts from start-up short-haul carriers, many of whom had no in-house capabilities. The outward gaze started, as it did for many Swiss companies, says Taalat, with the 1992 Swiss rejection of membership of the European Economic Area, a free trade zone linked to the EU's single market. "After long debate about the pros and cons of joining, we came to the conclusion that we were on our own and had to find the best solution," he says.
For SR Technics, this meant chasing third-party work. In the mid-1980s, Swissair accounted for about 80% of the company's business, whereas its successor, Swiss International Air Lines, now provides only one-quarter of all contracts.
In pursuing foreign contracts, SR Technics has to face the fact that it is not cheap, says Taalat. Instead, what Switzerland has to offer the world is fast turnaround times, which in the world of aircraft utilisation-driven carriers makes more difference than the actual cost of a letter check, he says. For example, SR Technics claims to be able to shave 10-15 days off an overhaul of a Pratt & Whitney engine, which could translate into a medium-sized carrier requiring one fewer lease engine. This faster turnaround, combined with Swiss punctuality, means SR Technics still wins contracts against cheaper rivals in east Asia, says Taalat. "They know that if we say it'll be ready at six o'clock, it'll be there at 1800, no snags, no questions."
Like other MRO providers in Switzerland, SR Technics has to use its resources flexibly to deliver these time savings, and these resources are human as well as mechanical. Jet Aviation, for example, lays on extra shifts to accommodate short-notice maintenance and SHM's workflow has to keep up with the vagaries of weather conditions in Swiss winters. These shorter turnaround times have also been made possible by more efficient workflow practices. Jet Aviation gained 8% last year in better materials handling, for example.
Such efficiency gains are necessary to combat the industry-wide problem of greater time between overhauls. This has already triggered consolidation in the helicopter MRO market. In 2001, the Swiss Helicopter Group (SHG), a merger of logging and commercial helicopter operators, spun off its maintenance business as SHM in a bid to attract third-party work in Switzerland, which has Europe's largest helicopter fleet. The group's three largest maintenance bases were to focus on heavy checks, with SHG's other three subsidiaries keeping only line maintenance.
At the beginning of 2002, SHM was sold to Swiss Eurocopter dealer Europavia Group, which intends to follow the rationalisation plan even more aggressively, says SHM logistics manager Ren‚ Kunz. Overlapping approvals have been eliminated and SHM is to dedicate specific teams to each of the 24 types it overhauls.
Best practices
SHM is also planning to bring fixed-wing best practices, such as service contracts, into helicopter maintenance, in a bid to flatten demand peaks and lessen expensive emergency component shipments, says Kunz. But clients are not keen.
"To get the best out of such a programme, customers would have to share some information with us that now they would rather not share," he adds. "Maybe it's another Swiss trait."
Since gaining independence, SHM has increased its third-party work to one-third of revenues, but again, overseas expansion is its main goal. Hemmed in to a large extent by mountains and rotorcraft range, the group is instead pushing component overhaul for export. Already one of the largest dedicated helicopter MRO operations in Europe, the company has completed a SFr3 million ($2.4 million) renovation of its 8,860m2 (310,000ft2) hangar at its main Berne Belp airport base to become the logistics centre for the new venture.
Others, too, see money in maintenance, with non-specialists joining the fray in recent years. Pilatus has three maintenance operations in Switzerland. At its headquarters in Stans, near Lucerne, it concentrates on its own product line, but in 1997 it acquired Geneva-based Dassault Falcon service centre TSA Transairco and last year added Gulfstream specialist Altenrhein Aviation. The focus on maintenance came from a 1990s strategic decision to find a third pillar for the business, says Markus K„lin, Pilatus's vice-president of maintenance. "Jet maintenance is demanding, but it opens new doors and markets."
The logic to enter an obviously lucrative market seems to be shared by Ruag Aerospace. Already responsible for all Swiss air force aircraft maintenance, it expanded into civilian work with the 2002 acquisition of Fairchild Dornier Aviation Services. More recently, Ruag has added jet service centres across the country. Currently each of the major players, while following similar paths towards growth, has nevertheless remained largely within its own niche. But it is only a matter of time before they engage in that very un-Swiss business practice - rivalry.
JUSTIN WASTNAGE / BASLE, BERNE, LUCERNE & ZURICH
Source: Flight International
