Attracting aerospace to Poland's Aviation Valley

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AgustaWestland's acquisition last year of Polish helicopter and aerostructures manufacturer PZL Swidnik was the final step in what has been a remarkable decade-long journey of transition for Polish aerospace.

Shedding its communist-era legacy of overstaffed, state-run concerns, the country's tier one suppliers are now almost entirely foreign-owned, leaned-out and integrated into the global supply chain. Behind them, a group of home-grown small and medium-size enterprises are establishing themselves. And as these businesses take on new contracts, slowly workers are being recruited and trained again.

BIG NAMES
The past decade has seen an influx of big names into the Podkarpacie region, centred on the city of Rzeszow in the south-east of the country. The heartland of Poland's aerospace sector since the eve of the Second World War, it is now dubbed Aviation Valley.

AgustaWestland, Pratt & Whitney and Sikorsky have taken over formerly state companies PZL Swidnik, WSK and PZL Mielec, respectively. Others have set up greenfield operations, as German engine maker MTU did last year on a new industrial park opposite Rzeszow airport (see below), or Safran unit Hispano-Suiza in a refurbished former carpet factory in 2002. Goodrich and Italian engine maker Avio have also established subsidiaries in Aviation Valley. Some 23,000 people in the region are employed in aerospace.

However, Poland does not want to be seen by potential investors simply as a low-cost zone for offshoring lower-value, "metal-bashing" manufacturing jobs. It has technical universities specialising in aerospace; standards of education and English are high and business practices are transparent. In addition, the work ethic is prized and Poland is a European Union member bordering four EU nations.

Wages are lower than they are in western Europe, but the skills base is impressive in an industry still in transition. The industry's representatives believe Poland can add value in original design, engineering and research, as well as assembly.


Acquisition of PZL Swidnik by AgustaWestland added the W-3A Sokol to its portfolio. Picture: Polish navy 

FORWARD THINKING
Poland's success has been largely due to a group of industrialists who, with the backing of politicians and some EU funding, have established one of Europe's most forward-thinking clusters, also called Aviation Valley. Led by Marek Darecki, president of Pratt & Whitney Poland, and with a small office in Rzeszow, Aviation Valley represents almost 100 companies and more than 80% of Poland's aerospace industry.

Its members range from large manufacturers employing more than 1,000 to 45 family firms or subsidiaries with fewer than 50 staff. The organisation has established links with clusters around the world, and now also represents the country's aerospace sector in Brussels through the Association of Polish Aviation Industry.

Flight International visited Aviation Valley four years ago when the transition was well under way. However, in 2010 it has gone much further. Sikorsky's acquisition of the ailing PZL Mielec three years ago was a hugely significant move. The company - based in the town of the same name and best-known for its M28 utility twin turboprop - now manufactures the cabin for the Sikorsky UH-60M Black Hawk and assembles the recently launched S-70i "international" version.

The jigsaw was complete when PZL Swidnik was bought in 2009 by long-term customer AgustaWestland for around $113 million, giving one of Europe's big two helicopter manufacturers an additional product portfolio - including the W-3A Sokol medium-twin and the single-engined SW-4 light helicopter - that Francesco Guarguaglini, chief executive of AgustaWestland parent Finmeccanica, described as "highly complementary".

The takeovers of these two formerly state-owned concerns mean Aviation Valley is ready to move on to the next stage of its development and establish a fully integrated local supply chain, says Darecki. "When we started [our relationship with Western manufacturers] it was build to print. Then we had privatisation. Now we need a local supply base that will allow me to buy in metal forging services in Poland, have my parts machined in Poland, and buy in specialist services," he says.

One hurdle - two decades after the fall of communism - is still a business culture that is risk-adverse, with banks wary about lending money for capital investment and a reluctance by small family firms to move outside a comfort zone where the owner knows all his staff and can manage everything directly.

That is why Darecki and his organisation are keen to organise as many "benchmarking missions" as possible for members to other clusters throughout Europe. "That knowledge of how to expand above a certain size is a barrier," he says. "It is tough to get to 30 employees, but how do you get to 60? We want to see how others manage it."

Another objective is to attract small foreign investors alongside the big names. Typical of these is Canadian SME Vac Aero, a heat treatment and coatings specialist that employs around 150 people in Ontario and Quebec. The 50-year-old firm has had an outlet in Kalisz in central Poland since 2003 after having been encouraged to move there by its long-term customer Pratt & Whitney Canada, which also has a factory in the Polish city.

WELL-TRAINED
Now Vac Aero plans to set up a second Polish site in Rzeszow that will be operational by the end of the year. Eventually, says president Scott Rush, both plants will employ around 50 people each. Although the Ontario-based company has benefited from EU funding, another factor was "how well trained people were", says Rush. "There is a huge opportunity for SMEs here, with OEMs really hungry for their support."

Aviation Valley has also managed to harness EU funding to develop its aerospace education system. "Education is the smartest way for any country to spend European money," says Darecki. Some $80 million is being devoted to a programme called Aeronet to "produce engineers to the business needs" at the region's six technical universities.

Another $35 million scheme has paid for new buildings and training of specialist teachers to nurture technicians and assembly workers at 12 high schools. "I would argue that this will give us the best education system in the world in terms of high-tech machining," says Darecki. Even the under-10s are catered for with a project to encourage passion for flying and physics in monthly "fun" lessons for pupils, some of them conducted by Darekci and other Aviation Valley professionals.

Aviation Valley is spreading the word. In the past year, it has hosted delegations from Canada, Japan, the Netherlands and South Africa and helped set up a European Aerospace Cluster Partnership, a "platform to share best practices" comprising 31 organisations from the likes of Toulouse, Wallonia, Bavaria, the west of England and the Basque country.

For Poland, the fact that the bulk of its industry is in one relatively small area is a huge advantage, allowing it to develop economies of scale, strong links with education and a matrix of relationships between businesses. "The cluster approach is especially important for countries like Poland," says Darecki.

ENTERPRISE BEGINS AT HOME
Despite all its efforts to attract foreign aerospace investors to the region, Rzeszow-based Ultratech is an example of the sort of locally owned small and medium-size enterprise Aviation Valley wants to encourage more of.

With a staff of 70 - including 15 engineers - the company is one of 25 SMEs in Aviation Valley employing between 50 and 200 people. However, in 2000 when it was formed, it was one of only a tiny number of entrepreneurial shops looking for outsourced machining work from what were still highly vertically integrated state-owned original equipment manufacturers, says director Marek Bujny.

With most of its turnover coming from high-precision aviation parts including for landing gear and engine blades, Ultratech supplies local manufacturers United Technologies-owned WSK, Goodrich and Sikorsky's PZL Mielec as well as BAE Systems, Eaton, General Electric, Honeywell, Liebherr and Moog. It is the sole supplier for more than 60 parts on the Boeing 737.

A visit to Ultratech's rather cramped premises in an unprepossessing former warehouse shows that it is not out to seduce potential clients with first impressions.

However, inside the building it is clear where the company has invested its resources, with eight Japanese milling centres, including a five-axis Okuma, and 16 other machines producing critical equipment that ends up on airliners assembled half a world away, examples of which are proudly displayed in the reception area.

LUFTHANSA EXTENDS AVIATION VALLEY'S REACH
Aviation Valley is much more reachable for Scott Rush, president of one of the region's newest investors, Ontario-based Vac Aero.

Since April 2009, Lufthansa's regional arm has been flying five times a week to Rzeszow from Frankfurt, connecting the tiny airport to much of the world, including Rush's local hub Toronto. The sole connections had been on national carrier LOT via Warsaw and a daily Ryanair flight to London Stansted.

Aviation Valley now wants to attract a freight specialist to the airport, allowing the region's manufacturers quicker access to the global supply chain. Currently, aircraft parts travel by truck on southern Poland's tortuous road network to airports such as Warsaw or Munich, although new north-south and east-west highways being constructed with European Union money will help.

MTU: MORE THAN JUST AN ASSEMBLY CENTRE
MTU'S GLEAMING new facility - on a 7Ha (17.3 acres) site opposite Rzeszow's small airport - took just nine months from churned-up field to when production of engine components began in April 2009. But the plant is a key element in Aviation Valley's long-term strategy to integrate fully into the global aerospace supply chain and provide high-skilled jobs for Poles.

MTU Aero Engines Polska is much more than a low-cost assembly centre. The plant develops and manufactures stator and rotor blades as well as rings and discs for low-pressure turbines, and assembles the turbines themselves. It also carries out maintenance. In terms of research and development competences, its portfolio is broader, taking in full design responsibility for aerofoils and engine controls.

MTU chief executive Egon Behle says the company wanted to create both a manufacturing "centre of excellence" for uncooled turbine aerofoils for all future MTU commercial engine programmes, as well as a self-contained "value chain" within Poland.

Although it has maintenance and repair centres around the world, Rzeszow is the German propulsion company's sole offshore factory. It has around 300 staff - only nine of them expatriates and 60 of them engineers - and the target is to reach 400 by 2012.

"We were able to hire highly qualified Polish engineers," says the subsidiary's chief executive Krzysztof Zuzak.

Chief operating officer Tilmann Kloppe says some staff have chosen to move to MTU from other Aviation Valley companies, while others have opted to come home from jobs overseas, including two from Doncasters in the UK.