Hungary's Aeroplex stakes future in airframe MRO

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Aeroplex of Central Europe (ACE), the technical arm of former Hungarian state carrier Malév, is carving out a niche as an airframe heavy maintenance specialist after it was restructured and its workforce reduced by 40%.

Earlier this month, Hungary's government separated the Budapest-based company from the assets and liquidation process of Malév - which ceased operations in February - to re-establish Aeroplex as a standalone, fully state-owned maintenance, repair and overhaul (MRO) provider.

The ownership situation is unlikely to change in the "medium term", managing director Imre Nemcsok tells Flightglobal, unless the government resurrects Malév or a successor flag carrier. "This could change our status or highly affect our business activity," he says, adding that there is little opportunity for outside investment in lieu of such a development.

A government initiative to re-establish a national airline is being debated "almost daily" in the national press, Nemcsok adds, but the authorities have yet to reach a final decision on the matter.

In the mean time, Aeroplex wants to focus on airframe heavy maintenance as its core competence, because its two-bay hangar at Budapest Ferenc Liszt International airport was mainly used by third-party customers even during the Malév days. The parent company's stake in Aeroplex's airframe MRO business was "less than 20%" before February, says Nemcsok.

Nevertheless, Malév was still its biggest customer with a "significant" work package, comprising line maintenance, engineering, logistics and certain operations-centred component support tasks, such as wheel and brake repair. Following the bankruptcy, line and component support were therefore the areas which Aeroplex cut back on most heavily, with its workforce reducing in size from around 550 to 340.

Today the line maintenance unit employs less than 20 people, down from more than 100 before February. They still support a number of airlines in Budapest, but their business volume is "very small" compared with last year.

Third-party airframe maintenance work continued throughout the restructuring period, however. Nemcsok says that a contract with Norwegian Air Shuttle - covering around 30 Boeing 737 winter checks and 45 installations of Row 44 broadband systems - was completed in May without delay. He adds that it may lead to a follow-up agreement in the coming winter.

Aeroplex managed to avoid losing any customers after the bankruptcy, retaining contracts with Air Europa, Air Berlin, Russia's Nordavia and Ural Airlines. UK budget carrier Jet2 recently became a new client with a single C check, although it is not yet clear whether this will lead to any further cooperation beyond individual spot-market work.

The MRO company budgeted for revenues of around HUF 7 billion ($30 million) this year, having generated around HUF 11 billion in business before the restructuring.

Predicting that the company will find its niche as an airframe maintenance specialist, Nemcsok explains: "We have strong structural and interior teams [and] we can solve heavy structural repairs." Airbus A320s and Boeing 737s will be the main focus of the business, although the company also has capabilities for 757, 767, Bombardier Dash 8 and CRJ aircraft, as well as Fokker 100s and 70s.

While large MRO groups can offer a range of airframe, engine and component support services - Lufthansa Technik, for example, is on Aeroplex's doorstep with its own facility in Budapest - Nemcsok believes there is sufficient customer demand for the former Malév subsidiary to focus solely on airframe work. "Aeroplex is not too big. We don't need 20 customers," he says. "Three or four customers with a good schedule can completely fill our capacity."

He does not rule out forming partnerships with other MRO providers to complement each other's capabilities, but says that such cooperation is not a priority and is unlikely to be considered before next year. "I think there is no need to offer complete MRO packages with engine and component overhaul to traditional customers, because they have their own contracts [with separate maintenance companies]."

Nemcsok is clear that Aeroplex will have to fight its corner with labour-intensive yet low-margin airframe maintenance work. "This is the only way we will survive," he says. "Nobody else will support us or put money into the company."