North State Aviation, the emerging third-party narrowbody maintenance, repair and overhaul (MRO) provider based in Winston-Salem, North Carolina may not be a household name, but it more than makes up for that in substance.
The company, in business for little more than a year, is based at a 30,000m² (320,000ft²) hangar complex on the northeast side of Smith Reynolds airport. The facility can handle six simultaneous Boeing 737 maintenance events in its six 1,500m² bays, or four Boeing 757s.
North State is based at Piedmont Airlines' old headquarters, which it used from 1968 until 1989 until it became part of USAir. Later, the facility housed more than 400 employees of Pace Airlines, before the charter carrier and third-party maintenance provider closed down in September 2009.
© John Croft for Flightglobal.com
North State's facility in Winston-Salem could benefit as carriers increasingly turn to domestic MROs
However, talking to North State's owners - most of whom first worked together during the Piedmont days and later with Pace - gives an insight into why the company stands on the brink of success despite its relative anonymity compared with well-established maintenance titans such as Timco and AAR.
Timing of the new venture appears ideal, as airlines begin a slow-but-sure repatriation of outsourced maintenance work back into the USA in response to increasing productivity and efficiency as well as more favourable exchange rates.
Talking of his partners, four of whom he worked with at Piedmont, Tom Chappell, North State's vice-president of business development and contracts, says: "The six of us got together and decided to make this place work. We put together an MRO with the integrity, credibility and culture we knew at Piedmont." The only one of the six partners without aviation experience is the majority owner, a trucking industry veteran with limited direct participation in the venture.
Chappell left Piedmont after the USAir merger, eventually going to work for Continental Airlines and rising to senior director of purchasing for the carrier before retiring in 2010 and moving back to Winston-Salem from Houston.
While at Continental, however, he rekindled his relationship with former Piedmont colleagues, now at Pace, as part of a third-party Boeing 737 maintenance contract Pace won via a competitive process. That work ultimately included 29 heavy checks, 15 winglet installations and a constant stream of interior refurbishments.
Chappell says the quality of the interior refurbishments was so high, Continental stopped sending flight attendants to inspect newly installed interiors after the first few visits. Continental ultimately ended the arrangement after Pace's owner, Bob Brooks, passed away and new owners took over in May 2009.
With the demise of Pace, many experienced Boeing 737 mechanics were out of a job and, in a lot of cases, many still are.
Chappell and his partners hope to change that. If things go as planned, North State could grow from its 34 full-time and 30 part-time employees to 300 or more in two to three years.
The company aims to win "substantial" contracts with "two of the largest 737 carriers in the USA", says Chappell. "Within six months, we hope to have an announcement. There's a possibility of fleets coming here."
That work could range from interior modifications - including the installation of lighter new seats and in-flight entertainment systems - to heavy maintenance and interior refurbishments.
Chappell says the company has a good working relationship with fellow Smith Reynolds airport tenant B/E Aerospace, a worldwide provider of airline seating and other interior products.
Chappell says North State has the capacity to service an airline with 160-170 Boeing narrowbody aircraft. Its first year in operations has been more of a boutique operation, busy but lacking the lucrative long-term, nose-to-tail contracts from operators with fleets of Boeing aircraft.
North State gained its Part 145 certification in December 2010 and began looking for clients three months later, says Russ Kota, North State vice-president of maintenance.
Kota held the same position at Pace and, like Chappell, used to work for Piedmont in Winston-Salem until the USAir merger. Kota says the certification, which allows North State to carry out maintenance on most Boeing narrowbodies as well as Boeing 767-200/300/400 aircraft, was earned in a record time of three months and 13 days.
Mechanics must have US Federal Aviation Administration certification and have worked on transport category aircraft, with an emphasis on Boeing aircraft, for a minimum of five years, although the average experience level is 23 years.
To date, Kota says the company has "seven or eight" regular customers and has been bringing in four to five aircraft a month, with bookings until June or July.
On 12 March, when Flight International visited, the hangar was empty, the company having just completed a cargo door re-skinning on a Miami Air 737.
In addition to phase checks, North State has performed C-checks, engine borescope checks and avionics modifications, and is preparing for a large job at the end of March: a return-on-lease inspection of an ILFC 737-800, a 20-day project that includes gutting the interior and performing maintenance tasks similar to a D-level inspection.
Company president Charlie Creech says North State is already operating at a slight profit.
North State appears to be in an ideal position to capture new streams of airline work. "We're on the precipice of another round of likely outsourcing," says Chris Spafford, a partner at consulting firm Oliver Wyman. "It won't be as significant as the first round [post-2001] as there's not that much more to outsource, but carriers who did not outsource on the last round will be looking very hard at those decisions."
The first round of outsourcing by US airlines began with the carriers sending work to US-based providers, but as airlines "gained experience with outsourcing, they began to look overseas for productivity gains and the next level of savings", Spafford explains. "Several Asian MROs were more advanced than their North American counterparts and cycled aircraft into and out of the hangar more quickly."
As with the US automobile industry and foreign competitors, however, US companies took notice of their competitors' edge and put resources in place to compete. Common threads to bring work back to the USA include non-union shops with "more progressive" management practices such as lean manufacturing and repair, says Spafford.
"People have gotten religion on this topic," he says. "The comparable check turn-times from years ago are down by 10-15% for the same labour. That's significant. That's a big gain. That makes up for a lot of labour-rate difference.
"US providers are not making near the money the Asian providers are, but they're competing successfully and winning. People would rather not ship a plane all the way across the ocean and manage a company there [if the total cost gets close]."
North State has several of those advantages in addition to be centrally located in the heavily travelled eastern half of the USA. Its workforce is not unionised and its capability for quality work and quick turns was demonstrated during the Pace years.
"We know the airline business, and we know the value of having the aircraft out of the hangar and in the air," says Chappell. "Word of mouth will set the stage for what happens here next."