SR Technics: tomorrow the world

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After nine months running SR Technics, Bernd Kessler knows what his customers think of the Zurich-based maintenance, repair and overhaul house. The group chief executive - who joined from MTU Aero Engines in January - has been spending "40 to 50%" of his time meeting clients. "I talk not just to the CEO, but to the most junior person that deals with our company on a day-to-day basis," he says.

And their attitude to SR Technics? An organisation based on the solid Swiss values of reliability, quality and honesty, but sometimes inwardly focused with a tendency to think it knows better than its customers. Six years after its divorce from the country's collapsing flag-carrier "there is still a mentality that we belong to Swissair and these are our aircraft", Kessler admits. "People have to realise the world has changed. We have to earn the business and stand on our own feet. Our customers have a choice."

He has already carried out what he calls a "front-end restructure". Included in the shake-up were the appointments of a new head of sales and marketing, Lufthansa Technik veteran Peter Kamenz, and James Stewart, formerly of Bombardier, as chief financial officer. Another priority is going to be improving what Kessler calls "proximity to the customer". He says: "We want to keep our image about precision and expertise. But we also have to be price-competitive and concentrate on service, quality and innovation. That's how we want to differentiate ourselves in this business. We are a service company - the servants of our customers. We still have that Swissair legacy and we need to change to being a customer-centric organisation."

bernd kessler sr technics 
 © SR Technics

BUYOUT

SR Technics is, of course, a much-changed business from the former MRO division that emerged from the wreckage of Swissair in a management buyout. At that time close to half its revenues came from its parent airline. By the time Kessler joined, the percentage of turnover that came from Swissair's successor, Swiss International Air Lines, was only 15%. EasyJet and Aer Lingus, which came into the fold with the acquisition of FLS in Dublin and Stansted, were responsible for around 9% and 6% respectively.

The SFr 1.7 billion ($1.66 billion)-turnover company is still largely European-focused, with 70% of its business coming from the region. However, the Middle East and the Indian subcontinent beyond is the biggest prize: SR Technics operates a line maintenance operation for Gulf Air in Bahrain (the Arab carrier is one of its biggest customers). It has also established a "strategic alliance" with Abu Dhabi Aircraft Technologies, a subsidiary of the emirate's investment vehicle Mubadala - which, together with Dubai Aerospace Enterprise and another Gulf finance house, acquired SR Technics in 2006 - and a sister organisation of fast-growing United Arab Emirates flag-carrier Etihad.

Kessler, who has also worked for Honeywell, says the company is in "intense discussions" with its new partner. "We need to look at expanding the market in the Middle East by moving ADAT and SR Technics closer together," he says. "They have labour costs 50% less than Europe. We have the technology."

After India and the rest of Asia, North America, where SR Technics has zero presence, is the next goal. "It's by far the largest market and we will find a niche," he says. "We want to have a truly global business."

COMPOSITES

Kessler says SR Technics has no interest in the military MRO outsourcing market or the business aviation completions sector in which its rival Lufthansa Technik and fellow Swiss services company Jet Aviation specialise. He sees composites and other "high-tech sophisticated repairs" as "key to staying profitable" in a market full of competitors adept at "wrench-turning and panel beating". With the Boeing 787 shortly to enter service and a composite department already functioning at its Zurich base, Kessler says developing competencies in handling and mending the material is "a very important element going forward. We have to develop the ability to do ad hoc repairs on composites. Our intention is to have fast response capabilities to keep airlines flying."

The current downturn is likely to see increasing numbers of older airliners put out to grass. But Kessler, a mechanical engineering graduate who also holds an MBA from a US university, does not believe this will impact too much on SR Technics' business, which covers airframes, engines and components and is largely focused on power-by-the-hour maintenance contracts with airlines operating newer aircraft. With many of its larger customers, such as EasyJet, adding new aircraft to their fleets and more bottom-line-focused carriers - including the dozens of start-ups in the Middle East and Indian subcontinent - committed to or considering third-party providers for their MRO, Kessler believes the outlook is positive. "Outsourcing will continue," he says. "And through our investors we have some nice opportunities to expand our base."