SR Technics' acquisition by HNA Group brings to an end a period of uncertainty for the Swiss maintenance specialist. Its previous owner, Abu Dhabi's investment firm Mubadala, had been trying to sell the business for some time.

However, China's HNA may need to forge strategic partnerships in order to secure the long-term future of the Zurich-based MRO provider.

Mubadala became SR Technics' sole owner in 2009 – at a time when the investor's ambition was to establish an international MRO group. The sovereign wealth fund also owned local maintenance specialist Abu Dhabi Aircraft Technologies and planned to build new or acquire existing MRO facilities in Asia and North America too.

In 2014, however, ADAT was transferred to Etihad Airways to become that carrier's in-house technical department, while Mubadala retained engine repair capabilities and concentrated on planned maintenance joint ventures with General Electric and Rolls-Royce.

HNA now has an 80% stake in SR Technics following its deal with Mubadala.

Engine and component support will be central to the future business of SR Technics, given the MRO specialist's high-cost location. SR Technics supports CFM International CFM56s and Pratt & Whitney PW4000s at its engine overhaul shop.

Maintenance providers expect a wave of CFM56 support work over the next decade, following production ramp-ups by Airbus and Boeing for their respective CFM56-powered A320 and 737 families.

Mubadala has furnished SR Technics with several long-term service contracts, such as an engine MRO deal with Air Berlin, which is part-owned by Etihad. But the CFM56 aftermarket is also characterised by shop overcapacity, and the ubiquitous medium-thrust powerplants tend to accumulate long on-wing times before being removed for overhauls.

The MRO market for the PW4000, on the other hand, is declining – like that for other large legacy powerplants, such as GE's CF6 – especially if maintenance providers have no access to an engine fleet in order to manage in-service equipment through spare engines or employment of serviceable used material from tear-down engines rather than new spare parts.

In 2015, SR Technics partnered UK asset management company AerFin to offer such services for operators of A340-200/300s, which are exclusively powered by CFM56-5Cs. AerFin acquired a fleet of A340s from Cathay Pacific, allowing SR Technics access to such engines.

SR Technics will need to expand its capabilities to newer powerplants in order to sustain its engine overhaul activity in the long term. But to be able to gain the required technical know-how, SR Technics will need to do one of two things. It could partner with an airline – for example a subsidiary of HNA, such as Hainan Airlines – in order to gain access to repair manuals and engineering data through aircraft orders. Alternatively, the MRO specialist might co-operate with an engine manufacturer to become an authorised service centre.

While SR Technics has been a player in the engine MRO market, where up to 80% of overhaul costs are typically related to material rather than staff expenses, the situation is much tougher for the company in the highly competitive and less lucrative airframe maintenance field. In an attempt to accommodate its high-cost location, SR Technics tried after 2010 to establish itself as a VIP aircraft completion centre. But that plan did not succeed, and SR Technics embarked on a different strategy in late 2014 aimed at conducting complex interior upgrades for airlines.

After a refurbishment programme for SAS Group's widebody fleet, SR Technics has won similar follow-up deals from the airline and leasing sectors. However, such contracts seem unlikely to generate enough work volume to fill the company's capacity in Zurich. The MRO provider has four hangars at its headquarters with space to accommodate six widebodies and with a staff of around 2,200, its website indicates.

Part of SR Technics' technical training programme has recently been acquired by Swiss as that airline plans to conduct light maintenance for its entire fleet in-house. The Lufthansa Group carrier – which previously outsourced all but line maintenance activities – has negotiated with SR Technics about potentially renting hangar space in Zurich. But Swiss's chief executive Thomas Kluhr told FlightGlobal earlier this month that no decision had yet been reached.

In Malta, SR Technics operates a heavy maintenance facility for narrowbodies, which will be expanded as a result of a recent contract extension with main customer EasyJet. That site's future had hinged on the UK budget carrier continuing to use the hangar for heavy checks.

Meanwhile, Mubadala – which is retaining a 20% shareholding in SR Technics – in 2015 reached a tentative agreement with Etihad in 2015 to "explore the feasibility" of a heavy maintenance facility in a low-cost location in eastern Europe. That facility would not jeopardise SR Technics' Malta hangar, Mubadala aerospace and defence systems executive director Grant Skinner told FlightGlobal in late 2015. Still, a central question is how these plans will tie-in with HNA's strategy – especially since the Chinese group has a major shareholding in MyTechnic, a Turkish MRO.

For HNA, the acquisition of SR Technics will add access to customers, technical expertise and know-how of providing comprehensive maintenance services to airlines. SR Technics, for its part, will likely gain better access to potential customers in China and elsewhere in Asia through the ownership change. The MRO provider already has a component repair shop in Malaysian capital Kuala Lumpur and has partnered Garuda Indonesia's technical arm GMF for component maintenance and training.

However, in order to sustain SR Technics' business in its home region in the long term, HNA will need to decide about – and provide required support for – its new subsidiary's future industrial footprint in Europe.

Source: Cirium Dashboard