Newly rebranded Estonian maintenance provider Magnetic MRO is broadening its services having deemed traditional airframe heavy maintenance capabilities insufficient to sustain the business in the long term.

Formerly known as Air Maintenance Estonia, the Tallinn-based MRO provider specialises in heavy checks for Airbus A320s and Boeing 737s. But while the Baltic country offers a labour-cost advantage over regions in western Europe, man-hour rates are catching up, with annual increases of 4%, chief executive Jonas Butautis told Flightglobal at the MRO Europe 2014 conference in Madrid yesterday.

Butautis is therefore aiming to establish flight-hour-based component support packages plus powerplant and engineering services, and to build up a network of line maintenance stations.

While the MRO provider operates out of modern, purpose-built hangars, it has been "lingering on" for the past three years and the airframe maintenance-focused business model without additional services has "no future", says Butautis.

The chief executive was formerly at the helm of Lithuania's FL Technics. He left that maintenance provider at the end of 2013 to set up a component distribution business under the Magnetic MRO name with partners in Ireland. He has since arranged a deal with the owners of Air Maintenance Estonia – private equity firm BaltCap – to effectively merge the two businesses under the management of Butautis's team. Air Maintenance Estonia thus acquired Magnetic MRO and adopted the latter's brand.

Component MRO capacity will be created through partnerships with specialised repair shops. Butautis sees a clear advantage in co-operating with "selected" external repair providers "with good [labour] rates".

"If you own a shop, you are trapped," he says. "You don’t look elsewhere."

The main challenge in establishing full-support component maintenance programmes is to raise capital for spare-equipment pools, so Magnetic MRO plans to act as service integrator between repair shops and financiers seeking to invest in MRO.

Raising funding for investments in future maintenance business in general is a major challenge for MRO providers, in parallel with the need to build up technical capabilities to support new-generation aircraft such as the 787 and A350, acknowledges Butautis. Whether there is sufficient financial know-how among MRO providers is a "question that keeps me awake at night", he says.

As schedules for regular base checks are becoming longer for new-generation aircraft, more business growth opportunities will be found through line maintenance, predicts Butautis.

Also on the radar for Magnetic MRO is expansion into other regions, especially Asia and Africa, and establishment of local facilities such as a warehouses to offer component support services. Operators will not accept being served from Europe, says Butautis, but international growth will only be realised after an initial consolidation period of 18 months, he adds: "First we want to build our muscles in Europe."

Source: Cirium Dashboard