MROs develop narrowbody niches to support Central and North American fleets.
San Jose, Costa Rica; San Salvador, and Panama City—The Central America aviation industry is projected to be one of the fastest growing in the world, and three major MRO companies here hope to expand with it. The two more established MROs compete and cooperate, and their hangars are full based on the niches they have developed. The third, and much younger, player is still developing, as part of one of the biggest global MROs.
All three are located in free trade zones, all three have forged educational programs with local schools to train mechanics, all three pursue narrowbody maintenance, and all three have regulatory authorizations from multiple countries. All three state short flight times to the U.S. as major advantages and part of their strategic plans. The major similarities between the companies end here.
Their ownership structures and histories drive some of the differences. Coopesa, based at San Jose International Airport in Costa Rica, is a cooperative owned by its employees. Aeroman, based at El Salvador International Airport, was born from TACA Airlines and now is part of Aveos group in Canada.Panama, based in Balboa at the former Howard Air Force Base, is part of the international conglomerate in Singapore.
Given that the labor rate averages $53 per hour in the U.S. and $36 per hour in Central America, per TeamSAI data, MROs here with solid quality systems and turnaround times can provide a cost advantage. “But you’re right on the edge of the narrowbody market for North America, and it requires quite a contribution to performance and an ability to turn airplanes as quickly as they would in the U.S. to make that work,” says David Marcontell, president of TeamSAI M&E Solutions.
Central American MROs arguably have tackled that, but U.S. union pressure to keep work in country is another issue in today’s political climate. But none of the major Central American MROs rely solely on U.S. customers.
Aeroman, which started providing in-house maintenance to TACA in 1983, and became an-certified repair station in 1992, has grown steadily since it started pursuing third-party work in 1998. When TACA redefined its fleet strategy in 2001, and moved to an all- fleet, the changes paved the way for Aeroman to gain capabilities and experience on the type, win America West and as customers in 2004, and become one of the founding Airbus MRO Network members in 2005.
That path to its narrowbody niche, coupled with gaining early ISO 9001:2000 quality certification in 2003, enabled Aeroman to become the biggest MRO player in the Central American market.
This ascension contributed to TACA selling 80% of Aeroman in 2006 toTechnical Services, which has changed ownership since and rebranded itself Aveos.
While strong on its own, Aeroman works closely with Aveos on quality assurance and process improvements, making each more efficient.
Aeroman’s eight production lines have five steady customers, including two major U.S. airlines, for steady maintenance work. “We would like airlines big enough to fill a line,” which is not possible with smaller carriers, says CEO Ernesto Ruiz. Only one of eight lines is split between operators.
Aeroman technicians perform about 150 heavy maintenance visits per year, which keeps the hangars full.
Ruiz is evaluating whether to build another hangar, which could be operational by 2012. “I hope to be breaking ground before the year end,” he says, but “right now we are in discussions with the government” about issues such as infrastructure.
Aeroman is content with itsand Airbus narrowbody focus, given that these are the world's biggest fleets. It doesn’t anticipate adding widebodies to the mix. But it plans to add 737NG capabilities in the near future, perhaps even in the next year.
Growth is an opportunity and challenge. “You want to grow,” says Ruiz, but “you have to go step by step and be very careful, because you want to maintain your quality.”
Aeroman has worked very hard to create a quality organization and considers its labor force "a fixed asset and not a variable.”
Founded in 1963, Coopesa ranks as the oldest MRO in the region. It has a good relationship with Aeroman and has taken some of its overflow in the past, but now it is pretty much full, too, says Rimsky Buitrago, Coopesa’s CEO. He sees customers starting to sign longer-term contracts because slots are tight.
U.S. customers generate about 60% of Coopesa’s business. One of its biggest projects now involves maintenance, modifications and paint for 10 Airbusowned by Gecas. It also recently won a heavy maintenance contract from Copa Airlines for a few Boeing 737NGs. Eight years ago, Coopesa launched a modernization strategy, which includes next-gen narrowbodies, and Buitrago sees that really coming to fruition now.
“We are going to double the size of the operation in the coming five years to better serve the U.S. market,” and he would like to addcapabilities. “Coopesa’s market used to consist of small operators and leasing companies,” he says, “but then after we saw the outsourcing wave from the U.S., we switched our efforts to attract legacy and low-cost carriers.”
That plan prompted a partnership with Timco Aviation Services. “Timco has been helping Coopesa better understand the expectations—regulatory and non-regulatory—that U.S. operators and owners have for maintenance visits,” says Kevin Carter, Timco's co-CEO. “In addition, we have been sharing some of the practices we have undertaken in our own operations to improve productivity and ‘lean’ out maintenance processes on nose-to-tail types of programs.” Conversely, “Coopesa has been showing Timco new techniques and approaches to using state-of-the-art systems and technology, such as in the areas of Web-based reporting and data availability.”
Part of Coopesa’s success stems from its cooperative ownership structure. Employees own the MRO, which Buitrago believes makes them care more about details such as process improvement, waste and customer satisfaction. The MRO reports back to its employees. “I see these guys every day, so we give each other feedback, and I think that is a speedier way of improving things because you can make corrections immediately,” says Buitrago. It also contributes to high-quality output and a stable workforce.
Employees are eligible to apply for ownership after working for Coopesa for one year. Acceptance is based on the person’s performance, aligning with the company’s values and culture. “It’s like a big family,” says Buitrago—a big family with 650 members (out of a workforce of 850).
The openness here is palpable. Employees all know the numbers; they understand that their performance impacts whether the company makes money.
To accommodate Coopesa’s business growth aspirations, it needs a new facility, which it hopes to start constructing in the first half of 2012, says Buitrago. The first phase would provide about 50% more space than Coopesa has today.
ST AEROSPACE PANAMA
ST Aerospace Panama started operations in 2007, and uses two of its four hangars, each of which can accommodate up to three narrowbody aircraft. “Our plan is to gradually commission the remaining hangars and grow our capacity as the demand increases,” says Chiew Leong Lua, ST Aerospace Panama’s president until March 1, when Kah Wai Aw succeeded him. This growth plan means it could take up to 12 narrowbodies, although one of the existing hangars is wide enough to house a single Airbus.
ST Aerospace Panama’s hangars and workshops do not bustle with activity like at Aeroman and Coopesa, but “MROs in the region have been in business longer than we have, so they have a head start. But we can leverage ST Aerospace’s capabilities and network,” says Lua. “Clients here have experienced ST Aerospace work before in other regions, so they know what to expect,” he says.
While the Panama facility operates as a separate company, “We have used the proven systems and processes that we have already established at our sister companies,” says Lua. For example, before the site opened, “we sent a core group of mechanics and inspectors to San Antonio for practical training, and when we started operations, we had people from San Antonio deployed here to help us get started,” he says.
When asked what distinguishes the Panama facility from other ST Aerospace sites, Lua says cost—and the fact that it is the large MRO’s first facility in Latin America.
Most of its business comes from the region, either from airlines, such as Boliviana de Aviacion and Copa, or lessors, such as Gecas, Aer Cap or AWAS, that place aircraft here.
The opportunities with leasing companies, however, are usually not constant, and “the work usually presents itself on short notice,” says Lua.
Given ST Aerospace Panama’s vast apron and facilities, “we have the availability at our facility to park aircraft for an extended period without affecting operations,” says Lua. It also can leverage the ST Aerospace network to accommodate aircraft at other facilities.
Upcoming developments include receivingand Argentina maintenance certification any day.
“Our near-term future is to continue to establish ourselves as a center of excellence for narrowbody aircraft,” says Lua, but ST Aero has space just south of its fourth hangar where it could build a widebody facility, if needed.
“Latin America is a little market compared to the U.S., but it’s growing and it’s important to be here first to attack the needs of this market,” says AvioTrade’s Federico Handal, whose business has offices in Miami, San Salvador and Brazil. “It’s closer to the U.S. market than Asia,” he adds.
Andres Garcia, commercial director for Condesa, a consultancy based in El Salvador, agrees and says, “If you want to invest in the future, this region will grow.” If you need immediate growth, India or China might be better, “but if you’re willing to get in while it’s still emerging," Central America is the spot.
Ironically, Garcia mentions that “a Chinese company is looking here [El Salvador] because it’s proximate to the U.S. and it could reduce costs,” he says.
Given Costa Rica’s big investment in IT and education and El Salvador’s proactive approach to aerospace, this emerging market could be ripe with opportunities. Coopesa and Aeroman, in particular, have an advantage with long and strong partnerships with local schools to develop mechanics.
Aeroman has an internal training department, but it also established a TMA (aeronautical maintenance technician) degree with the Universidad Don Bosco that takes two intensive years of study.
Coopesa worked the Costa Rican government to create two-year programs that graduate aviation mechanics from technical high schools.
“The human capital we have developed here is our most important asset,” says Buitrago.
There is a big demand to get aircraft maintenance training because people see MRO as a solid career opportunity and wages are typically above average in the region. A motivated and capable workforce is a benefit.