MRO opportunity convinced Timco the time is right to ramp up RJ work
Timco MRO Services is confident its new Cincinnati area regional jet heavy maintenance facility will drive business to other parts of the company, notably a pair of support shops and its aircraft interiors product line.
Timco purchased a turnkey regional jet maintenance operation at Cincinnati Northern Kentucky International Airport from Pemco World Air Services, which was planning on shuttering the facility. Timco closed the deal and transferred thePart 145 certificate on Oct. 31, acquiring assets ranging from tooling and parts to the information technology infrastructure.
One asset came as an unvalued yet invaluable bonus: access to an experienced workforce left over from Pemco's departure and the demise of Cincinnati-based regional jet giant Comair, North America'slaunch customer and a former provider of third-party regional jet (RJ) work out of Cincinnati. Timco MRO Services President Bill Norman tells Aviation Week that the new Cincinnati facility has a staff of about 50, and the company is eager to add more employees as demand warrants.
Several factors underscore Timco management's confidence that the customers will be there, Norman explains. In the North American market, existing regional jet MRO work is handled by the OEMs, Bombardier and, or by carriers that operate the jets. Some of Greensboro, N.C.-based Timco customers tell the company that independent competition would be welcomed, Norman says. He is quick to note that such overtures are hardly commitments; still, having existing customers clamoring for a new business line to meet their needs is a gratifying challenge for any business.
Another positive, in Timco's view: the demand for RJ MRO services—like the fleet mix itself—may shift, but it will not go away anytime soon. Norman acknowledges that betting on 50-seat RJ work would be a long-term loser. However, forecasts show that rapidly retiring CRJ200s will be replaced by other RJs—either larger Bombardier models like the -700 and -900 or Embraer 170s or 190s, which would create a stable, long-term demand for RJ MRO work.
Aviation Week data back this view, projecting the current fleet of North American RJs to grow slightly in the next decade, to 2,116 units by 2022 from 2,084 units. Larger models, primarily theseries and the bigger CRJs, will absorb the 50-seat RJ's dwindling market share as higher fuel prices drive those aircraft into early retirements.
The North American RJ fleet's near flat-line growth trend could signify a sweet spot for an independent MRO provider looking to get into the game. Rapid fleet expansion could attract too many competitors, while a steep fleet decline would obviate the need for MRO providers. A steady stream of new aircraft supplanting older, less economically viable ones means a set of operators continually searching for any cost advantages they can find.
“From [an operator's] perspective, the more competitors, the better the cost. From a competitor's perspective, the more competitors, the thinner the margins,” says Steve Rehrmann, principal of aircraft fleet valuation specialists CK Aviation Services. “Going forward, it is likely that some of the current providers of [RJ] maintenance will exit the arena as their fleets dwindle,” effectively decreasing competitors.
Norman says his team is realistic about Cincinnati's potential. The 125,000-sq. ft. hangar space can accommodate at least five RJs—plenty of capacity to handle the demand. “Cincinnati will never be the size of Greensboro,” Norman acknowledges, “but our vision is to fill those five lines over time. It won't happen tomorrow, it will take time. But we are confident” it will happen.
He notes that Timco, which has eyed the RJ market for some time, could have set up shop at either of its large heavy maintenance facilities—its 600,000-sq.-ft. Greensboro headquarters or its similarly sized location in Lake City, Fla. But the opportunity to acquire an existing, purpose-built RJ operation near the middle of the country was too good to pass up.
Local economic incentives further boosted the facility's appeal, which sits in Northern Kentucky. The Kentucky Economic Development Finance Authority approved up to $1.7 million in tax credits based on Timco creating 165 full-time jobs over 10 years at an average annual salary of $50,000.
The company is confident that the Cincinnati operation will drive growth in its existing business lines. Norman notes a natural synergy with Timco's composite structures shop in Greensboro, which repairs common items like flight-control surfaces and exterior doors, but does not perform any regional jet work. “If the volume is there, an extension of that [facility] is growing into piece parts for RJs,” he says. “Getting parts from Cincinnati to Greensboro is not that difficult.”
Another long-term growth opportunity: interiors. Timco Aerosystems has its own line of new interiors products, including seats, galleys and lavs. “We have an interest in penetrating the RJ market,” Norman acknowledges.
Filling the newly acquired maintenance lines in Cincinnati may get a boost from yet another Timco business area: line maintenance. The company has 20 line maintenance bases across the U.S., including one in Cincinnati, and they serve many RJs. “There's an opportunity for us to reach out to our customers and offer airframe maintenance as well,” Norman says. “I envision a day where, if a carrier needed it, we could do emergency field service out of Cincinnati to our [RJ] customers across the U.S.”