Fast 5: A Costa Rican MRO’s Outlook for 2021
Ennio Rodriguez, CEO of Coopesa, sees pressure on labor prices and longer credit terms from operators due to the crisis brought on by the COVID-19 pandemic, but he also sees positives, as outlined in this interview.
What’s the state of your business?
As of April 1, most contracts were cancelled for the rest of 2020. Because of this, we needed to trim costs and guard our cash flow. Our reaction was quick enough that we didn’t have any liquidity issues but it will impact our profits this year without question. We have been careful not to go into the red: for seven months we managed to stay in the black.
The next three months have started to improve but at a slow rate. Now we’re in that difficult transition of generating cash flow to increase operations while at the same time keeping costs down. It has required very careful financial and workforce planning because a big portion of our people are furloughed.
Are you expecting a surge in airframe maintenance demand in 2021, as airlines plan to resume operations and lessors need lease returns?
Yes, we’re starting to see a surge in demand from cargo companies, including cargo conversion, which includes the conversion and C check. Today that represents the largest chunk of our business. Right now we’re converting a Boeing 737-400, which should take 90 days on average, including the C check. At the same time, we’re seeing lessors starting to get planes ready even though excess capacity worldwide exists, but many companies are reorganizing fleets and changing plane models, which has created some reactivation for the lessors. Customers for the rest of the year will be lessors and cargo companies. We are starting to receive requests for proposals from airlines for 2021. We expect to see a comeback, but not to early 2020 levels, when we had to say no to one of every three clients that approached us. Airlines are making decisions about what work they will do in-house and what they will outsource. We expect 2021 to be our new normal and not as stressful as what 2020 has been so far.
Given that airlines are retiring older aircraft and refleeting with modern aircraft, does Coopesa plan to expand the types of aircraft it maintains?
Yes, we are in process of certifying the Boeing 737 MAX and Airbus A320neo with the 17 agencies with which we work-- including the FAA, EASA and the rest of the agencies in Latin America and the Caribbean.
Are you expecting to do a lot of lease returns in 2021?
We do have lessors as some of our biggest clients and, yes, we do a lot of lease returns. Right now we have 23 lessor aircraft parked—they update us on which aircraft are being negotiated, but we don’t start C checks, cabin reconfiguration or painting until the lessor has secured a client.
Normally we don’t park as many aircraft, but because of the pandemic, we’ve managed to park as many as possible. If we had more space, we could park more.
Because of the pandemic, do you think there will be any permanent changes to MRO?
I see efficiency efforts all around the production line, including more use of IT, better tooling and better processes. I see a leaner and more efficient industry emerging out of the pandemic. In our case, we anticipated some of those changes but have accelerated them due to the pandemic, which has been a jolt that that has forced us to rethink our operations and costs so that we can remain competitive in this tougher market. We have examined processes, tooling and IT and are in the process of purchasing a new IT system. We also have accelerated the implementation of other platforms that we had already acquired or had under contract.