Line maintenance across the world was immediately impacted following the outbreak of COVID-19 but the market could start to recover this year. In this MRO podcast, Jacco Klerk, CEO of Direct Maintenance, talks about the prospect of aircraft returning to service and ramping up operations to meet MRO demand.
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Rush Transcript:
James Pozzi: Welcome to the revamped MRO podcast. I'm James Pozzi, European MRO editor of Aviation Week. And I'll be hosting regular episodes speaking with prominent industry figures about some of the most pertinent topics today.
To kick off the new podcast, we'll be looking at the markets long awaited recovery in the aftermath of the COVID-19 crisis. Today, we'll be focusing on the line maintenance segment, a part of the industry which saw an almost immediate hit as a result of the crisis. Our first guest is Jacco Clerk, who is CEO of line maintenance provider, Direct Maintenance, which has stations based across Europe and Africa, covering 59 aircraft and engine combinations in total. Jacco became CEO in October 2020, having previously held a senior position at Joramco in Jordan.
James Pozzi: Well, thank you for joining me then today, Jacco, you are the inaugural guest of the revamped MRO podcast. It's great to have you here. I'm speaking to you from London, still in lockdown and in isolation, very much missing flying and travel, of course. I presume you're speaking to us from the Netherlands at the moment.
Jacco: Yes, that's correct. And yeah, I feel honored to be your inaugural guest in your new podcast. So I wish you all well with your initiative and your future guests and your success [crosstalk 00:00:32] criteria.
James Pozzi: Thank you. It's fantastic to have you with us actually. Let's get started then. So you joined Direct Maintenance as CEO in the latter part of last year, I think around October time. So you kind of came into it sort of in the middle of the crisis then, which kind of engulfed the whole of 2020 in the aviation industry. So obviously Direct Maintenance is a specialist predominantly in line maintenance activities. And obviously this was one of the market segments, worst impacted initially from COVID-19. So where we are now, February 2021, passenger numbers, depending on what region you're in, are slowly creeping up in some parts of the world. Where do you see line maintenance at the moment in February 2021 in terms of recovery and the prospects for that?
Jacco Klerk: Yeah. Yeah, good question. Of course, everybody was hoping that the start of 2021 was going to be better because of the new COVID virus. And there is still a slowdown in debt recovery that is influencing, of course, mainly the passengers operations across Europe. And of course that would also have an impact into our line maintenance operation, how we support our clients at the different locations. So that's still slow starting, which we still expect to continue at least into Q2. And I think it's only when you see, for example, like the new roadmaps as being presented this week by the UK government, and expect other countries will start to do that as well in the near periods that that will lead, the people are more vaccinated or there's different ways of how to control and allow people to travel, that we should in Q2 be able to start to offer more movement. So in this time, still, recovery is limited in line maintenance it's just to say Q2, where we should start to see it pick up.
James Pozzi: Do you think the recovery ultimately rests on traffic increasing for line maintenance specifically that industry, do you think it is dependent on getting people back into aircraft and flying and passenger numbers to achieve that?
Jacco Klerk: If you're looking from the passenger flights, regardless if it's regional narrow-body or wide-body, yes. I think that is that part. It's about that, besides the technology and the system is there with the vaccinations that people could travel. It's also that people feel confidence to travel, that if they go to other destinations, heard there are no additional restrictions, or when they're coming back home. So I do think that will play a role and that will lead to the demand of the people have some police to see if you see just example again, the UK had a new roadmap, was being given to older people and then return to have an increased in the people, start to look into holiday flights as well. Of course it will lead as well to other travel.
If you're looking more on the area of cargo, cargo of course, is very busy at the moment. And I will foresee that we continue for the time being as, based on all the data. What has been shared at the pickup of the cargo flights will remain, sorry, I mean, it's more than from the passenger flights, it will take slightly longer time before that comes to full. So cargo we're busy and flexible because it's always quite dynamic a bit more from the passengers. It will be related to the demands of a person who wants to travel.
James Pozzi: Yep. Certainly as you mentioned that there has been a spike in cargo services and for many MROs, this has been a, not quite a lifeline, but certainly a shot in the arm having that work in 2020 coming in. Was there a strong volume of, or a high volume of, of cargoes work coming in that you mentioned? Was it from typically carriers in Europe that you were seeing or what are some of the activities you were doing in the cargo space in the last year?
Jacco Klerk: We've seen a shift. We’ve seen that the full cargo operators are flat out busy in a dynamic market. So we are quite adaptable depending on how the logistic chains and, yeah, it depends on the niche. What you have seen of course is in the meantime, had that passenger aircraft are operated as cargo flights. So we see some of our clients who operated now their wide body equipment, as alternative cargo airplanes. So it's a different operation and that's something we support together. I think as custodians of aviation, to make sure that we keep being productive and make sure that the cargo is delivered on time and we take care of the associated line maintenance.
James Pozzi: Sure, sure. Related to that then, one of the questions being posed at the moment, is the readiness of companies to deal with any particular backlog that may occur when as aircraft gradually return to service over time, do you foresee any challenges related to capacity to meet this backlog for direct maintenance at your, I think there's over a dozen line stations in Europe and Africa, do you foresee any challenges related to capacity or is that something that you've kind of already planned for?
Jacco Klerk: We have planned to what we can plan of course. That's based on the discussions we have with our clients, the airlines, what they expect, what they forecast. So we are ready to get up to, basically up to the level of pre-COVID. It's more to what extent everybody starts to fly at the same time and which obstacles that may generate because many aircraft at the moment are stored apart. And so we support our clients when needed with this as well. So it's more to say, how quickly is this ramp up going to be, and how big is that going to be ultimately in the summer? But so far we do not foresee any issues from our side to keep up with the demand of the airlines.
James Pozzi: Sure, sure. I mean, summer, I guess, all being well is when you anticipate sort of certainly a spike and maybe even a peak in line maintenance services, right? As people are maybe traveling overseas for those summer holidays is that when you would anticipate kind of a peak in kind of maintenance demand for your services?
Jacco Klerk: It's a demand, but that's normal seasonal influence, which we are used to. So that's why we have that agility within now teams to make sure that we are flexible to those demands of our clients. That means that we also have utilized the past period to see also internal organization, hey guys, the world is changing for us, with every crisis things will change. That will also happen now. So take that as an opportunity.
So we are looking within ourselves. How can we provide a better and more flexible service towards the client? So that's something we are gearing up and as well, what other steps can I do preventively to make sure that you eliminate the possible risk because of the fast changing demands of your clients? And yes, we are fully confident that the activities we are developing and deploying at the moment that we are in time to support our clients, because I think that's ultimately what is needed.
The airlines of course, are in a challenging period. They're really asking from their suppliers, partners to be flexible, agile, how to utilize that equipment and it could be that on a certain route, it was an extreme where maybe in the past you had maybe a wide body flying that they will start with a narrow body aircraft, or even in the narrow body operation that will first start to fly with smaller equipment, which is more fuel efficient. And that's why you see the Embraers flying, the willingness to get these 737 MAX in the air as quick as possible because of the fuel economics. And so that's something we need to think with the airlines that they will be more changing on the journey out of this current situation and to be more agile, how they utilize their equipment.
James Pozzi: Certainly that's something that we've heard about actually, the airlines customers for example, are looking for more flexibility from their maintenance providers. Okay. So we mentioned the aircraft types there and narrow bodies. What about in the wider body segments? I mean, it's no secret that some aircraft that have either been stored short term or longer term, a period more than three months may not return to service, particularly some of the very large aircraft types or the older ones we're seeing obviously 747s retired. There's question marks about the A380 program, of course, that looks like it may have run its course as a long-term proposition. Do you see your future then focusing more on say smaller aircraft, not just narrow bodies and regional jets, but also perhaps as we mentioned, the more fuel efficient, larger aircraft, such as 787 and A350. Do you see a future kind of focused on those types of aircraft in the wide body market?
Jacco Klerk: Yeah, if I just would look from the perspective of an airline, they want to be the most efficient on their utilization. So even in their wide-bodies, if they have the opportunity to fly one of the newer equipments, like the A350, or the 787, compared to the older wide-body aircraft, yeah. With also maybe a smaller seat capacity. And then I expect these changes will happen and that we foresee as well, based on the discussions we have with our clients, where I say, well, expect first, maybe not a triple seven, but we're going to fly with another equipment on that route, yeah? And it's only when we see that the loads and the yield is going to make it viable, are we going to change the equipment, or we going to change the frequency? So I think that's where airlines are having a different tier system, how to make sure to utilize the right equipment.
And so I do expect wide-body to return, yeah, even looking to Asia are they-
James Pozzi: Yeah.
Jacco Klerk: Able to travel long haul, probably, hopefully by the summer as well for Europe at the same as the U.S. And then predominately, I think [inaudible 00:12:04] will be for certain business travel, and some long-haul family travel, reunites, that those are [inaudible 00:12:11] who start to pick up, but I expect the majority of the inquiries will happen within the region. Let's say within Europe or already within China and the same within the U.S.
James Pozzi: Sure, sure. Okay. An interesting something I was pondering as well, we talked about services before that the airlines were looking for, and we mentioned the flexibility. In terms of specific services though, have you seen a spike in demand in the past year for aircraft disinfection services, obviously taking into account the current climate, and the virus, and a focus on hygiene, is that something that's become evident to yourself or your team?
Jacco Klerk: Yes. We have seen the demand for that. So we have also utilized this opportunity on the request of our clients, where they have asked for this. And for sure this will be a new, I think becoming a standard item in the aviation industry, besides the normal turn around of the cleaning of an aircraft on a daily basis, there will be more disinfecting, but also different materials will start to be used. I know the high touch areas in an aircraft, certain material will be added to that to minimize the transmission of a virus. So yes, the disinfection will become a new norm together with new materials to be used. That's something we see within a group company of MAC Interiors, where they already try to develop certain elements to contribute to this. So yes, that will be a new norm in our industry.
James Pozzi: Because certainly I think that the anticipation from, from OEMs I've spoken to and MROs as well has been that that will be ever more important for restoring passenger confidence, which over time, obviously it's anticipated that will happen, but it may not be a given straight away. There may be people apprehensive about flying even with vaccines and whatnot because of, obviously, the virus and the unfamiliarity of it, I guess now, because a lot of people wouldn't have flown for quite a while. So. That's interesting that that has spiked and more people are asking for that as a service. Okay, just on the business side of things then, if we look at the human side of things to start with, the labor market in some regions is very tight right now. There's high demand for mechanics at present, especially maybe since the turn of the year, that's certainly been the case. I've seen that in North America and some parts of Europe as well. What are you seeing in the line maintenance market right now in terms of labor and staff like mechanics and technicians? What's your perspective on this right now.
Jacco Klerk: If you ask me right now, and because we're still not fully utilizing to the normal flight schedules, I don't see this as a immediate issue, challenge within the line maintenance organization. It's more where we do, for example, extensive storing and parking. That's where I would say you had research a demand that aircraft flying faster into alternate operation. Yeah. For the storing or parking that we can handle that. So it's posted, there's a good signal. So we tried to utilize our work force across the stations to support this. Do I foresee a challenging issue on the longterm in line maintenance as you outlined? Yes. I do see where the high aging workforce, which is already higher and bigger issue in North America, but that will help it well in Europe. I think there is a big push needed in the future to get new talents within the industry.
At the same time, we need to embrace more new technologies to make it where possible, less labor intensive. But for sure within line maintenance, there's not much work you can delegate, so you cannot use widely drones to do the turnaround inspection, [crosstalk 00:16:27] on the side. That when we going to get up and people could have left as well. Now, the industry that we need to look as joint custodians of the aviation industry to say, hey guys, how do we ensure to keep talent within aviation? And how do we start to develop the new pool because of the future aging workforce?
James Pozzi: Yeah. How is Direct Maintenance sort of approaching that head on, are you... I imagine you're involved in initiatives to bring that age down and to bring new talent into the workforce.
Jacco Klerk: Yes, actively, because I think it's also our responsibility not to sit still and to wait and it goes wrong. I think with all the forecasts we have seen, we also play a part that we invest heavily on getting the new generation of people in here with the apprenticeship. Even now have people said, why do you need to apprentice? Well, we need to make sure that this pipeline is ongoing. So that's where we actively try to balance that in that way, because if we don't do that, we will not only harm ourselves, but the rest of the industry. So we as Direct Maintenance want to have ensured that we have a young and vibrant workforce looking after our clients.
That's something we will continue to do in the coming years to balance the experience of the people with the new people coming into the market. I think Direct Maintenance has been, already for many decades the trend-setter not only Europe, but also in Africa to develop their own talent pool, and that has been paying off. I heard that we are highly regarded by our clients, how we service as them with local talented people in different African countries.
James Pozzi: Sure, sure. And interestingly, you did mention technologies before, and you said, obviously it's not very... It's not tasks you can delegate in that regard in line maintenance. Interestingly though, someone I was speaking to last year, not too far removed from your company actually, he stated that the pandemic while obviously challenging and damaging in many ways to the industry has also given some MROs a good opportunity to innovate. With that in regard to the nature of the work you do in line maintenance. Are there any kind of areas of technology you think Direct Maintenance may prioritize investment in? What are some of the things you're looking to maybe bring forward and help your operation?
Jacco Klerk: I think it's across the whole chain in line maintenance, from the airline down to the service provider. Yeah. Where I see that we all have separate IT systems, approaches, and that has historically been, and I agree with anybody when you have a crisis like this, it's time to rewrite the roadmap. Where I would say there is room for opportunity, how to reduce the administrative burden and return optimized utilization of the people, the information flow, but also predictive maintenance to reduce the amount of defects that before an aircraft is on the ground, that more things are prepared to resolve possible items, to optimize the usage of the components, etcetera. I know initiatives already on the way for many year, but there is still absolutely room to say, guys, we're still looking from our own angle or our own sphere of influence where I do believe here with predictive analytics, more can be done.
And that could be on the long-term I think an added value because we have our existence of the passengers who fly the airlines. And so we need to find ways how we can be superior in customer support to make sure that the clients say, okay, you know, this is why we know Direct Maintenance, and this is why I want to work with Direct Maintenance in the future. And that means that we need to work sometimes different avenues and not only looking about the standard services we provide, but what can we do to reduce the risk? Because you can say, well, we only do what we've been asked for, but at the end of the day, if an airline is having an AOG or another issue that they cannot use a certain seat because of an IAV issue, that's costing them a lot of money. So those are the items where I believe we need to find ways of working better together.
First, I see the moment that is more a cost consolidation heavy because of the current situation, which is normal, but that should lead that people should be triggered with new initiatives to step out. And I think for line maintenance, that's predominantly in that area, because it's less heavy on equipment. And we're looking from the wide-bodies, because you only turn around the aircraft near the body, it's depending on how we support, what we do a home-based operation in a line maintenance organization. What can we do to make sure to minimize the delays and the inconvenience of the airline during the schedules? Yes, I think that is where we can add value to optimize the value chain.
James Pozzi: Okay. Interesting, yes. Okay. Going back to the state of the industry then, and the future and looking at that side of things. So obviously it's Direct Maintenance has that magnetic MRO connection. And you're well-backed company, I think it's fair to say. There's been a lot of speculation and thoughts that there will be a lot more consolidation to come in the next few years. Is it feasible that you think that will occur in the line maintenance space and will Direct Maintenance look to be an active part of that consolidation? Do you foresee that happening in the next few years?
Jacco Klerk: Yes, absolutely. We see it already ourselves, but also speaking to a client is enforcing this view, and that's why already that we already working to integrate the magnetic MRO line maintenance stations into the Direct Maintenance operation.
James Pozzi: Yep.
Jacco Klerk: That's will be the first start of scaling to 10 countries and 20 plus stations. And we have healthy ambitions to support our clients, on our drive, on their request they want to set up a larger strategic network of stations. Because from the point of view of the airlines, the way the line maintenance providers are, there are many smaller organizations. Which mean for the airlines, they need to check, align with each of those organizations individually to make sure that they are compliant with their procedures. And they are looking really for companies going forward to say, we want to make sure that we have a partner who can provide the right customer service and care across different stations.
So I foresee for that reason, the desire and the demand by airlines to say, if you want to be a significant player to us-
James Pozzi: Yep.
Jacco Klerk: Yeah? You need to have more stations. And so for that reason, the consolidation will happen. And similar, when you're coming out of COVID when the government support is going to stop, a lot of smaller companies could struggle because of what has happened over the past period and where you have large organizations, you have more flexibility to be adaptable, to be there for your clients. And so yeah, for those different reasons, skill, developing situation currently, that this consolidation is going to happen, yes.
James Pozzi: Sure. Okay. Do you foresee this expansion being kind of around Europe, predominantly in your Africa stations, or will it stretch further afield eventually to maybe other regions? What can you tell us about that from a regional perspective?
Jacco Klerk: If I see for Europe, I see it for sure happening in the coming years. If I see, for example, Africa, it's still very fragmented and it's also based on geographical setup, but ultimately we already have multiple stations over there and it's our attention to expand there too. If you're looking to the U.S. and North America, and of course it's already a going process over there. So I see no change in that regard that this will come as well to Europe-
James Pozzi: Sure.
Jacco Klerk: And I see the same is going to happen towards Asia. Of course, Asia is a very large continent-
James Pozzi: Yes.
Jacco Klerk: Compared to Europe. But even for there, the discussions we have with our clients is there to say, it's a lot of opportunities in that area, and the same as well for example, if you look to South America as another continent, not to forget.
James Pozzi: Yeah.
Jacco Klerk: So yes, I do see this develop like a network of service providers in any industry for consistency of service and standards. That's something where the airlines would like to look to. Instead of that they have to go every other airport, to exaggerate, to make new agreements and to have control and understanding. They want to say, we want to have a reduced headache, which means we need to work with certain service partners.
James Pozzi: Sure. Okay. Very, very interesting stuff then. And just finally, how optimistic are you personally about the sort of recovery prospects of not just the line maintenance segment, but the wider industry? What's your kind of prediction for the timeframe of recovery? Do you think it will be a near term thing, or do you think that the recovery is going to be maybe a bit slower, to be forthcoming?
Jacco Klerk: Yeah, well, as a true aviator, I poured all my life in aviation predominantly.
James Pozzi: Sure.
Jacco Klerk: I want to happen tomorrow, but everybody would say the same-
James Pozzi: Yes.
Jacco Klerk: But I also need to be realistic. I expect to see as certain restart of the recovery over the summer. Of course, it will not be what everybody wanted or expected because the whole change [inaudible 00:27:32], what you have is taking longer. Yeah. Otherwise it would have gone faster for the summer.
James Pozzi: Yeah.
Jacco Klerk: I foresee, listening of course, to the airlines, to the different publications that it will happen in stages. So I foresee that it will be gradually a little bit, a little part over the summer, some extent, a winter operation and the problem, it, it will be going back to a high demand coming to December in 2020. And if you look into the statistics, they talking about 2024, to come to a 2019 level because I think had it, for example, so the business travelers-
James Pozzi: Yeah.
Jacco Klerk: Will travel probably less because also the companies have to be careful on the finance. They've seen how we can work more remotely instead of [inaudible 00:28:23] meeting. So for that reason, I say it will start up more gradually than what we would expect it to be.
James Pozzi: Absolutely, yes. So certainly it's one to watch out for then, and we'll certainly be mapping that very closely as I'm sure everyone else will in the industry, but fingers crossed the recovery will arrive in good time and things will be back to some kind of normality very, very soon. Jacco Klerk thank-
Jacco Klerk: And I think also, sorry to interrupt-
James Pozzi: No problem.
Jacco Klerk: That's also where I think that the new part of our industry is going to be, the flexibility and agility. And instead of the used way, how we have worked in the past, yeah. To be more adaptable in, how can we change quickly to find new opportunities and new airlines will start up out of this.
James Pozzi: Yep.
Jacco Klerk: And that's something from working away from the traditional way of how we have been working to say, how are we able to do differently nearly in the way, of course, how I know it's different, but in the IT world, how they do the developments of products, or in general product development that we need to see, how are we able to do this more also in the aviation industry? I think that's the biggest takeaway to say, guys, how can we move faster and quicker to be creative?
James Pozzi: Like both a mentality and I guess a culture change-
Jacco Klerk: Yes.
James Pozzi: So to speak. Okay. Okay. Interesting. Very interesting. Jacco Klerk, thank you for joining me today on the podcast and all the best.
Jacco Klerk: James, thank you very much for your time. It was a pleasure talking to you.
James Pozzi: If you have any comments, feel free to contact me at mroataviationweek.com. You can subscribe and download Aviation Week's MRO Podcast on iTunes. Thanks for listening and joining us.
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