A chance phone call from an old apprentice friend from his Aer Lingus days has launched Conor McCarthy into the maintenance business. The Irishman poses for pictures with his friend Paul Brennan in an eerily deserted hangar at Dublin airport that they hope will shortly be filled with narrowbodies undergoing maintenance checks.
It was Brennan who told McCarthy in early 2009 that the company he was working for, SR Technics, was closing its large overhaul operation in Dublin. "I knew it had some good businesses like auxiliary power units and landing gear repairs," says McCarthy, but he also knew how tough it was to make money in Europe's high wage environment.
At its peak SR Technics had employed more than 1,100 people and maintained a wide range of Airbus and Boeing types. However, while parts of the company were profitable, its losses were too large for parent Abu Dhabi-based Mubadala Group to sustain.
McCarthy, a former Ryanair chief operating officer who has worked with EasyJet, Mexico's VivaAeroBus, Australia's Jetstar and is currently a director for AirAsia, saw the chance to create a profitable services business in Dublin. With so many jobs at stake the Irish government was an interested party and potential bidders all presented their plans to Enterprise Ireland and the Irish Development Agency.
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© Mark Pilling/FlightglobalMcCarthy: low-cost airline history keeps focus on bottom line |
NEW MODEL
Several parties including a management buyout were interested in taking the SR Technics operation as a going concern, but McCarthy was SR Technics' preferred bidder, with his plan to buy the infrastructure - including a hangar for three narrowbodies and landing gear and auxiliary power unit workshops - and rework the traditional MRO model to lower the cost base.
McCarthy, as the largest single shareholder, and a team of investors including AirAsia founder Tony Fernandes, EADS, Enterprise Ireland and Dublin-based aircraft technical consultancy Santos Dumont, were able to raise $25 million.
"We are fully funded with cash in the bank," he says. Now a team of just 35 people is re-commissioning mothballed equipment and getting ready to take in work. The company won its certification in October and McCarthy is seeking the first Airbus or Boeing airframe work.
LOWERING THE COST BASE
"We have a name in Dublin for producing good quality work, but not for producing it at the right price," says McCarthy. "[But now] we've managed to reduce our direct costs and our labour costs by 40%, which gives us huge capacity to price [competitively] within the marketplace and win business," he says. Starting from scratch, the new, non-unionised, Dublin Aerospace has a fresh set of working arrangements. "Crucially we will have no overtime," says McCarthy.
The incentive for staff, who McCarthy admits have a lower than average basic salary compared with other European workers, comes from doing the job faster and more efficiently. They are then rewarded in a profit share scheme, paid quarterly, paying out up to 20% of the company's profit. There is also the incentive for the job to be done properly, for if a part comes back on warranty the time spent repairing it is a negative count against that team. The 20% profit share is divided into half for the company's overall performance and half for each of the four business units: narrowbody aircraft overhauls, APU servicing, landing gear overhauls and technical training.
He has turned to an old Aer Lingus arrangement to deal with seasonality and the airline desire for major checks to be performed in the quiet winter months. This sees staff working every second Saturday during the winter. For every four Saturdays worked they get a week off in the summer.
TALENT POOL
One advantage Dublin Aerospace has is a deep local talent pool of hundreds of experienced engineers in the region made redundant because of the SR Technics closure. McCarthy anticipates that two narrowbody lines will be up and running within a year; he may be employing more than 100 people by the end of 2010.
"Our challenge is to keep our costs right. That's the parallel with the low-cost airline business," says McCarthy.
Source: Flight International
