StandardAero President Marc McGowan on the company’s worldwide authorisation from Honeywell for the HTF7000 family of engines and its plans for its Netherlands facility
In 2011 StandardAero celebrated its 100th anniversary, though the company has gone through quite a bit of change over that time. The original company started life in 1911 as Standard Machine Works, a small automotive engine repair shop, then quickly moved into the fast-developing world of aero engine repair and overhaul. Today the company is one of the largest independent MRO houses, and also includes completions and paint among its capabilities.
Q: StandardAero was part of Garrett Aviation Services, but you have had a number of changes of ownership over time…
A: Absolutely. The Garrett Aviation Services division was set up many years ago as both an MRO outfit and an FBO operation with four FBOs. At that stage it was still part of the Allied Signal portfolio, but it was spun off as a separate entity, and has had various owners since. These have included GE, a couple of private equity firms and the then named Landmark Aviation at one stage. After that, in 2008 we were acquired by Dubai Aerospace Enterprise. However, post 9/11 and the attack on the Twin Towers, the US Government was dead set against the foreign ownership of FBOs at key airports, so the FBOs had to be spun off. They continue to thrive under their new ownership. DAE then sold StandardAero to the New York-based private equity firm, Veritas Capital, and they are our owners and partners.
Q: What differentiates StandardAero today?
A: As a company we have always had deep engineering skills across a range of fields. Here on the business aviation side, we are heavily involved in the MRO side on the overhaul and maintenance of the Honeywell TFE731 engine platform and the jets it flies on, so we do a lot of Falcon overhauls, also Hawkers and Lears. We are an authorised service centre for Bombardier’s Challenger 300 and Global platforms. We also have authorisation on Embraer’s 450 and 500 jets. In all we have over 70 different authorisations, including on a range of avionics, which we install, upgrade and maintain. However, the real momentum for us is provided by the Honeywell HTF7000 family of engines. We have the worldwide authorisation from Honeywell for this and it is the only overhaul authorisation that Honeywell has issued or intends to issue.
The early adopter of that platform was Flexjet, which flies Bombardier Challenger 300s. Those jets are now coming up for the mid-cycle of their 8,000 hour inspections. A percentage of these will typically require a significant overhaul at the 8,000-hour mark, so there is a lot of business out there for us.
Q: I understand that StandardAero will be utilising its Netherlands facility for line and minor work for European owners and operators of the HTF7000 engine family?
A: Yes. This is very big for us. It is our first real opportunity to establish a significant footprint for ourselves in Europe.
Q: What are you doing on the completions side?
A: In the last several months at our Associated Air Center business, we have finished two widebody completions. We did the industry’s first 787 Head of State completion, and we have now finished our first 747-8 completion, also for a Head of State. We are also bidding on numerous widebody and narrowbody completion projects, on almost every possible airframe. Our near term focus is very much on getting aircraft into our completions pipeline and we have beads on all kinds of bids.
Q: The completions market is pretty challenging right now, isn’t it?
A: It is always a challenge to win competitive bids, but our reputation helps us there. What is really challenging though, not just for us but for every completions house out there, is getting those green completions scheduled nose to tail. We are fortunate in that our alignment with the airframe OEMs brings us close not just to the OEMs but to their customers as well, both on the airframe and the engines side.
Q: How big is StandardAero on the business aviation side now?
A: We now have just over 700 full-time staff on the business aviation side, with an annual turnover for business aviation of around US$400 million, and we have four sites in the continental US, and now expanding to include utilization of our facility in the Netherlands.
Q: What is your take on the economy and how that is likely to play for your business?
A: One of the peculiarities of the current US economy is that we have GDP growth of just about 2% and we have Federal Reserve Chairman Janet Yellen talking about worries over an overheating economy. In my book, 2% is a long way from overheating and that is certainly not a present danger. What we have is very slow growth. In this sector we need the economy to be at around 3%, then we have very healthy growth. What we are seeing is an economy that has limped along, not doing terribly, but not doing great, either. If it starts to get north of 3% then we’ll start to see OEMs selling aircraft at a good clip, and that will be good for everyone.
Q: I’ve heard it said that MROs benefit from a stagnant economy because people fly older jets for longer, instead of buying new or refreshing their fleet with younger aircraft. What is your view on that?
A: There are two dynamics that play into that and both of them work against the idea that MROs benefit from a slack market. First, if OEMs have a sustained period of low sales, they start looking more seriously for other revenues. They all have very well-established global MRO networks, so they put more effort into those and that generates more price competition for us. Not good. Also, with stagnant growth we see more pre-owned aircraft coming onto the market as cashstrapped owners give up their jets. That drives down the price of pre-owned stock and the difference in price between a brand new widebody jet and a pre-owned jet can be very significant. So the older aircraft become real competition, blocking the flow of green deliveries to completions houses.
Q: Are you optimistic or pessimistic going forward?
A: I wish there was a little more consistency in the economy, quarter over quarter, but overall, we tend to be more bullish than bearish. Anecdotally, as I drive about I see a lot of building activity going on and a lot of small business activity. That is a good thing.