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StandardAero Reveals Five-year Growth Ambition

 - June 16, 2019, 6:00 AM
A significant proportion of StandardAero’s work involves large airliner powerplant maintenance. The company tripled its CFM56 activity over the last three years, and also inked a 10-year contract with Rolls-Royce to supply MRO support for the RB.211 family of turbofans.

Having doubled its annual revenues and expanded its business dramatically over the past five years by combining organic growth with the new work brought by four strategic acquisitions, StandardAero aims to double its size and revenues again in the next five years.

Founded in 1911 and now owned by The Carlyle Group, Scottsdale, Arizona-headquartered StandardAero has grown in the past five years to become “one of the largest, if not the largest, independent jet-engine maintenance companies on the planet,” CEO Russell Ford told AIN. “The company is much larger, broader, and greater in scope and capacity than it ever has been in the last 100 years.”

During the past five years, StandardAero has added 23 primary repair and manufacturing facilities to grow its presence to 37 facilities in 10 countries on five continents. It has boosted its employee base from 3,500 people to more than 6,000 and has increased from 25 to 41 the number of turbine aero engine families it services. Concomitantly, the company has significantly expanded its business with key existing customers and added many new customers internationally.

Now, “my goal is to double the size of the company again in the next five years,” said Ford. He intends to do so by adding more engine families to StandardAero’s repair portfolio; by continuing to expand its business with existing customers; and by pursuing additional corporate acquisitions to boost the capability which StandardAero already views as its primary market differentiator—its ability to offer engine and component MRO turnaround times shorter than its competitors can achieve.

Significant Acquisitions

About half of StandardAero’s growth in the past five years has arisen from increased business volume with existing customers and half from acquiring four substantial businesses within the past two years to widen its portfolio of repair and manufacturing capabilities. Its purchases of Jet Aviation Specialists and PAS Technologies brought more component repair and component-manufacturing capabilities. Acquiring Kelly Aviation Center in San Antonio from Lockheed Martin added substantial new MRO capacity for both civil and military customers, as well as bringing StandardAero high-thrust engine test cells. Its acquisition of Vector Aerospace from Airbus tripled StandardAero’s helicopter engine and airframe MRO business and doubled its turboprop MRO business.

Vector Aerospace “gave us access to new customers and gave us critical mass on turboprops, which allowed us to create a center of excellence” for turboprop MRO, said Ford. StandardAero decided to locate the center at Summerside on Prince Edward Island (PEI), a Canadian Atlantic maritime province, moving its existing turboprop business there from its Winnipeg facility and, in cooperation with PEI’s provincial government, adding new facilities and training programs for technicians.

At the same time, said Ford, the transfer “opened a slot for us in Winnipeg to grow our helicopter business,” StandardAero’s existing helicopter-engine MRO business being located there. Because more than half of Vector Aerospace’s helicopter MRO business was with customers outside North America, the acquisition also immediately widened StandardAero’s helicopter-MRO customer base internationally.

Its strategy to “gather up smaller companies that do component repair under the StandardAero umbrella” remains sound, said Ford. That is “because the big OE[M]s prefer to work with big companies like StandardAero, which have the capacity, the capabilities, and the ability to invest in the latest processes.”

While it was scouting and then buying suitable acquisition targets, StandardAero was also working hard to expand its existing MRO business. “Expanding our business with existing customers opened doors for us to win new [engine] platforms and big new programs,” said Ford. In the past three years, it has tripled its CFM56 MRO business with Southwest Airlines, WestJet, and GE Aviation. Within the past two years, StandardAero won a 10-year contract from Rolls-Royce to perform all heavy maintenance on the manufacturer’s RB.211 family of engines and the contract “is likely to [be expanded] to the life of the engine,” he said. It also won a 20-year contract from Rolls-Royce to perform heavy maintenance on the AE1107C-Liberty (U.S. military designation T406) engines that power all Bell Boeing V-22 Osprey tiltrotors.

Vital to StandardAero’s recent growth and its continuing growth prospects has been its strategy—achieved through the acquisitions of Vector Aerospace and Kelly Aviation Center—of acquiring former government-owned, contractor-operated (GOCO) MRO facilities, according to Ford. In addition to Kelly Aviation Center, once a major U.S. Air Force maintenance facility, StandardAero now also operates the Fleetlands facility at Gosport in England, which formerly serviced the Royal Navy’s entire helicopter fleet.

“These are wonderful facilities: they’re large and the infrastructure is fantastic. All we have to do is fill them up”, said Ford. “So we have wasted no time in filling them up with commercial work, as well as military.” In addition to the modern engine MRO shops the two sites boast, they offer another massive advantage. “The workforce in these areas is great—a lot of former military people” who formerly worked at the two facilities still live nearby, he said. “This provides us with an extraordinary pool of former military individuals” who, in addition to being highly skilled MRO technicians, have a tremendous work ethic.

At a time when the future supply of technicians represents a major challenge for most MRO providers, having on hand large pools of highly trained and highly motivated people who are available to recruit is a tremendous benefit and one widely available to StandardAero. “We have plenty of military-trained people round all of our large facilities,” said Ford. He said that, in addition to the company’s large-scale hiring of former military personnel, very early on StandardAero saw that the MRO industry was heading for a technician-hiring crunch and acted quickly to secure its future employee supply by establishing technician-training programs with universities and colleges located near its major MRO facilities.

Industry Challenges

According to Ford, the biggest challenge StandardAero faces today is supply of finished jet-engine materials. This is because certification of those materials is a lengthy process and it is difficult to achieve; and because the suppliers that produce the materials and components for jet engines use proprietary manufacturing techniques and processes that other companies cannot reproduce. When those vendors are operating at maximum capacity, as they are now, supply of new parts for repairs becomes uncertain. This forces StandardAero to part-build engines and then allocate staff and work tasks to different engines, switching work back and forward between engines until new parts become available to allow the repair on each one to be completed.

In cooperation with OEMs, StandardAero is able partly to mitigate this issue by developing “repairs that allow us to extend the service life of some of these components,” said Ford. Additionally, “we do a good job of not allowing used serviceable material not to be lost, but redeemed and used again. We have a used-part [segment] of our business that scours the earth for parts that are the hardest to find and parts that have the longest lead time” between placing an order for a new part and its delivery date. “That [used-part business] is more than just a niche—it is a focused area for us and it probably will be for a couple of years,” until new parts become more readily available. “But I don’t think the problem is going to be solved in the next 12 months. We’re going to have to battle for another year or longer.”

StandardAero addressed the issue of a shrinking MRO workforce by tapping the pool of ex-military personnel.

In the engine, airframe, and component MRO business, the turnaround time (TAT) between an MRO shop receiving an item for repair and shipping it back is vitally important. The longer it takes for an aircraft operator’s engines to be repaired or overhauled, the more spare engines it will have to stock—a huge consideration when each engine can cost $15 million or more to buy. Many engine MRO facilities don’t perform repair and overhaul of all the components they receive: they often have to send out components to specialist third-party shops, and the time taken to repair those components is the pacing factor in the TAT for the repair of the entire engine.

“Typically it takes two to three weeks if you send it out—but we can [often] do the same repair in two days,” said Ford. “If the total TAT for the engine overhaul is six weeks when the repair of a component is subcontracted,” a two-week reduction on that time assumes phenomenal importance for the customer. “So StandardAero purposely has verticalized and grown our component-repair capability,” he said. “That is why we have done the acquisitions…and where we’ve found value. For us it has created a differentiator in the marketplace—turn time.” Reducing MRO turnaround time for a specific engine fleet can save any big StandardAero customer hundreds of millions of dollars in inventory cost.

As it attempts to double in size again over the next five years, StandardAero hopes to conclude further similar acquisitions. “There are additional companies in the aftermarket world that look like they would be a good fit for us,” said Ford. Companies that own proprietary repair and manufacturing processes “would be the type of companies we are looking to acquire,” he said. StandardAero’s acquisitions “are not done in a random walk. They are done in a purposeful way that has generated a real benefit.”