What have been your biggest challenges in the first year of refocusing Olympic Air’s maintenance business?
Pascalis: We started our operation on Sept. 28, 2009, and the old Olympic Airlines actually concluded their operations on the same day. The first challenge was to take over the hangar facilities at Athens Airport: they were coming out while we were going in. It sounds easy, but it’s not. You have one huge, 40-year-old organization moving out, and us moving in on the same day. Logistically, it’s a big effort.
The second challenge was to start a discussion with Athens Airport related to the charges we pay with respect to these hangars, and that’s an ongoing process. It’s very, very important for us if we are going to develop business in Athens, which is our aim, to have costs that we can live with and that are acceptable in the industry.
The third issue was the actual design of how the business is going to go forward. Our major aim was and is still to achieve some sort of joint venture with an MRO partner. That JV could take many different forms. It could be a marketing agreement, it could be a share swap, [or] it could be a number of different combinations.
The last issue relates to the ongoing merger process with Olympic Air and Aegean. There’s work to be done on that front, but we’re still awaiting approval by the EU. We expect an answer by Dec. 7, positively or negatively.
What would be that JV’s focus ?
Pascalis: The positive thing with Olympic Engineering at the moment is that we can start with a fresh sheet of paper. It’s open. The old Olympic used to do certain functions. They were pretty good in doing maintenance and they had a very good reputation, but nowadays the level of outsourcing where you can get a positive return on your investment is much changed from when Olympic started 40-50 years ago. We are looking at all our options, from airframe maintenance all the way down to paint. We have three hangars at Athens Airport, assuming the merger goes ahead after approval.
What other maintenance changes or synergies do you see coming from the potential merger?
Pascalis: The reason for the possible merger is the synergies that come out of a possible tie-up between Olympic and Aegean. Obviously one issue is the economy in Greece, and the fact that the Greek economy cannot support two full-service airlines. You start from the airline level and move downward to engineering; the fleet is immediately increased from about 30 aircraft each to 50-55 aircraft with a slight level of consolidation there, which is a significant value to MRO. With third-party business added on top, it makes a fair amount of man-hours that can be consumed in a profitable manner.
One of your goals is to make Olympic Engineering the first-choice MRO in the region. What steps are you taking to get there?
Pascalis: Olympic has a tradition of quality work and a fairly good safety record, which we want to continue. We also have the possibility of integrating some of the airline systems into the MRO. I refer to, for instance, an SMS, safety management system, as one that already is running in the airline.
The issue is to develop the MRO, which the former Olympic unfortunately did not do. It did a lot of line maintenance work for third parties but traditionally not base maintenance. This is where we come in and where the change is aimed to happen. The idea is to continue to offer line maintenance services at Athens Airport, add base maintenance services and possibly workshop development or, as I said, a different kind of business that could be related to executive aircraft or paint. A lot of this will depend on the JV discussion we’re having now. If we tie up with a major MRO, we will try to create synergy: if our partner MRO has a facility that does landing gear, for instance, we will not invest in that. Either way, investment now in MRO is significant, so you need to put in a lot of money to create workshops and business. The synergies that will be created will depend on who that is, where he is, what he actually does now, and what is best suited for the operation in Athens.
Athens has a central location in Europe. Are you concerned about growing competition in the Middle East? How do you plan to differentiate yourself from those companies?
Pascalis: Well, we are absolutely concerned. Athens is in the crossroads of Asia, Africa and Europe, but today cost is one of the most important factors when you look at outsourcing. We believe we can have the edge over certain competitors, but by no means do we underestimate the level of competition or the quality of work that’s available. Specifically, to our east, we have Turkey, where the MRO market has developed tremendously in the last few years, and very successfully, I would say. We have a big job in front of us, but we are the kind of people that love challenges and that’s the way we’re going to go.
On which types do you plan to develop base maintenance capabilities?
Pascalis: We’ll initiate services on the types that Olympic Air is flying—Airbus A320 family aircraft, Bombardier Dash 8-Q400s and Dash 100 series. We already have limited capabilities on Boeing 737, and we are moving ahead with that as well. We see the 737 as part of the core narrowbody business, and we want some good capabilities on ATR aircraft. The old fleet of Olympic Airlines is still situated at Athens Airport, basically 737 Classics, A340s and ATRs. We want to assure that we can work on those types to prepare them for their next home.
What is the time frame for adding those capabilities?
Pascalis: We want to conclude most of it by early next year. When we started operations, we had 10 new Airbus A320 family aircraft out of 17 and eight new Bombardier Dash 8-Q400s out of 10, so our only older aircraft were the Bombardier Dash 100 series and the ATRs that we flew initially. Maintenance mainly will fall from 2011 onward, and together with issues relating to the merger, ties nicely with us moving ahead in January 2011.
Right now, how much in-house maintenance do you carry out?
Pascalis: Olympic Engineering, which is a separate entity, does mostly third-party work. In fact, with a workforce of about 36 people, its revenues are expected to be more than €2 million by the end of the year. On the airline side, obviously the majority of work is for the airline, and there’s some line maintenance third-party work. All in all, if we add them together, most of the work is for Olympic Air. We of course are looking to increase that percentage, and that again will be timed with the possible merger with Aegean Airlines.
I should also mention that we achieved EASA 147 approval. In fact, we’ve got a fair amount of third-party work on that front. We see that training is increasingly important and required, both in Greece and abroad.
Tell me a bit more about the goals you have for the next year.
Pascalis: If approval is granted by Dec. 7, one development would include bringing the Aegean fleet and the Olympic fleet together. Apart from that, there will be third-party maintenance together with a JV that is not concluded yet. Our first task is to conclude the merger with Aegean. There’s always a chance that if it’s not approved, then we need to rethink schedules and plans.
The second issue is to develop the JV. We do not intend to pretend that the MRO market is easy, specifically for a new entrant in third-party major airframe business, but we clearly believe that we need to continue the quality of work and the legacy that Olympic Airlines had as an MRO provider.
A lot of changes are expected in Greece in the next year. The latest financial crisis in Greece also affects how we will go ahead. We believe that Greece will get over it. It will be a difficult year for Greece in 2011, but from 2012 onward, we believe that there will be a fair amount of development. We have our hands full, and we'll see how things develop.
No comments:
Post a Comment