Tracey Cheek posted an articleA Delicate Balance: Tom Foley, Owner and CEO of Stevens Aviation, talks with Anthony Harrington. see more
NAFA member, Tom Foley, Owner and CEO of Stevens Aviation, talks with Anthony Harrington, Editorial Director with Business Aviation Magazine.
Q: How has the past year been for Stevens Aviation?
TF: We have been working on a whole range of projects over the last couple of years and a lot of them have now come to fruition, which has helped things tremendously. While the MRO business remains a difficult one, it has to be said that business has firmed up nicely over the last year for the larger players. The fact that President Trump is himself a long-standing enthusiast of business aviation has been very beneficial. People are now buying noticeably more aircraft than they were three years ago, and all that is great for the sector.
Q: How is the refurbishment side of your business doing?
TF: We won a very important contract outside the business aviation space, to do a maintenance and refurbishment programme for the Department of Defense. This involves a good portion of the C12 fleet, probably around 200 or more aircraft. The whole fleet probably numbers around the high 300s. That contract is excellent for us. On top of this, we are having a great deal of success with our Garmin 1000 upgrades for King Airs. We are also doing a lot of ADS-B upgrades. In fact, the Garmin G1000 business is being partially driven by the need for aircraft to be ADS-B ready by 2020. A lot of the old King Airs are not compliant but with the Garmin 1000 upgrade that gives them what the regulations require.
Q: How expensive is the ADS-B upgrade?
TF: The basic upgrade does not take many hours to do, but it is expensive. The cheapest mods work out to $60,000 to $70,000 for labour and equipment.
Q: Are owners and operators generally taking advantage of the necessity to upgrade to ADS-B, to do a full avionics upgrade?
TF: It would be great if they were, but no, not in general. Some are, but the majority are definitely looking for the least expensive route to getting ADS-B compliant. We initially expected people with aircraft like Falcons and Hawkers to want to do a full upgrade, getting an ADS-B mod that fitted in with their existing avionics suite at the very least. But many, as I said, are choosing the least expensive option, being content with basic compliance. Probably the main thing that is driving owners’ thinking on this is the fact that residual values on pre-owned aircraft have fallen dramatically since the global crash of 2008. They don’t see that there is going to be any opportunity for them to recover any major spend when they come to sell. This line of thinking is exacerbated by the fact that most of the aircraft we work on are over 10 years of age. There is very little chance that they would be able to recover the cost of an integrated solution, but they could expect to get back the value of a simple bolt-on addition. You have to keep in mind that this is nothing new. The aviation industry is very expensive, so it is only in the very best of times in private aviation that owners are not watching those nickels and dimes.
Q: What is your view of the current state of the market?
TF: Over the last year and a half we have definitely become larger, but no one in the industry is yet seeing the levels of business we all enjoyed in 2006 and 2007. Owners and operators are still being very careful about what they spend. However, my take on the US economy is that it is quite solid at present and people are definitely less cautious than they were. The private aviation sector is stronger than it was, but the drawback is that aircraft values have not recovered much, and people still have concerns about whether now is the right time to buy a new aircraft or even a pre-owned aircraft.
Q: How is the general refurbishment market doing?
TF: We are seeing a lot of modification and refurbishment work. The used aircraft fleet just keeps getting older, so people have to paint them and put a new interior and new avionics into them, and this is playing well for us.
Q: With sales of new aircraft being slow, the OEMs have refocused on a er sales revenues, looking to capture as much of the opportunities there as they can. How is that impacting you?
TF: That has hurt all the independent MRO providers. We were a Beech service centre at all our locations and Textron pulled all that in-house. Bombardier did the same with Lear servicing. Citation have had their in-house service centres for quite a while now and they make it almost impossible to compete for aircraft that are still under warranty. But that still leaves a large pre-owned eet out there that is more than 10 years of age. The market has adjusted to the new conditions and some of the smaller, less well-capitalised MRO players have dropped out. Larger players like ourselves have stabilized our businesses and the work ow has strengthened along with the economy.
Q: What is the key to competing with the OEMs?
TF: Our strategy is not to be cheaper than the OEMs but rather, to offer a higher level of customer service. We can turn things around more quickly than them, we offer a comparable or better quality and a more pleasant personal experience, because we are less bureaucratic and more customer focused.
Q: What are your thoughts about the future for MRO?
TF: There is no doubt that this is a tough and very technically demanding business. It is hard to execute, but when you execute well, you can make money. So, I am cautious, but I am pleased that the business and the industry as a whole seems to be in a healthier place. One of the challenges is that this business is very volume sensitive, so when the economy turns down, your pro stability deteriorates very quickly. So long as the economy stays strong, things will be healthy, but as and when the economy turns down, all bets are off. We have been around for 60 years and I have owned and run Stevens for the last 29 of those years. We have seen a lot of cycles and we know how to operate through both up and down cycles. We’re glad the down cycle looks to have ended and we are hoping that the up cycle lasts for a good while yet.
This article was originally published in the Autumn 2018 issue of Business Aviation Magazine.