Magnetic Halves Costs To Survive Crisis

Magnetic MRO's core airframe business has changed, with some heavy checks cancelled or reduced in scope and increasing requests from lessors.
Credit: Magnetic MRO

Sometimes a crisis forces you to do things very differently, and sometimes it accelerates changes that should have happened anyway. Magnetic MRO, like many shops, has been put through a wringer to learn both kinds of lessons.   

Magnetic has stayed active, even during the virus crisis, with one subsidiary receiving Airbus approval to do aircraft interiors and Magnetic staff doing their first virtual inspection of an aircraft.

But CEO Risto Mäeots says his core airframe business has changed, with some heavy checks cancelled or reduced in scope and increasing requests from lessors for work on repossessed or returned aircraft. 

“The type of work needed for a returned aircraft is very similar to an end-of-lease scope: heavy maintenance, painting and cabin refurbishment,” Mäeots says.

In addition, Magnetic and its sister-company Direct Maintenance have parked about 30 aircraft. Starting in July, they will be doing work to return some of these aircraft to service.

Magnetic MRO has not retained all its staff though the crisis, but took aggressive measures based on the view that “the future is not going to be same,” Mäeots says.

He notes it took China about four months of a very tough quarantines before resuming most flights. He says there is no way the EU could manage the virus faster with its lighter restrictions.

That judgement “triggered us to start immediate restructuring, lowering headcount, turning our business from scale to efficiency and renegotiating with suppliers,” the Magnetic CEO explains. The results were a 22% reduction in headcount and a 55% reduction in variable and fixed costs, compared with January, 2020, levels.

But Magnetic can still scale up fast, as it has emphasized retaining people in key positions and those with licenses. And Magnetic has received government aid in the form of salary compensation. 

The MRO has faced shortfalls in deliveries of some parts due to the lock down of OEMs, closed repair shops and a paralysis of transport. But Mäeots says deliveries started to improve in late June.

The Magnetic CEO predicts the first MRO sectors to recover will probably be labor-intensive functions, for example line maintenance and heavy maintenance. But trading and leasing businesses will be stalled for a while. And the airline customers that will be first to need MRO will be those that have major domestic networks, as domestic service will revive first.

As for Magnetic, Mäeots expects the big post-crisis change will be more automation. “Fortunately, we were lucky to have started a new ERP system implementation project before COVID outbreak, and we had also completed mapping all our group processes and made them efficient,” he says.

This new ERP system will be the digital heart of Magnetic for years to come. The virus crisis made Magnetic managers rethink their processes one more time.

And Mäeots predicts MRO staff will travel less frequently and have more virtual meetings after the virus crisis ends. “What CEOs, CTOs or COOs failed to do in years, Mr. Covid did in one quarter, a harsh lesson.”