Timco Aviation Services: New Frame Work
Manufacturing
Written by John Zorabedian   
Thursday, 01 May 2008
Timco Aviation Services: New Frame Work - American Executive - RedCoat Publishing
CEO John Cawthron led an efficiency overhaul at this leading aviation maintenance company.
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The major airlines, struggling from rising fuel costs, have been seeking cost savings in maintenance, repair, and overhaul (MRO) to keep their fleets in the air and the companies profitable. That has meant pressure on MRO companies such as Greensboro, NC-based Timco Aviation Services to increase efficiency in their operations and provide the best value.

Timco Aviation Services: New Frame Work - American Executive - RedCoat Publishing
John Cawthron, CEO
Timco expects its 2008 revenues to fall off slightly from 2007, when the company brought in $356 million, said Chairman and CEO John Cawthron. Last year, the company landed a multi-million-dollar contract with United Airlines to upgrade the carrier’s premium class cabins. Cawthron said some of the work on that contract will be pushed out to 2009 from 2008, accounting for the revenue drop.

The work is being done by Timco’s interiors division, called Timco Aerosystems, which designs, engineers, and builds cabin equipment. The company also has a seat manufacturing division in California called Brice Seating. As the second-largest aviation MRO company in the world, Timco expects its interiors and seating business will help the company even out the cycles of maintenance work and capture more of the growing global market.

Cawthron said the company will soon close arrangements to provide interior work and seats for several large carriers in Asia and the Middle East. “The outlook for our Aerosystems division is good, as long as the airlines continue to focus on upgrading their fleets to compete internationally,” he said.

Timco is also planning to expand internationally to provide cost savings for major US carriers and to capture more contracts from European airlines looking to get out from under the strong Euro. This year Timco will invest about $3 million in start-up costs in India and Latin America as it ramps up MRO operations abroad. “That is not a contraction of what we do in the United States; it’s an expansion of what we do worldwide,” Cawthron said.

In Costa Rica, Timco is forming a partnership with Coopesa, an MRO company with 50 years of industry experience. “We intend to expand in Central America and Mexico to give US airlines a blended rate using our US and South American capacity,” Cawthron said. “The blended rate will offer superior value to operations in our hemisphere.”

And to build its business in the fast-growing aviation market in India, Timco will partner in India with Hindustan Aeronautics Ltd., a government-run defense contractor, on India-based airline work. Timco also does MRO work at its Lake City, Fla. facilities for a growing share of US government MRO requirements, including for the US Coast Guard’s fleet of C-130 transport planes.

Corporate turnaround
Cawthron took over as CEO and board chairman in 2006, after Timco’s former majority shareholder, Lacy Harber, sold the company to Owl Creek Asset Management. The new private owners are seeking gains after the company suffered a $25 million loss in 2005. After a strong 2007, the company is back in the black and thriving in a competitive market, Cawthron said.

The company’s main MRO operation is at the Piedmont Airport in Greensboro, where the company employs 1,800 people. Cawthron said the most important part of the turnaround was getting the entire team of workers and engineers working together to deliver higher efficiency. “Greensboro had a record year last year and will be approximately the same this year,” he said. “We had to completely redo the process of repairing aircraft.”

Timco recognized its productivity gains of almost 15% by paying out more than $7 million in incentive bonuses company-wide last year. The main driver of this efficiency boost has been process mapping, whereby the work schedule and steps are laid out 60 days before an aircraft arrives at the hangar. “Our motto is ‘the fanatical pursuit of common sense,’” Cawthron said. “When we changed management here, we went down to the floor and explained to our people the efficiency and productivity gains we need to remain competitive. We were committed to turning it around from the bottom up.”

Competitors include Singapore Technologies (ST Aero), the world’s largest MRO, and the AAR Corporation based in Chicago. Like Timco, these companies can provide “nose-to-tail” maintenance and repairs. “We are the only ones, along with ST and AAR, that have the capacity to do nose-to-tail work for the big carriers like United, USAir, and Delta,” Cawthron said.

As the major carriers struggle with fuel costs, many are also under increasing scrutiny over maintenance and operational integrity. Cawthron said Timco’s experienced leadership team understands what the airlines need to meet the demands of the market and regulatory oversight.

Industry analysts expect airline MRO expenditures to drop from an originally projected $9 billion in 2008 to between $5 billion and $7 billion in the US. This means MRO companies will be strapped for cash, but Timco is positioning itself to capture a larger share of the global MRO market, worth approximately $40 billion annually.

Although Timco will not be outsourcing any US jobs or work abroad, Cawthron said expanded foreign operations will make the company more cost-competitive even as it provides high quality. “We intend to be competitive in this market and to remain a leader in this market. We do not deviate in any shape, form, or fashion when it comes to safety and quality,” he said. “We have earned the confidence of the world’s leading airlines, and the quality and dependability we deliver strengthens the growth potential of our business.” 
 
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