The COVID Crunch: Changing environments and trends in aviation operators, with Oceania Aviation

Crenfeldt explains that while Oceania was largely able to continue operating during the initial 2020 lockdowns in New Zealand thanks to its ongoing work with aeromedical fleets and agricultural operators, the company did have to adjust to some major changes off the back of the changing needs of the operators it works with.

“COVID had a notably differing impact between fixed-wing and helicopter operators, and even within those two camps, some responses were quite varied. For example, many mid-sized fixed-wing operators are flight training academies – flight schools – and some of those schools were deeply affected by international border closures and couldn’t bring in new students from overseas. We actually saw one of our clients, a very large flight school in Hamilton called L3, completely shut down and leave New Zealand,” Crenfeldt says.

“For those flight schools that remained, we saw some new trends emerge. Overall inflow of students was down, which meant utilisation of aircraft was down and therefore maintenance wasn’t required as often. But on the flip side of that, we have seen that flight schools are changing the way that they are bringing students through the program. Previously, students beginning flight training would spend the first three to four weeks in the classroom, and the utilisation on the aircraft would be very low. Then, the whole cohort would begin flying at once, and the maintenance demand would go up. So we, as a maintenance provider, would see these big dips and these big highs.

“However, the flying schools now are bringing in a smaller number of students each intake but doing so more often and closer together. So that’s ironing out the maintenance requirements for us which not only makes the workload more manageable, but we’re able to manage our labour costs better, which also provides cost efficiencies for the flying schools.”

On the rotary side of the business, Crenfeldt says things have remained fairly stable, though operators have introduced new behaviours in line with new operating environments. “Agricultural flying didn’t slow down, and that is a huge part of what we support within the industry. Maintenance requirements are based on cycles and hours flown, so since that sector of the industry didn’t shut down during lockdowns, neither did we,” he says.

While another key segment of Oceania’s customer base, tourist operators, were forced to shut down entirely during COVID, the business noted another emerging trend. “We’ve seen a lot of tourist operators swivel and adjust as best they can, with many turning to agriculture, longline or other similar work, which they never used to do. It’s been great to see, as most operators were able to keep at least part of their fleet flying despite the downturn and it has kept the helicopter side of our MRO support operations steadier,” Crenfeldt adds.

A sign of the times

Through working closely with customers, Oceania Aviation has also noted some more concerning trends that could have longer-term ramifications, if operators don’t keep communication lines open with their MRO providers.

“Particularly in the helicopter sector, we’ve seen a fair number of deferrals of maintenance on airframes, as operators instead poach or rob components from other airframes that have been stood down or parked during the downturn,” Crenfeldt says.

“So, what I mean by this, is if an operator had six or eight aircraft and they are only operating two due to current demand levels, what we have seen some doing is once a component or a lifed item became due, they’d go and take it off a parked airframe, instead of putting it through the normal maintenance cycle.”

While this may not be a huge problem if done correctly, and it certainly works as a short-term solution, this practice can lead to bigger issues down the track. “Basically, what happens is when the operator does bring the pilfered airframe in for maintenance, we then have to do a major catch-up, and this isn’t ideal for managing cash flow on the operator’s side,” Crenfeldt says.

According to McCalman, Oceania’s head of supply chain, some operators are now also bypassing their parts provider for procurement in order to try to cut costs. “It’s another trend we’ve seen where we believe some operators are now directly shopping on the aftermarket and doing ad-hoc purchasing themselves without going through their MRO provider. What the operators may not understand fully is that we have reach with our suppliers and the OEMs to potentially get them better parts and freight pricing, and we also have the skills to be proactive and plan for the next maintenance requirements ahead of time, which can save a lot more costs in the long run.”

Chaos in the chain of supply

McCalman goes on to explain the critical global supply chain that was already hard-pressed to perform before the COVID pandemic, but now faces unprecedented challenges. “Essentially, the aviation supply chain is based around an aircraft-supported freight network, and historically, we didn’t tend to use sea freight. We’d only be driven to use sea freight if we were restricted in some way, mainly by size, weight, or dangerous goods. Everything else came in the belly of an aircraft, and more often than not, a passenger aircraft.

“With global lockdowns, and restricted flights, the airline industry came to a standstill, and with it, so did the aviation supply chain. It was like a boulder rolling down a hill; you have the manufacturer producing items we’ve already ordered, it’s on a truck and it gets delivered to a depot in the US, for example, to get consolidated and then airfreighted to us. All of that activity was still happening, and boxes were arriving at the depots, but they didn’t have an aircraft to ship on to. The problem compounded as boxes continued getting dropped off at the depots, the depot warehouse doesn’t get any bigger, and there’s still nowhere for these items to go. Ultimately at the end of the day, we can’t help our customers if we can’t get our stock shipped.”

Oceania Aviation was able to turn to sea freight as a more reliable, albeit slower alternative to the strained air freight system. “We did divert some items to sea, but so did everyone else, and sea freight is obviously a lot slower,” McCalman explains. “If you’re not typically set up for the longer lead times, then your stock levels will suffer accordingly, and it just becomes so much harder when the whole world suddenly turns to sea freight. Then you have a ship blocking the Suez Canal for a few days, and you’ve got the Auckland ports doing an IT infrastructure upgrade; it was a bit of a nightmare for us and subsequently for our customers.”

On top of this, New Zealand faces its own challenges regarding the potential over-reliance on sea freight for larger and heavier items. “Recent indications are that sea freight operators could see New Zealand as not being cost-viable in the longer term, which could pose local operators another problem. It would see New Zealand become essentially a satellite of Australia, with all ships going through Australia’s ports first and then being shipped separately to us here. This could add another 10+ days to every delivery, and without influence or bulk-purchases, individual operators will feel the pain from these ongoing delays,” McCalman says.

The crisis runs even deeper than just getting the stock here. McCalman explains that new variants of COVID-19 have only led to even greater disruptions throughout the supply chain, that could pose a critical threat to operators that aren’t pre-prepared. “I think it’s important for the industry, and particularly for operators, to know that the supply chain is a very delicate system at the best of times. It is quite literally a chain, made up of various links. On one end we have the customer – the operators – and then us – the MRO, our suppliers, the OEMs, all the way through to the raw material supplier, which supplies the materials that get turned into a part. What COVID has done is it has impacted or broken all those links in the chain, between the raw material supplier right through to the customer,” McCalman says.

“For example, the Delta variant has seen manufacturing stop in many parts of India, which is a major supplier for raw materials and sub components, so the flow is cut short right at the beginning of the chain. Now as the parts manufacturers are trying to source raw materials and sub components from a much smaller supply pool,” he explains. “It’s unlike anything we’ve seen before; usually an event might affect one part of the supply chain, and even if it’s a serious disruption, it works itself out. This supply issue is having a longer-term effect and unfortunately, there’s very little that we as MRO providers can do, apart from try to plan well in advance. So operators, too, need to be planning ahead where possible for things like engine overhauls, at least six months out, rather than six weeks out – because parts are going to take a lot longer to secure, and we don’t want to see our customers disappointed or worse, AOG.”

Hope up ahead

While the supply chain was, and remains, challenged, McCalman and Crenfeldt say that conditions are slowly improving. “Once borders open up, things will definitely improve, but we are operating on the assumption that it could take a number of years to return to pre-COVID flight capacity, and thus the return to a normal freight network,” McCalman says. “From March to now, we’ve seen freight movements improve out of the States, as well as through Australia, Singapore and out of Asia – though it’s nowhere near pre-COVID capacity. Alongside improvements though, prices are escalating, and we have to really make use of our strong relationships with suppliers and OEMs to keep costs down for the customer as much as possible – because we know how tight cash is at the moment.

“Essentially the outcome of all these challenges is that we as an MRO and parts provider need to plan further ahead, and be as organised as possible, which can only happen when we work in extremely close partnership with our customers to understand their requirements months in advance, not days.”

Navigating such difficult operating environments, both McCalman and Crenfeldt highly recommend engaging in a strong partnership with your MRO provider. “Communication allows us to get a handle on what’s happening and gives us time to better manage the supply network and the freight network, talk to freight suppliers, and get ahead with bulk orders. The more information we have from our customers, the better,” McCalman says.

Crenfeldt adds, “We want our operators to know that we completely understand that the target continues to move, but by staying close to your MRO provider, and sharing your needs with us, it’s the best way to get the best most cost-effective service, rather than going it alone.

“Just keep us in the loop, and we can do the difficult parts for you, navigating the supply chain and getting on top of the OEMs. Plus, a surprise helicopter on the door on a Monday morning is not going to give us the time to invest in the parts and spares you need, nor invest in keeping the facility available for the labour. So, by partnering with your MRO provider as closely as possible, together we can be proactive and really get you the results you need.”