SR Technics can seem a lot like its home country, Switzerland: extremely competent, hard-working, sometimes reserved, small and a bit isolated. Competence and hard work count heavily in MRO, but small size and isolation can be handicaps when competing against global giants.
So it made sense when SRT was bought by Abu Dhabi’s Mubadala Development Co., flush with revenues during the peak of oil prices. Mubadala could give SRT the financial strength to perform maintenance, which is often really asset management and requires acquiring and holding major inventories of engines and other expensive parts. And the combination gave SRT connections with one of the fastest-growing aviation markets in the world.
Then oil prices came off their heady highs, and in 2016 Mubadala sold 80% of SRT to the HNA Group. Though not owned by the Chinese government, HNA has close ties with Beijing, is based in another booming aviation market and has stakes in about 14 airlines. It looked like SRT had found another friend with major capital and helpful aviation connections.
But after a rapid acquisition pace, the fast-growing HNA has itself run into financial stress. Even with $100 billion in revenue and more than $160 billion assets, the conglomerate has been selling off assets to shore up its cash position, already parting with about $13 billion of businesses in 2018.
Will SRT be put up for sale again? One London financial consultant reports speculation that the Swiss MRO could be sold, and that SRT managers are considering a management buyout. From Asia come rumors of a different scenario. HNA is setting up a separate investment group that might buy all or a portion of SRT, replenishing HNA cash but leaving HNA essentially still in control.
SRT says it can’t comment on shareholder affairs, and HNA did not respond to a request for comments.
The management buyout option would have to find a mutually agreeable price, which might be difficult, and raise the funds. And it’s hard to see how this option solves SRT’s basic problem: it’s a 3,000-person MRO competing with companies like Lufthansa Technik, with 26,000 employees, AFI-KLM E&M with 14,000, HAECO with 17,000 and ST Aero with 8,000 in aviation and 22,000 in its engineering parent. And most of these companies have sister airlines to fill some of the hangar space.
Global MROs also have global footprints, and SRT’s geographical network is more limited. Outside of Europe, SRT has mostly sales offices and logistics centers, plus a component shop in Malaysia. Although owned by a Chinese corporation with many airline interests, SRT does not have much of a Chinese presence yet.
So far in 2018, the MRO has won contracts to support components at HK Express, with 23 aircraft and part-owned by HNA, and engines at Russia’s Ural Airlines with 43 jets.
There’s obviously a rich market in China and Asia, if SRT or its owners can find the capital to build facilities to tap it. But an owner that is selling off assets to raise cash does not seem the most likely source of new investment. Right now, ownership and the direction of the talented MRO’s future growth might be up in the air again.