To survive the drastic pandemic-driven downturn that hit its airline customers, Everett-based aircraft maintenance company Aviation Technical Services laid 500 people off last year. It shifted focus from working largely on passenger jets, many of which stopped flying, to find new work doing maintenance on cargo planes.
And even then, ATS needed $57 million in government pandemic support to keep the remaining 1,200 employees on the payroll.
“It’s been a real heck of a year, the toughest one I’ve been involved with,” said chief executive Matt Yerbic in an interview last month at ATS headquarters.
As the worst of the crisis begins to ebb, Yerbic, 51, told employees Wednesday he’s stepping aside to become chairman. While he plans to remain active in strategic company decisions, he’s handing over the CEO role on June 11 to company president Paul Dolan.
Dolan, 55, flew Boeing F/A-18 jet fighters for the Navy in the 1990s and held executive positions at two jet engine repair companies in San Diego before joining ATS five years ago.
Touring the company’s expansive hangar and ramp on the south end of Paine Field last month, he said the changes forced during the pandemic have left ATS stronger and positioned for a recovery.
“We’re smaller and leaner. The workforce is more motivated. It’s allowed us to diversify our customer base,” said Dolan.
In addition to storing and maintaining grounded 737s for longtime customer Southwest during the pandemic, ATS developed relationships with new airlines. It took care of about 120 grounded planes for Delta, 31 of those parked at Moses Lake, the rest in Kansas City, Missouri.
And Dolan said it found substantial new work doing heavy maintenance on Boeing 737s that had been converted to freighters for “one of the highest growth cargo operators” in the U.S.
Dolan declined to name that new customer, saying it is exceptionally sensitive about revealing details of its business. However, Jeff Lee, associate editor of trade journal Cargo Facts, said only one fast-growing air cargo company has built up a large 737 freighter fleet in the U.S.: Amazon Air. The online retailer’s logistics operation has 22 such planes operated by Minneapolis-based Sun Country and Atlas Air, based in Purchase, New York.
ATS, with facilities in Texas and Missouri as well as Washington state, now has a total nationwide workforce of about 1,200 employees, down from about 1,700 pre-pandemic.
The Everett workforce is about 800 employees, down from 1,100.
And although ATS is currently seeking to hire and train 50 to 60 mechanics, Dolan expects the overall size of the company to stay close to its newly reduced level for several years.
“I don’t see us adding a lot of that back,” he said.
What happens next?
ATS started in 1970 as Tramco at Boeing Field before moving to Paine Field in 1977. Goodrich bought the company in 1988 and then Australian investment bank Macquarie Group acquired it in 2007.
Yerbic started his aviation career at 18 with Alaska Airlines in Anchorage, working the graveyard shift loading bags and cleaning toilets while going to college during the day.
He spent 19 years at the airline and rose to become managing director of air cargo before he joined Macquarie in 2007 as chief commercial officer of its aerospace group, which included ATS. A year later, he was named president of ATS.
In 2013, the ATS management team led by Yerbic and other investors bought out Macquarie. Since 2015, New York City private equity firm JLL Partners owns 70% of ATS, with management owning the rest, including more than 20% owned by Yerbic.
Over the last decade, Yerbic managed ATS’ expansion from a stand-alone airframe heavy maintenance business based solely at Paine Field to a much larger operation with facilities also at Moses Lake in Central Washington; Kansas City; and Fort Worth, Texas.
In Everett, ATS does aircraft heavy maintenance inside its large hangar space at the south end of Paine Field, and has a separate parts repair facility at the north end. It also offers engineering services to airlines that want customized modifications.
At Moses Lake, it mainly does modifications on VIP aircraft. In Kansas City, it does heavy maintenance as well as teardown of older aircraft for parts. In Texas, it refurbishes, sells and distributes spare parts. It’s about to consolidate four separate Texas facilities into a newly constructed component repair center in Fort Worth, opening in July.
When the pandemic hit last March, expansion plans gave way to ensuring survival.
Yerbic said he’d planned the CEO transition for last year but stayed on longer to deal with the crisis. He hasn’t taken any pay since the pandemic began.
He scrambled initially to add sanitizing and cleaning measures — not easy inside a facility that maintains older aircraft, with all the oil, grease and metal shavings that entails — and adjusted shift schedules to keep groups of employees separated. Within weeks, he began layoffs.
“It’s mostly about making sure we stay in business,” Yerbic said in March 2020. “Our business tracks the airlines. The world of the airlines is changing so drastically and so rapidly, we don’t know what happens next.”
By last fall, business was half of its normal level.
Late in the year, ATS let the lease expire on an extra hangar it had occupied beside the new passenger terminal at Paine Field. “That was a COVID decision,” Dolan said, adding that it’s more efficient to have all the heavy maintenance in one place now.
Storing and keeping grounded airplanes properly maintained became a new business.
Engines were drained and preservation oils added. Engines and landing gear were wrapped to protect from moisture and insects. For maintenance, auxiliary power units were regularly turned over. Airplane tires were rotated every couple of weeks to ensure they didn’t go flat.
At peak, ATS was looking after 251 parked Boeing and Airbus jets in Everett, Moses Lake and Kansas City. Later, each one that returned to service required a minimum 200 hours of work, including relubricating all the moving parts and performing functional tests.
And when the Federal Aviation Administration cleared Boeing’s 737 MAX to fly again in December, ATS teams in Everett and elsewhere supported a couple of airlines by completing the wiring modifications required before their jets could return to the air.
Today, prospects are suddenly brighter. The U.S. airlines are looking toward a summer recovery. All the planes ATS stored for Delta are now returned to service.
Yerbic said the airlines anticipate the largest demand uptick in the fall. “We think the third quarter will be a turning point,” he said.
The big hangar at Paine Field can fit 10 jets at a time. Last month, there were seven inside being worked on.
Yet ATS is not expecting a full recovery soon.
Dolan cites an analysis by Kevin Michaels, founder of aviation consulting firm AeroDynamic Advisory, predicting that demand for aircraft maintenance, repair and overhaul services won’t recover to pre-COVID-19 levels until 2023 or 2024.
Until then, ATS anticipates business will be down 15% to 20%.
Still, Dolan said majority owner JLL has been a patient investor, funding the expansion and consolidation in Texas. “They’re not in a rush. They want to see value built up,” he said. “They never panicked through the pandemic.”
He said he’s confident ATS will eventually thrive again because its now-broader customer base and newly diversified business enable the company to take care of airplanes at every stage of their two-decade-plus lives.
“It’s always been our dream,” said Dolan. “From working on new 737 MAXs, to maintaining airplanes throughout their lives, through parting them out.”