Meryle Corbett is CFO and director of finance for Kelowna-based aircraft maintenance, air cargo and pilot training company Kelowna Flightcraft Group of Companies. BIV talked with her about strategies the company has used to weather the downturn and the high Canadian dollar, the importance of holding onto good talent through tough times and what’s on the horizon for 2011.
We compete on quality and we get an airplane out on time. Other people will charge way cheaper labour rates, but then you’re stuck in the hangar and they can’t get done on a deadline. If you’re two weeks late with a plane grounded, that’s millions of dollars to the passenger companies. So our focus is quality and timeliness. We get a plane out on time. It doesn’t matter what the barriers. Our theme is really, “Get ‘er done.” You hear that everywhere you go.
I think last year was probably our hardest. Work dried up a little bit in the summertime. But we’ve invested so much in training our employees, what we don’t want to do is have trained a guy on so many different aircraft types and specializations and then lay him off.
If he leaves, then when things ramp up in three months you’ve got to go back and retrain, you’ve got to find them, you’ve got to hire them and then you’ve got to re-invest in training. So we try to stay loyal to our employees and keep the ones that have good skills and expertise. In a downturn, we’d buy some inventory at auction and we’d re-certify it and clean it up and do those kinds of things. We try to find some make-work projects during the slow times to help out.
We have to buy U.S. parts in order to service our planes and a lot of the planes we service are Boeing. We buy a lot out of the Seattle area and from all over the States. So that costs us on the purchasing side although we can manage currency risk a little bit.
The other thing on the Canadian dollar is the labour rates we charge are always compared to the U.S. labour rate down in the Southern states or even down in South America, where they’ll charge $40 or $45 an hour to do the same kind of airplane labour, whereas right now, $65 to $68 is our rack rate. So there’s quite a difference. The problem [for customers] is, sometimes if you can be a little more efficient on costs, sometimes you get what you pay for.
We got lucky in 2010 because we were able to successfully gain a military contract for search and rescue off the coast of B.C. We do all the maintenance for them. So that contract was worth between $30 and $40 million and that helped absorb some of the downturn we would have normally have had where other companies were struggling.
We’ve always been pretty cheap here. It’s the culture of the company: when you can save costs it goes right to your bottom-line profitability. And that impacts our employee bonus system so everybody’s fairly conscious of it. We went out to bid to find IT cost savings last year. We’re saving six figures on some of our IT stuff by standardizing to one telecommunications provider. Instead of four different companies supporting four different bases, one company can support all of them, streamline the processes and give us some savings. We’ve also been using our technology to understand our vendor patterns, where we spend a lot of money and going back and saying, “Look, we spend this many millions of dollars with you, we need better discounts or we want freight concessions or something.”
It adds to it. It gives us that little extra incentive to do that. When you’ve got a hot market and you’re desperate to hire people because the economy’s climbing, there’s not enough time to always focus on that, whereas here we know we have to focus down to stay efficient. And your suppliers are more willing to receive it that way too because they’ve got to compete for their survival so they’re willing to bend a little.
We try and make it a win-win. We can lock in a long-term relationship with a supplier. They win because they know they can rely on us to keep ordering from them. And we win because we have known costs and an ability to keep it down. To me, win-win always works better.
I think the landscape is going to stay volatile. We don’t know where the Canadian dollar is going to go. It can go from US$1.20 to US$0.90 in a matter of months. You have to always be ready and be on your game because you never know when you’re going to get a similar kind of situation. It could bounce all over the place. So we manage the risk on those things and we watch it. The business and market is picking up just slightly. There’s more interest in our work. We’re booked out a couple months longer than we would have been this year in terms of maintenance projects in our hangars, so that’s good news.
We’ve got 600 jobs here in Kelowna. Our first goal is that we’ve got to keep livelihoods going in the community. We don’t have to make big profit when times are down. We want to keep customers happy so they remember a good experience. And then we’ll pick up later when times are better.
But what we’re doing is we’re shifting strategy to do things like go pick up better deals on the market when you can buy inventory at auction and stockpile your parts so that when you need your parts in two years and the market’s gone crazy again, you got them in at a deal at the low times.
Our volume is probably going to be maybe 10% higher than last year. The HST helps a little bit. Lots of little things have just starting to pick up. But just because it’s picking up doesn’t mean you can sit back, kick your feet up and relax yet.