‘It allows us to dream a little’: Sky’s the limit for Atlantic after Lufthansa deal

Lufthansa Technik Shannon's hangar sits directly across the mid-western airport's runway from Atlantic Aviation Group's base, almost dwarfing a passenger jet parked in front of it. "It's three times the size of this place, it's huge," observes Shane O'Neill, Atlantic's chief executive.

His company will take over its neighbour from German aviation giant Lufthansa next month following a deal done last October. Neither side has revealed the price, but Atlantic’s move will save more than 300 jobs that might otherwise have been axed.

Both are in the aircraft maintenance, repair and overhaul business. Neighbours for decades, they’ve borrowed each other’s equipment, swapped notes on their industry, even exchanged ideas. So when Lufthansa Technik announced a “strategic review” of the Shannon operation, Atlantic quickly learned that bad news could lie behind that vague corporate phrase.

“The three options on the table were a sale, a restructure or closure. All very stark really,” says O’Neill. “So, a good result for the region, the best possible outcome to be honest with you.”

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There was a lot of goodwill towards the deal, including from safety regulator, the Irish Aviation Authority, and State agency Enterprise Ireland.

It moves Atlantic up a gear, positioning it to hit €80 million revenues this year from just €15 million back in 2015, when investor Patrick Jordan bought the company out of examinership. It gives it a second hangar at Shannon, with workshops and extra facilities that O'Neill explains offer huge potential, and would otherwise take his business three years to build. It boosts the firm's workforce to about 750 from 426 now.

“We’ve got more exposure to the team over there since the deal closed, and no more than the people we have on this site, there’s phenomenal talent coming across, and huge ambition to put pride back in the jersey,” says O’Neill. “It’s palpable that they want to control their own destiny again and we’re going to facilitate that over the next few years.”

It's a phenomenal site, there's phenomenal workshops, we could be doing, you know, parts maintenance, engine maintenance, wings, God knows what

Atlantic already has two operations. Shannon, which employs 320 staff and Brize Norton in England, where more than 120 people work. Its biggest business involves taking in aircraft from airlines, inspecting the air frames, then repairing or replacing anything that needs work. It's a tightly-regulated business as it is central to safe air travel, and requires teams of highly-skilled workers. O'Neill frequently emphasises that his colleagues and their skills are central to everything.

Groups of those staff are working on three Boeings in the hangar behind the conference room where he is speaking. The nearest, a 757 converted for freight, bears the distinctive red and yellow colours of logistics behemoth, DHL. Furthest away sits a 767 belonging to long-standing Atlantic customer, Star Air, another cargo carrier, part of Danish group, Maersk. A smaller passenger aircraft sent by one of the Republic's many aviation lessors is parked in between.

All are Boeing, because like every aviation maintenance business, Atlantic is approved to work on specific types of aircraft, in its case, those made by the US manufacturer. Lufthansa has Airbus approval, opening the door for Atlantic to work on the group's A320 series, widely used by airlines and thus adding a big market that the Irish player can tap. Licensing for the new generation Boeing 787 should hopefully follow.

While Atlantic is acquiring this potential, along with the hangar, workshops and workers, it is not getting Lufthansa’s customers. “We have to build that up ourselves, so there is a risk in it,” O’Neill acknowledges. “Our existing customers, some of them are expanding, but not enough to fill that hangar, so we’ve gone out and we have found new customers.”

Some have wanted to deal with Atlantic but could not as it did not previously have the space, others are former customers that want to return, more are new. “We have an American cargo carrier that’s going to come in. We’re in the process of trying close deals with other airlines.” In short, he is confident that the new business can fill the 40 per cent of the new acquisition’s capacity that he believes is enough to make it work.

Cargo airlines loom large on the company's client list. It targeted these businesses to ensure it would have work during the quieter summer period, when carriers are flying their planes and not sending them for overhaul. UPS is also a customer, along with Irish freight business ASL. But O'Neill notes that the company strikes a balance with passenger operators. Jet2 and TUI also send aircraft there. "We have dealt with Ryanair in the past and would welcome them back with open arms."

That balance aided Atlantic in riding out the Covid storm, although it was by no means an easy ride. Pointing at the hangar behind him, O’Neill says the company could put 1,200 workers’ hours through there today, which it needs to stay profitable. “There were days when we had 100 or 200 hours.”

Nevertheless, Atlantic kept everyone on. O’Neill argues that the company had to do it, despite the cost of paying 320 people with business reduced to a trickle. “We said you know ‘board, we’re going to have impact here, but let’s not impact our people, because when we come out of this crisis, that’s where our product is’.”

Atlantic used the State’s Employee Wage Supplement Scheme to cover months when work was severely down. The company provided 40,000 hours of training, much of it given by the company’s own experienced technicians, so staff were heavily involved in deciding how all that would work. “They were brilliant,” O’Neill acknowledges. “It just re-emphasised to me that we’re very fortunate to have the team that we have here.”

Air travel is now recovering. Industry figures show that globally, it was 44 per cent of 2019 levels last month, but it is more like 80 per cent in Europe and the US. However, Russia's invasion of Ukraine has cast yet more uncertainty over the industry. O'Neill's says Atlantic's first priority is two of its workers from the Ukraine, for whom the company's human resources staff are providing with support.

The macro level is hard to call. “There will be an impact, it’s hard to say what it’s going to be. The price of oil has gone up, how’s that going to affect airlines that have already suffered on the back of Covid? The knock-on effect on us is that there’s pressure on price, we have to remain competitive. The quality of the product coming out of here is fantastic. But we can’t just compete on quality or delivery times, we have to get our costs right.”

In some ways, Atlantic is used to turbulence. It began in the 1960s as Shannon Repair Services, an Aer Lingus subsidiary. The airline sold it to UPS in 1983, the year that the company launched its first apprenticeship programme, some of whose graduates are still with it today. UPS also built the hangar at Shannon that now houses its operation.

The logistics group sold it to Air Icelandic, which then transferred it to Russian carrier Trans Aero. That airline ran into trouble in 2014, forcing the Irish maintenance business under the protection of the High Court, which appointed examiner Michael McAteer of Grant Thornton, to oversee its rescue.

Jordan, who had sold a construction business in 2007 and was looking for investments, stepped in, drawn by the fact that air travel was growing at the time, creating obvious opportunities. O'Neill came on board as chief operations officer, taking his current job in 2017. In 2015, Atlantic Aviation Group, as it was newly named, employed 270 people with annual sales of €15 million. By last year, that reached 426 workers and €45 million turnover.

The ultimate target is €200 million profitable sales and 1,000 workers by 2030. Atlantic reached a big milestone when it bought part of defunct airline Flybe's maintenance operation in Brize Norton in mid-2020. That business maintains the giant Airbus A400 cargo aircraft flown by Britain's Royal Air Force.

While it did not tick quite as many boxes as Lufthansa Technik Shannon, Brize Norton met many of Atlantic's own criteria for deals, including getting it into a new market. It came to the acquisitions team through an industry contact in Britain. "He rang us and said 'I think there's an opportunity coming, would you like to have a look at it? Based on what you're trying to do, I think this might work'."

The already troubled Flybe had gone to the wall in February 2020, just as the first Covid jitters were hitting air travel, leaving behind two maintenance businesses. Both ended up in Irish hands, as Dublin Aerospace bought the civil aircraft operation. "We did the deal over a three-month period on Teams. We started it in March 2020 and we got it signed on the second, third of June, 2020," O'Neill recalls.

They finally got to visit Brize Norton in September 2021, but are now getting there and back regularly. The A400s were used to airlift people from Kabul as the US and its allies pulled out. Before that they were enlisted to transport Covid vaccines. O'Neill speculates that they could yet play a role in aiding those hit by the Russia-Ukraine conflict.

Acquisitions aside, Atlantic grew its own business over the past seven years. After the examinership, it looked at what it did, and asked how that could be expanded. O’Neill says this involved workers, backers and customers. “It wasn’t Patrick or Shane sitting in a room on their own, sticking their finger in the air and saying ‘this is a great idea’.”

What emerged was that customers were looking for other services that the company could provide from its own resources. Since then it has added design. “That’s experienced engineers, who know the aircraft well, and they’ve trained to modify aircraft, cabin interiors, and avionics.” All that has to be done within strict rules set by safety regulators.

A third stream is continuing airworthiness management. That is managing technical and maintenance records for individual aircraft owned by customers, or aiding airlines and lessors when they are moving planes between different jurisdictions. All those records must be approved by the Irish Aviation Authority and ultimately the European Union Aviation Safety Agency.

Finally, Atlantic added a training school, to meet its needs and those of the wider industry. This includes an apprenticeship programme run with State agency Solas and Technology University Dublin. Along with that it offers type training, this is where engineers specialise in working on a particular type of aircraft, for example a 757 or 737, to get a basic maintenance licence.

O’Neill says these ancillary businesses offer plenty scope for growth in their own right. Immediate challenges aside, he sounds optimistic about the longer term. “I’d say we’ll get to €150 million revenues probably within the next three to four years,” he predicts.

But O’Neill is obviously keen to tap the potential that the Lufthansa Technik Shannon takeover will bring. “Three times the size of this facility we can go headlong into the same type of business, or we can mix it up a bit,” he says. “It’s a phenomenal site, there’s phenomenal workshops, we could be doing, you know, parts maintenance, engine maintenance, wings, God knows what. It allows us to dream a little.”

Name: Shane O'Neill
Job: Chief executive of Atlantic Aviation Group
Family: Married with children
Hobbies: Sport, particularly Gaelic football
Something we might expect: He has a degree in quality management and a master's in reliability from Sligo Institute of Technology, and an executive MBA from NUI Galway.
Something that might surprise: He took part in the Leadership 4 Growth Programme in 2019.