AvCraft finds bargain in 328 program deal

 - November 30, 2007, 10:29 AM

Leesburg, Va.-based AvCraft last month signed a contract to buy the Fairchild Dornier 328 program and its associated support businesses. The deal, at press time still subject to government approvals, would include the rights to the Fairchild name, the plant and equipment for the manufacture of 328s and 18 fully built 328JETs in storage at the bankrupt company’s Oberpfaffenhofen, Germany manufacturing complex. Although neither the Fairchild Dornier administrators nor AvCraft would discuss price, asset estimates peg the transaction’s value, including the completed airplanes, at roughly $100 million.

AvCraft CEO Ben Bartel has met with potential corporate customers and existing airline operators of the 328 to assuage concerns over the company’s ability to support the product. Fairchild Dornier, long notorious for its lack of enough parts, warehouses, accurate technical documentation and support expertise to satisfy the needs of airlines, fell into bankruptcy last April largely due to its inability to react to changing requirements of its customers. AvCraft must convince those same customers that it controls the capital and manpower to do better than its bankrupt predecessor.

A corporate aircraft completions and refurb specialist, AvCraft can claim virtually no level of experience in dealing with scheduled airlines. Of course, the level and nature of support expected from a business jet client does not compare with the demands of 328 operators Atlantic Coast Airlines, PSA and Skyway Airlines, for example. The ever-confident Bartel told AIN he relishes the challenge, however.

‘Let the Customers Design It’
“Not for one minute do I think this is going to be easy, but I look at this as an opportunity,” said Bartel, referring to Fairchild’s reputation for less-than-stellar support. “I’ve spoken with virtually all the customers personally. Immediately after this thing closes I’m going to get together all the senior people in the company and we’re going to go out and allow the customers to design [the support infrastructure] through a series of focus groups. I’ve got a pretty successful background in customer service. My basic philosophy is if you let the customers design it, it’s pretty tough to go wrong.”

Bartel said all 328 production will remain in Germany, where some 1,000 employees who participated in a government sponsored “occupational program” stand ready to resume work once the assembly line opens. “It’s a state-of-the-art facility, it’s brand new and there’s an unbelievably well trained workforce there,” he added. Bartel estimated that within two years the company will employ 500 people in Oberpfaffenhofen. In the U.S., the division will likely need another 500 sales, support, administrative and technical personnel.

The AvCraft CEO estimated that aircraft assembly would begin in about six months, after the company delivers the 18 airplanes still in inventory. Bartel said he has already sold all 18 airplanes, most of which will go to new customers. Eighty percent of the sales, he added, came from non-airline customers, a trend he expects to continue. “I believe there’s a future for between 300 and 500 of these things,” said Bartel. “We have real serious interest already for north of 100 airplanes, and we’re already working on contracts for more than 40.”

AvCraft holds an STC on a shuttle interior mod for the 328JET. A 29-seat version it used to obtain the certification now flies with its Canton, Ohio-based division, AvCraft Jet Charters. It also plans to resume working toward an STC for the Envoy 3, the business jet version of the 328JET that features a flat floor and extended-range fuel tanks. The company had finished more than half the work necessary for the Envoy 3 STC when Fairchild Dornier filed for bankruptcy last April.

With the sale comes Fairchild’s wing production and support facilities in San Antonio, where Fairchild Dornier once employed more than 700 people. Although Bartel said at this point he expects to resume wing production in Texas, that could change. “Until I get a better alternative, we’ll leave the wing production in San Antonio,” he said. “Now if someone steps up and says we’ll build the wing for 50 percent of what you’re getting it for today, obviously I’m going to listen.”

AvCraft also plans to conduct Fairchild business out of its offices in Leesburg, near the site of Fairchild’s largest U.S. sales office in Herndon, “but there won’t be anything of that grandeur,” said Bartel. “My corporate philosophy is different from the previous ownership. I believe most of the money and most of the company’s presence should be geared toward operations rather than corporate offices.”
AvCraft currently employs about 160 people, and generated revenues of roughly $30 million last year.