Completions outlook good and getting better

 - September 14, 2006, 9:51 AM

It is hard not to get excited,” said General Aviation Manufacturers Association (GAMA) president and CEO Pete Bunce in April as he reflected on market activity in this year’s first quarter and on new technologies and products still to come.

The GAMA numbers were unprecedented, with the highest first-quarter billings in history, and at $4 billion, 39.7 percent higher than in the first quarter of last year. In addition, numbers compiled by AIN showed 236 turbine business aircraft were delivered in the first quarter of this year, 62 more than in the first quarter of last year.

As for pre-owned aircraft, demand for high-serial-number/low-hour aircraft has remained high. Last year, the industry recorded 1,439 sales, and the moving
average of monthly sales continues to rise.

All of this new and used aircraft activity spells business for the completion and refurbishment industry as OEMs and independent shops scramble to keep up. And while the excitement might be just a little less
palpable this year, those in the completion and refurbishment business are looking at good times.

Savannah Air Center CEO Jeff Zacharius said business was good last year and is better this year, and he expects the Savannah, Ga. completion and refurbishment center to see a 30-percent increase in revenue this year over last year.

Jeff Bosque, president of Landmark Aviation’s Associated Air Center, sees a “very strong” market for completion and refurbishment work and describes the Love Field center’s backlog as “unprecedented.”

Midcoast Aviation, now a Jet Aviation property, expects to deliver 25 green completions this year, and president Kurt Sutterer conservatively estimates an annual growth rate of about 10 percent.

“We’re as busy as we can be,” said Jim Harrison, head of completion and refurbishment at Jet Aviation in West Palm Beach, Fla. “I’d say we’re probably doing 100 percent better than last year.”

Launching a start-up carries with it an inherent risk, but Dale Dunn, president and founder of DunnAir Business Jet Completion Center, feels encouraged. The Tucson-based center opened last winter and has delivered seven airplanes since receiving its
Part 145 repair station certification last July.

Last year, the forecast was that growing demand for new and derivative aircraft would be a driving force in all this completion and refurbishment activity, and that seems to be the case. It is at Bombardier. The Canadian company began delivering its Challenger 300 in January last year, the Global 5000 entered service in April and the Global Express XRS followed in November.

The Montreal-based manufacturer also introduced the Challenger 850, 870 and 890 last year, “to meet the evolving needs of both existing shuttle operators and a new generation of potential users.”

It is an axiom in the industry that you never tell the customer “no.” Rather than say no, Bombardier has acquired some partners in the completion process to make saying “yes” easier. The strategy has allowed the company to focus on doing standard interiors at its Montreal plant and to send aircraft that require more highly customized cabins to select independent centers. These include Innotech Aviation in Montreal; Lufthansa Technik in Hamburg, Germany; Midcoast Aviation in Cahokia, Ill.; and Savannah Air Center in Savannah, Ga.

Midcoast has long been doing green Challenger 604s, and although production of the 604 ceased this year, the company will hardly lack for work. Bombardier has chosen it as a “preferred” completion center for the Challenger 605, Global 5000 and Global XRS, as well as the Challenger 850 business jet derivative of the CRJ200.

Bombardier picked Savannah Air Center to handle green completion work on select Global 5000 and Global XRSes. According to Savannah CEO Zacharius, the company has two Global 5000s and a Global XRS in the works. “We’re trying to space out the green completions so we don’t get swamped. We need to keep our refurb business going,” he explained.

Last fall, Innotech Aviation began doing work for Bombardier on its Global line. “We’re getting progressively more involved in the interior work and will eventually be doing entire cabins here,” said Marc Galin, director of sales and marketing. “We’re going to be very much a high-end, boutique interiors shop for the more personalized aircraft.”

Lufthansa Technik was selected by Bombardier to do executive/VIP interiors for the Challenger 850 and has a contract for 17 of them over the next three years. Five are already in the completion pipeline in Hamburg, and the first was scheduled for delivery to a European customer this month.

Dassault Falcon Jet has traditionally used the completion facilities at Jet Aviation in Basel, Switzerland, to assist with green Falcon interior finish. With demand growing, it plans to continue to send some of its Falcon 2000EXs and Falcon 900EXs there.

The French company does most of its aircraft interiors at its Little Rock completion center in Arkansas. But even with the new hangars there built specifically for the Falcon 7X, said Roy Elsasser, director of aircraft spec and design, “We just can’t put any more airplanes through the Little Rock facility.”

While some OEMs are outsourcing entire green aircraft, Gulfstream Aerospace continues to provide quotes only on finished aircraft, which are all done in-house. It was 10 years ago that the Savannah, Ga. aircraft manufacturer decided to get into the cabin completion business. Today, about 99 percent of Gulfstream business jets sold have cabin interiors done by Gulfstream.

This has allowed Gulfstream to “roll back” some 300 elements of cabin completion work–lavatories, lighting, wiring–into the aircraft assembly process, which Gulfstream refers to as “initial phase manufacturing.” In doing so, said a spokesman, it has “dramatically reduced” final-phase manufacturing, or cabin completion. The introduction of “lean manufacturing” and the roll-back program has reduced total cycle time for the initial phase from 18 to 16 weeks, and the final phase of cabin completion from 25 to 23 weeks.

With interior completion centers in Savannah and at other Gulfstream facilities in Appleton, Wis.; Dallas; and Long Beach, Calif., Gulfstream, he explained, is able to keep up with a “modest” increase in aircraft production. “We carefully control the when, where and how of the production rate.”

He added that while Gulfstream offers its aircraft interiors in the form of a prescribed cabin configuration choice and list of standard options, “You can still opt for a completely customized, personalized cabin.”

A relatively new in-house furniture center in Savannah produces cabinetry and trim for all four Gulfstream completion centers.

The company continues to provide service and/or cabin refurbishment work on about 70 percent of the worldwide fleet of more than 1,500 Gulfstreams. And at the same time, the centers solicit work on airplanes from competing manufacturers. The idea is that doing quality work on competitor aircraft will help sell new Gulfstreams.

Last year Cessna Aircraft in Wichita expected to deliver 240 aircraft, 61 more than during the previous year. The company beat that expectation by seven airplanes. With deliveries of the new Mustang scheduled to begin in January, Cessna expects to see delivery numbers closer to 335.

The demand for new Citations has meant changes in the interior completion process, primarily in what Cindy Halsey, v-p of interior design, engineering and development, calls lean technologies.

“We’re working more efficiently and putting personal touches where customers want it and not where they don’t expect it or might not even see it,” she explained. For example, the company no longer paints seat frames, which customers never saw, to match the color of the leather upholstery. And it no longer offers a choice of 27 colors for the baggage compartment carpet.

Cessna has reduced the “stock to dock” time for interior components, scheduling arrivals as close as possible to the time they are to be installed. “We discovered that the longer it sits in a box, the more likely it is to be damaged.”

The company has also placed new emphasis on vendor choices. The new Mustang very light jet is an example. “We went with some high-end interiors suppliers, such as Ipeco of Torrance, Calif., for the seats, to PCI NewCo in Wichita for sidewalls and headliners, and to DeCrane Aircraft as the interior integrator. DeCrane ships virtually the entire cabin to Cessna as a kit, ready for installation.”

In fact, Cessna has outsourced most of the cabinetry and upholstery work for Citation interiors. “We’re not cabinet builders,” Halsey explained. “But we know who the best cabinet builders are, and that’s who we pick.”

With the Mustang, Cessna moved away from the “menu” approach of offering a bare airplane and hundreds of options. “The customers told us, ‘Just give us a well equipped airplane,’” she said.

Cessna is also doing line-installation of some of the interior during Mustang assembly, said Halsey. “We’re doing it only on the Mustang, mostly because it was designed that way from the start.”

At the same time that Dassault Aviation is looking ahead to the first deliveries of its new Falcon 7X early next year, the company expects to see deliveries of all Falcon business jets jump from 60 this year to 75 next year. That means plenty of work for its completion facilities. The French manufacturer does some Falcon interiors at its facilities in Marignac and sends some–Falcon 2000EXs and Falcon 900EXs–to Basel, Switzerland, for completion by Jet Aviation. But the greater number, by far, are done at its Little Rock, Ark. completion center, where new hangars are being prepared for Falcon 7X completion work.

According to Elsasser, upgrading the computer product development program to Catia V5 has allowed design engineers to keep up with aircraft production. “Now everything is being defined by engineering,” said Elsasser, “from screw holes to wiring bundles.”

Embraer’s launch of a corporate aviation division last spring will further drive growth in the completion and refurbishment market. The Legacy, in executive and shuttle configuration, has sold well. Now the Brazilian manufacturer has announced the launch of the new Phenom 100 very light jet and the Phenom 300 light jet. It has also redesignated the Legacy as the Legacy 600 and most recently revealed plans for the Lineage 1000, a business jet based on its E190 airliner.

The $40.95 million Lineage will compete in a market niche between aircraft the size of a Global Express and Gulfstream and the size of the Airbus Corporate Jetliner and Boeing Business Jet. The company plans a “flexible interior” with five distinct privacy zones and two lavatories. A third lavatory and shower are optional. The company will offer a set of pre-defined cabin configurations.

Embraer works with Nordam and Duncan Aviation for interior components for the Legacy 600 but has begun producing its own cabinetry in a shop at its new Gavião Peixoto plant in Brazil.

Embraer selected BMW DesignWorksUSA to do the interior design of the Phenom 100 and 300. With that defined, Embraer is in the process of selecting vendors for the interior components, and according to v-p of market intelligence Marco Tulio Pellegrini, “Installation will be done in Brazil.”
The manufacturer has not yet chosen a design firm for the proposed Lineage interiors.

Plans are also under way to create an executive interior for Boeing’s 787 and Airbus’ A350 and A380.

At the European Business Aviation Convention & Exhibition (EBACE) in Geneva this spring, Jet Aviation made its intentions clear as it presented 1:25-scale mockups of a Boeing 787 and an Airbus A350 with executive/VIP interiors. The designs were in partnership with yacht and corporate aircraft interior designer Peder Eidsgaard. One of the more striking features was a cinema/lounge with raised level seating, a pop-up, 60-inch gas plasma screen and a loft-style mezzanine daybed.

Also at EBACE, Boeing Business Jets said it has been sending out initial proposal requests for a bizliner based on the 787-8. Dubbed the 787 VIP, the airplane will be available beginning in August 2012, according to BBJ president Steven Hill.

The 787 VIP would offer approximately twice the floor area of a BBJ 3. Like the BBJ series, the 787 VIP would be sold green off the 787 Dreamliner assembly line and sent to an independent completion center of the customer’s choice for interior completion.

As for an executive/VIP version of the giant Airbus A380, despite rumors that Lufthansa Technik has an inside track, Airbus has yet to reveal even whether one of the big jets has been sold for that role.

The independent side of the completion and refurbishment industry saw two major changes last year. In the first, the group of companies acquired by The Carlyle Group between 2001 and 2004–Garrett Aviation, Piedmont Hawthorne and Associated Air Center–were brought together under the new Landmark Aviation brand.

Associated Air Center, a major independent completion and refurbishment center for large executive/VIP aircraft, from Airbus A319s through Boeing 747s, continues to operate under its old name. The Dallas Love Field center plans to deliver 13 large executive/VIP and government airplanes this year.

Associated president Bosque said in May that the facility was working simultaneously on three BBJs (one for an African head of state) one BBJ 2, and three Airbus ACJs (A319-based). He added, “We’re booked out to the second quarter of next year.”

Resources from Garrett Aviation’s group of interior shops have been shifted, for the most part, to the larger center in Springfield, Ill. “We realized that Springfield had most of the assets and resources and if we pumped more into it, it would quickly become a world-class completion and refurbishment center,” said Landmark CEO Roger Wolfe.

The company is also promoting the Springfield facility as a one-stop shop, capable of airframe work, engine overhaul, avionics and exterior paint. “We might have as many as 20 to 25 aircraft on the ground there at any one time,” he said.

The paint shop at Springfield, said Wolfe, is a major asset, capable of accommodating aircraft as large as the Global Express. “In the past year,” he said, “the shop has done more than 40 full paint jobs.” Just two years old, the facility consists of three booths, all capable of doing strip, prep and paint. “We could probably do 300 paint jobs a year without breaking a sweat.”

According to Wolfe, interior completion and refurbishment accounts
for about 25 percent of Landmark Aviation’s business, and the company expects to see double-digit growth in that area this year.

In February last year, Jet Aviation signaled its intent to buy independent completion and refurb center Midcoast Aviation, and the acquisition became final barely a month later.

The deal calls for Midcoast to retain its brand name. Company president Sutterer said, “We’ll do exactly what we’ve been doing at Midcoast”: maintenance, repair and overhaul; interior refurbishment; and green cabin completion.

The company, he said, has invested $17 million in infrastructure in the past couple of years, and he added that considering the number of airplanes moving through the paint shop, “We could probably stand to build another one.”

Midcoast has also made strategic moves with some major suppliers. They include “an exclusive agreement” with B/E Aerospace to install its new 16-g Stratus executive seats in green Bombardier business jets. He also noted that B/E is about to introduce a 16-g, side-facing divan that weighs 50 pounds less than the old model. An STC is expected before year-end, with availability starting early next year. Under the terms of a 10-year agreement, Midcoast will be providing service as a B/E representative.

Midcoast has also joined with Lufthansa Technik of Hamburg, Germany, as a participant in the German company’s network integrated cabin equipment (Nice) system. “We’re their distribution and support center for that product in the U.S. and it will be installed in some of our green cabin completion projects,” said Sutterer. “We’re already quoting it for some of our customers.” The Nice system controls all cabin functions and devices and distributes audio/video and data on a single digital Ethernet backbone.

Sutterer said the availability of capital for expansion and growth “is certainly greater as part of Jet Aviation,” adding, “So you won’t see us shrinking anytime soon.”

Jet Aviation’s completion and refurbishment center at West Palm Beach, Fla., will also continue as it has in the past, focusing primarily on refurbishment work on large business jets–“Falcons, Gulfstreams, Challengers,” said interior completions manager Harrison.

Most recently, Jet Aviation won a contract from Piaggio to do 20 cabin completions for the Italian manufacturer’s Avanti II turboprop twin over the next two years. Harrison said the center is still doing some Sikorsky S-76 cabin refurbishment and has just issued quotes on some S-92 cabins.

Independent completion and refurb centers have been reporting full shops and additional shifts to keep up with the demand for refurbishment work. Savannah Air Center, which opened its doors seven years ago doing exterior paint, has become a serious competitor for such established centers as Duncan Aviation and Elliott Aviation. The green completion projects are starting to roll in from Bombardier; a Global 5000 and a Global XRS are currently in the works and more will come before year-end. At the same time, the company is soliciting more refurbishment projects on a variety of aircraft types and models.

The center has been in a state of near-constant expansion since it opened. A new, 19,000-sq-ft shop dedicated to upholstery and engineering was expected to open this month, followed by ground-breaking for a new 70,000-sq-ft hangar.

Zacharius said Savannah Air has the Boeing 737 and Boeing 767 on its repair station certificate, but despite invitations to bid on larger business jets the company is taking a cautious approach. “I don’t know about doing a green BBJ,” he said, adding, “Maybe after we get our feet wet on a refurb.”

He also noted a growing number of customers asking for bids on a complete aircraft reconfiguration and refurbishment, rather than on a less complex, not to mention less expensive, refurbishment alone.

“Exterior paint, for some reason,” said Zacharius, “has really exploded, and we’re getting a tremendous number of calls.”

All this activity has resulted in a search for more skilled workers and more engineers to add to its current workforce of about 200. “We’re hiring for all the trades,” said Zacharius.

Meanwhile, smaller independent centers such as Indianapolis Jet Center are also doing well–some of them exceptionally well. “All I need are more hours in a day,” said company president Randy Keeker, noting that the shop has a three-month backlog. “We finished 2005 in a flurry that’s continued this year, and it looks like it will go on through the entire year.”
Indianapolis Jet is hiring and considering taking over more hangar space at

Indianapolis International Airport to expand the current 6,000 sq ft dedicated to cabinetry and upholstery. Keeker also anticipates building a new hangar big enough to handle aircraft as large as a Boeing 727. “We’re hoping to get some large-aircraft projects.”

DunnAir could hardly be called a small shop–at least not in terms of size. The company is housed in a 235,000-sq-ft hangar capable of accommodating a Boeing 747. Among aircraft in the pipeline is a Boeing 757 in for minor refurbishment. “I expect we’ll run about 15 full refurbishments through here this year, and maybe a half-dozen minor refurb jobs,” said Dunn.

He said the facility, at Tucson International Airport, is getting three or four requests for bids a day and as of the middle of last month was waiting for replies on 17 quotes. “It’s our time, and we’re going to take advantage of it,” said Dunn.

At Van Nuys Airport in Los Angeles, Syncro Aircraft is completing a Gulfstream IV. “We try to do one large airplane at a time, and maybe 20 minor projects,” said president and CEO Barbara Cesar.

“I think this year is going to be much better than last year,” she said. “I’m not going to say by how much, but a lot.”

Is the company hiring? “Oh, yes,” said Cesar. “We’re looking for a production coordinator, skilled instal-
lers, cabinetry specialists, upholsterers, everything,” she added.

Eric Roth at International Jet Interiors in Ronkonkoma, N.Y., has his center hard at work on the complete reconfiguration and refurbishment of the first Challenger 604 to go into service in India. “It’s going to be one of the most incredible cabins we’ve done,” said Roth. The company is working with the client’s interior designer, “who came in the other day with samples of alligator, ostrich and python. That’s going to require some coordination with the wildlife people,” said Roth.

Also in for a major refurbishment, though on a somewhat less dramatic level than the Challenger 604, is a Hawker. A Falcon 900 is expected to arrive later this summer, also for a major refurb.

Business has been “really good” said Roth. “We’ve been doing a lot of work for international customers and we would certainly like to expand.” Part of that expansion is adding to the current workforce of about 20 employees.

Roth said customers bringing airplanes in for refurbishment seem to be focusing particularly on the latest technology–the latest satcom system, Airshow 4000, 110-volt outlets for laptops and iPod outlets.

So is there a downside to all of this? Most likely, say some insiders, it is on the pre-owned aircraft refurbishment side of the industry.

When the economic revival began making itself felt about two years ago, the demand for new business aircraft began to grow. But OEMs, left during the recent recession with white-tails for which there were no customers, inventories sitting idle on shelves, and valued employees laid off, were cautious about ramping up production too quickly and being overextended if the current boom turned to bust.

So, unwilling to wait two or three years for delivery of a new airplane, customers began “cherry picking” from among the late-model/low-hours pre-owned inventory. And typically, the first stop after acquisition was a refurbishment shop.

As a result, refurbishment specialists found themselves in the enviable position of being nearly swamped with work. And that has continued to the present. That’s the good news. The bad news–and it’s only relatively bad news–is that the demand might flatten over the next year.

“Last year was a year in which we really didn’t have to work to sell airplanes,” said Jeteffect president Bryan Comstock, recalling the rush by customers to buy pre-owned aircraft.

“In the first quarter of this year, all the brokers were back at work, educating buyers and sellers alike,” he said. “Everybody felt the slowdown. Then in the second quarter, it picked up again. Now I think this summer, there’ll be another slow period. But it’s an unpredictable market.”

New airplane sales continue to propel used aircraft sales as customers find that delivery dates for some airplanes are out to 2008, 2009, “and in some cases as far out as 2010,” said Joe Carfagna, vice chairman of Leading Edge Aviation Solutions in Franklin Lakes, N.J.

But the used aircraft inventory has shrunk. “I have a client with a G550 who’s looking for a Boeing Business Jet and he can’t find one anywhere,” said Syncro’s Cesar. “He did hear about one that was for sale, and by the time he contacted the broker it was gone.”

This means that, at worst, refurbishers might see a drop in demand this summer and into the fall. Or the demand might simply flatten, said others.

“It’s a wild market and I’ve never seen one like it,” said Carfagna.

As for new aircraft completion work, barring an unforeseen economic downturn that affects the sale of new airplanes, the forecast seems to be for continued growth, at least according to market surveys by Honeywell and Rolls-Royce.

Last fall, Honeywell predicted growth in business jet deliveries from about 800 aircraft this year to slightly more than 1,000 in 2015. Rolls-Royce was forecasting a 32-percent increase in
deliveries from 2005 through 2014, with medium- through ultra-long-range aircraft constituting 70 percent of the dollar value of those deliveries.

Also good news for the business aviation industry as a whole is a decision by House and Senate negotiators in May to remove measures of the Tax Relief Act of 2005 that would have increased the tax liability of business executives who use company aircraft for personal reasons. Those measures would also have limited the tax benefits companies receive when the aircraft are used for recreation.

The short- and long-term future of business aviation then looks good, and by default, the forecast–short- and long-term–for the completion and refurbishment industry is equally strong.