Fairchild strikes deals for 328 and Airbus components

 - January 9, 2008, 4:20 AM

Fairchild Dornier on December 20 sold its Airbus components manufacturing and general maintenance businesses to Switzerland’s RUAG Aerospace after weeks of intense competition between the Swiss firm and the Russian partnership of Irkutsk Aircraft Works and Basic Element. On the same day, bankruptcy administrator Eberhard Braun announced that Leesburg, Va.-based AvCraft Aviation won the rights to Fairchild’s 328JET manufacturing and support division, conditional on various legal and board approvals.

The deals come after Irkutsk and Basic Element submitted a bid for the Airbus parts division that differed in several points from previously negotiated agreements and required further talks between the bidder and the failed company’s creditor committee. Their latest bid essentially withdrew the firm offer for the 728 project–the company’s most expensive element–in favor of a more definitive commitment for the components division. According to Braun, partly because the Russian bid included only an option for the 728 and excluded any interest in the general maintenance business, RUAG’s offer, which included both the Airbus and maintenance work at Fairchild’s Oberpfaffenhofen headquarters, proved superior.

At press time the acceptance of the 328JET offer remained subject to government approvals because the sale involves the merger of German and American companies. AvCraft, which customizes 328JET interiors for corporate use at its completions center in Tyler, Texas, also charters a 29-seat corporate-configured 328JET from its facility in Canton, Ohio.

In the absence of a suitable bidder willing to take over Fairchild Dornier as a whole, Braun had reached tentative agreements in November with RUAG and AvCraft. Earlier, Alliance Aircraft, led by former Fairchild executive Earl Robinson, failed to submit bank guarantees requested by Braun for its bid to take over all activities of Fairchild Dornier. Likewise, a group of Swiss investors acting under the name Aviation Finance Consulting failed to provide sufficient financial credentials. When Irkutsk/BE reduced their initial offer from a complete takeover to only the 728/928 project, Braun decided to sell off the bankrupt company to several different investors.

Complicated Deal

When Irkutsk/BE withdrew its offer for the entire company and ventured instead to concentrate on the line of 70/90-seat regional airliners still under development, the time seemed ripe for a long-hoped-for solution. Braun agreed to the sale in principle and negotiated an agreement with the Russian consortium, in which EADS, as holder of manufacturing rights of essential 728 components, was apparently involved. Shortly thereafter, however, Irkutsk/BE again changed its focus, this time to the Airbus components business. Since the final bid submitted turned out to differ in several points from earlier agreements and no longer held an advantage in terms of scope, the offers from AvCraft and RUAG suddenly became more appealing.

Fairchild Dornier produces various components of the Airbus A320 series and A330/ 340 series, and is responsible for subassembly of the aft fuselage, including the aft pressure bulkhead.

Manufacturing activities, except for production of Airbus components and sub-
assemblies, are currently at a standstill, and development work on the 728/928 project remains suspended until the now unlikely event that a suitable buyer surfaces. Product support of the 328JET and turboprop line, as well as maintenance activities, continues. A total of 1,400 employees are still working at the company’s Oberpfaffenhofen plant, compared with 3,500 before insolvency hit the company early last year. While 1,100 staff members have left Fairchild Dornier for good, some 1,000 continue to participate in an “occupational program” and could resume work on short notice, in case manufacturing of the 328JET were to resume suddenly, for example.