AvCraft’s 328 buy closes under cloud of skepticism, uncertainty

 - January 28, 2008, 6:29 AM

When reports began circulating last month that Leesburg, Va.-based AvCraft Aviation had reached an agreement to buy Fairchild Dornier’s 328 production and associated support businesses in Germany, signs of a less-than-healthy state of affairs within AvCraft, particularly at its Tyler, Texas-based repair station, emerged as fast as disgruntled ex-employees could log onto their e-mail servers. At its peak employing more than 100 managers, mechanics and associated support personnel, AvCraft’s Tyler facility has seen its total roster shrink to 22, only one of whom at press time was an A&P certified mechanic. At least two former employees have filed wage claims with the Texas Workforce Commission in an effort to recover back pay, medical premium reimbursements, 401(k) contributions and vacation compensation, while those that remained awaited word on the company’s plans for the future of the Tyler location.

By the third week of March contract negotiations between AvCraft and Fairchild Dornier’s bankruptcy administrators remained in the “final stages,” according to one of the principles of the public-relations firm retained by AvCraft last month. In early January AvCraft CEO Ben Bartel told AIN “the ball is on the one-yard line,” and that only some minor details remained outstanding. A month later news prematurely broke that the sides had reached a final agreement.

On March 26, however, the company announced that it finally reached terms with the administrators on the purchase of “the entire 328 program and its worldwide customer support operations.” The deal reportedly included 18 finished airplanes and five more in various stages of completion. The company said it expects to begin deliveries within 60 days.

Through its public-relations firm, AvCraft claimed it paid all back salaries to the former Tyler employees last month, and attributed the gaffe to an accounting error. However, the Texas Workforce Commission confirmed that one of the claims it received–for $10,460.79– remains open and has entered litigation. AvCraft paid the other, worth $720, on March 5. Several ex-employees insist that the company still owes them benefits compensation. According to the AvCraft spokesman, total employment company-wide now stands at “about 100,” including those working at its Akron, Ohio-based AvCraft Jet Charters division. He also said AvCraft’s Tyler facility “voluntarily” surrendered its licenses for Class 3 aircraft, battery repair, altimeter certification and transponder certification.

In its statement regarding the Fairchild Dornier transaction, AvCraft said it decided to move all service activities to Akron, signaling the imminent closure of the Tyler facility. The company attributed the decision to Akron’s closer location to “major 328 fleet and corporate operators.”

Meanwhile, previous reports of the scope of AvCraft’s purchase appear exaggerated. Notwithstanding Bartel’s stated intention to resume wing production at Fairchild Dornier’s former San Antonio facility, the assets of the U.S. divisions–Dornier Aviation North America (DANA) and Fairchild Aircraft–went up for bids in a Chapter 7 process completely separate from the insolvency proceedings involving Fairchild Dornier GmbH in Germany.

On February 10 the bankruptcy court for the Eastern District of Virginia approved DANA’s plan for reorganization and the sale of “substantially” all its assets to a pair of U.S. investors incorporated under the name M7 Capital. Former DANA president Dr. Christof Schiller said that M7 also won the bid for the assets of Fairchild Aircraft, and that the companies expected to close the transactions by March 17. However, at press time the DANA assets remained under the control of a U.S. trustee, Jason Gold of Washington, D.C. lawfirm Wiley Rein & Fielding.

Wiley Rein & Fielding’s Dylan Tranche said the sides hoped to close the transfer of the DANA assets, worth $6 million according to the original sale order, during the last week of March. Although M7 indicated it had committed to retaining most of the some 60 employees left in San Antonio, a number received layoff notices on March 13.