New Mooney boss fights sticker shock
Although it’s unlikely to become the Wal-Mart of general aviation, the newly created Mooney Aerospace Group (MAG) has announced a price rollback. Roy Norris, who on January 8 became chairman, CEO and president of Long Beach, Calif.-based Advanced Aerodynamics and Structures Inc. (AASI)–which on March 19 acquired Mooney–recently told AIN, “This is the biggest price reduction in the history of general aviation–no exceptions.” Mooney Aerospace began taking orders after announcing the price reductions. “We’ve been averaging 40 strong inquiries a day, and we now have 200 active prospects,” Norris said.
He said list prices on the three current Mooney models are being slashed an average of 20 percent. That translates to a reduction of the top-of-the-line Bravo 2’s $505,000 tag to $399,950; from $445,000 to $349,950 for the Ovation 2; and $299,950 for the Eagle 2, down from $360,000. Reviving the production of Mooneys and lowering prices–without deleting equipment–is the opening move in Mooney Aerospace’s strategy to expand business aviation downward back into the piston singles and light twins.
Immediately after Norris assumed leadership of AASI, he and his handpicked management team of industry veterans purchased the bankrupt Mooney Aircraft and prepared to resume production at its Kerrville, Texas plant. Soon thereafter, publicly traded AASI became Mooney Aerospace Group to “bring business jet travel capability down to the small company for whom a business jet isn’t cost effective.”
The first step toward this goal was to acquire Mooney and its three current production models. Company stock is still publicly traded on the Over the Counter Bulletin Board as AASI, though Mooney Aerospace has applied for a symbol change. The Mooney Airplane Co. is a wholly owned subsidiary of Mooney Aerospace Group.
The lower prices for Mooneys will continue to include ground and flight training at FlightSafety International. Factory service centers will be co-located with company sales centers, maintaining contact with and support for the existing 43 Mooney service centers. Norris said Mooney Aerospace is also seriously evaluating production of spare parts for many previous Mooney models, “at least back through the J models.”
A new marketing structure will hinge on three regional sales centers–a to-be-determined east central Florida site, another in Kerrville and one co-located with the corporate headquarters and support center in Long Beach. “They’ll be like Lexus showrooms,” Norris said, “staffed by salespeople who are all pilots, with actual aircraft on the floor. This will be the same kind of marketing as in the business jet world, treating customers like VIPs. Our customers deserve at least the same consideration as the buyer of a $60,000 Lexus.” A field sales force, four individuals for each sales-center territory, will fly demo aircraft to prequalified customers as necessary, “again, as in the business jet world,” he added.
A Neglected Market
The Mooney Aerospace market is identified as wealthy individuals and companies with $10 million to $100 million in annual revenue. Said Norris, “This market has essentially been abandoned. It consists of people [who] really have no alternatives to airline travel except small general aviation aircraft.” He noted that “a trip of up to 1,000 miles can be very comfortably accomplished in a small general aviation aircraft” such as one of the three current Mooney models, at less total door-to-door time than flying the airlines.
As an example Norris cited his recent trip to Las Vegas to meet with prospective investors: “We found out at 2 p.m. we had to meet them as soon as possible. The earliest any airline could get us there [from Long Beach] was 11 p.m. So we took one of the Mooneys, had our meeting in Vegas at 6 p.m. and I was home for dinner. That kind of situation happens all the time for heads of small businesses.” Norris said even a small company can afford to buy and own a Mooney for about $4,000 a month (in debt service), “which is far less than the cost of even a one-eighth fractional share.”
Describing the advantage of the new sales setup, Norris said, “Single-engine aircraft are predominantly marketed through dealer organizations. That represents 25 percent of the sales price. The cost to sell a product directly to the customer, which we will do, is 7 percent of the price, so we reduce the marketing cost by 18 percent of the sticker.” Then Norris plans to go “back to the future” by cutting manufacturing costs to those in effect for early-1980s single-engine piston production levels. “That alone will reduce the price of aircraft by 20 percent. We’ll split the savings with the customer and still run a profitable company.”
Norris’ rationale for lower production costs: “It’s not rocket science. Basically, it means building baskets in a basket factory, not a computer factory.” Although he cited the 1994 General Aviation Revitalization Act, which eased the product-liability burden on aircraft manufacturers, for improving pros-pects of profitability, Norris insisted that product liability was never the chief cause of skyrocketing aircraft prices. He explained that as the major general aviation manufacturers concentrated on designing, developing and manufacturing complex, expensive turbine-powered aircraft, they spent heavily on state-of-the-art design, development and production equipment and facilities.
With increased complexity came vastly higher part counts, longer, more expensive certifications and consequent exponential growth in supply, support, engineering and production staff levels. These overhead costs were spread organization-wide, burdening the small general aviation products with costs they did not create and which provided them little benefit. The problem, he summarized, is that most piston-engine aircraft are being built in “factories inappropriate to the task.”
Why, then, did Mooney, without the overhead burdens of Cessna, Raytheon or Piper, go into Chapter 11 bankruptcy last July? “It was underfinanced, and it had a top-heavy, relatively inefficient management and support structure,” said Norris. Among his first acts was to streamline the entire operation, starting with reversal of the direct labor to indirect labor ratio. Under the previous ownership, 30 percent of employees were direct labor, meaning they actually built airplanes, while the other 70 percent were in support capacities. Today, Norris noted, “of the 102 employees on site, 70 are direct labor, and we will maintain that ratio as we continue to rehire the craftsmen in the Kerrville area who have been building Mooneys for 50 years. Those craftsmen are our single greatest asset.
“Also, the previous ownership had succumbed to the lure of technology for technology’s sake. We eliminated all unnecessary complexity and the people required to support it. For instance, we now use computer-controlled equipment only where it enhances efficiency.”
The one-time Cessna marketing executive added, “I know Cessna’s, Raytheon’s and Piper’s costs. That’s why we bought Mooney and its Kerrville facility.” Norris observed that, even with a less than optimally cost-effective operation, “it has had the lowest manufacturing cost of any aircraft factory in the U.S., and I’m going to make it even lower.”
He said another reason for buying Mooney is that its models “are the top-of-the-line four-place aircraft being built today. They have the best safety record, and they’re the fastest single-engine [civilian] piston aircraft in the world. They represent the ideal travel mode for a requirement of four or less seats. The only problem is that they’ve been too expensive.”
Norris said the next level for Mooney Aerospace will be to add a six-passenger aircraft complementary to the Mooney line, preferably a type-certified model. He did not rule out an aircraft already under development, such as the twin-turbofan Century Jet CA-100, with whose developers Norris said he is in final negotiations. According to the company executive, the Mooneys would ultimately represent the lower end of his company’s offerings, with a microjet–“something positioned between the Eclipse and CitationJet”–at the top. Development, as required, would be done at the Long Beach facility, followed by production in Kerrville. He characterized Southern California as “the largest general aviation market in the world” and “great for development but terrible for manufacturing” due to a variety of labor, environmental and local governmental issues.
Norris said he expects to announce a further aircraft program acquisition later this summer. Asked if the Raytheon Beech Bonanza and Baron were possibilities, he replied, “Those models certainly fit the category we’re looking at, along with a whole host of single and twin six-passenger airplanes.” As examples of aircraft being evaluated he cited the Socata line, the Aerostar and the Navion look-alike Meyers (a six-place model that has obtained FAA type-inspection authorization). “But the one we choose has got to be ‘best of breed,’ or something we can make ‘best of breed’ very quickly. Our target market demands it.”
Norris expressed a firm belief that aluminum construction will continue to serve Mooney Aerospace best. “Composites will never replace riveted aluminum for primary structures.” He said that, based on his experience with the Beech Starship, composites “are neither cost- nor weight-effective, and they require much more expensive fabricating and processing equipment.”
He noted that the Kerrville factory has the tooling and space to produce up to 760 aircraft per year, and is thus able to accommodate other aircraft types that Mooney Aerospace may acquire or develop, perhaps, said Norris, “a turboprop Mooney.” An indication that new aircraft development is part of Mooney Aerospace’s game plan is that one of Norris’ first management team recruits was Dale Ruhmel as executive v-p for operations and engineering. Norris described Ruhmel as “the dean of light aircraft designers.” The former head of advanced design at Cessna was a principal designer of the Douglas DC-10 and for many years was a senior Boeing consultant. Ruhmel has certified more than 30 general aviation aircraft in his career and, according to Norris, “is the only man alive who holds three FAA Designated Engineering Representative tickets–in aero-structures, flight test and aerodynamics.”
Peter Larson, another of Norris’ former associates at Cessna, is Mooney Aerospace’s executive v-p and CFO. A former Cessna and General Dynamics Services CFO, he is called by Norris “perhaps the best cost-reduction CFO in the industry. He was instrumental in the turnaround of Cessna, from a $100 million annual loss to $150 million operating profit.”
The 21 aircraft on the assembly line when Mooney Aircraft halted production and went into bankruptcy are now being completed. The first of those flew June 18 at Kerrville. “At Oshkosh, we delivered the first one built under our new production certificate, and the other 20 will have been delivered by the end of this year,” Norris said. By year-end the plant will have returned to the 2000 production rate of 100 aircraft annually, “and we expect profitability by February. All the financing is in place to do that.”
Norris, 60, who retired in 1998 from Raytheon, was lured away from “sailing my boat in the Caribbean” to take the helm of AASI. Shortly after CEO, he announced plans for an extensive redesign of the Jetcruzer 500 single-turboprop pusher. But after evaluating available resources and the potential Jetcruzer market, he convinced investors to shelve the program, which has been in development for more than a decade. The engineless prototype rests in a corner of the cavernous Mooney hangar in Long Beach. In September, Mooney Aerospace will begin returning the $1.6 million in non-refundable Jetcruzer 500 deposits to all 160 customers who had placed them. The company has redirected funds earmarked for the Jetcruzer 500 to development of high-performance piston-singles and light-twins.