Avionics shops adjust to persistent downturn

 - May 9, 2008, 6:39 AM

In a down economy it usually makes sense to focus on the finer details of running a business. Instead of pipe wrenches, avionics installers are using Allen keys to strengthen and fine tune their strategies, relying, for example, on new and pending FAA regulations for RVSM, TAWS and ELTs to help propel them through the slowdown. The approach, according to managers at some of the largest avionics installation shops in the U.S., has been paying dividends by lessening the impact of revenue losses from other sources.

Midcoast Aviation, for one, saw a substantial portion of its completion business evaporate overnight when Bombardier decided in October to slow production of the Challenger 604 for the next four months. While the loss of that business certainly has hurt, Midcoast has been able to redirect its focus to other areas to soften the blow.

“We’re holding our own,” said Wayne Hundsdorfen, director of avionics sales for Midcoast. “We haven’t had any major layoffs, although we’ve had to adapt in some areas. While we’re seeing fewer completion opportunities, we’ve also been able to fill in on the avionics retrofit side. So we’ve been fortunate.”

“Holding our own” seems to be the watchword across the industry. Business certainly is not great, but there is enough of it to be able to say times aren’t terrible either.

There has always seemed to be some new mandate or requirement through aviation’s history over the last few decades to carry avionics sellers through the economy’s cyclical rough patches. Hundsdorfen said that while he does not believe the RVSM and TAWS mandates will necessarily bear enough fruit to completely erase the effects of a faltering economy, those installations nonetheless will provide badly needed revenue.

Discretionary Spending Down

Business aircraft operators, the lifeblood of the industry, these days are choosing to buy and install the equipment they need to have, and not necessarily all they would like to have. As a result, sales of big-ticket cockpit upgrades such as the Primus Epic CDS/R retrofit system from Honeywell and Pro Line 21 Continuum from Rockwell Collins have been slower than anticipated. Upgrades for equipment required to meet the new FAA mandates, on the other hand, have kept installers busier than they otherwise would be.

By taking purchases of TAWS and RVSM avionics out of the discretionary spending column, a strong near-term market for upgrades has emerged at a time when aviation department managers are having a tougher time justifying expenses. That has spawned a race among avionics shops to gain the appropriate STCs for avionics covered by the FAA mandates and provide bids to operators.

“I think we’re all in the same mode, where we’re bidding on the opportunities that are out there, but there are just not as many as maybe we thought,” said Gary Harpster, an avionics salesman for Duncan Aviation, where business is off.

When he’s not out making sales calls or filling quotes for new avionics installations, Harpster hosts a series of information sessions around the country to acquaint business aircraft operators with the finer details of the DRVSM, TAWS and ELT mandates. The presentations give Harpster the chance to talk with pilots and maintenance chiefs, and thereby read the collective pulse of the industry. While many operators say they are entertaining the idea of a major modification such as a complete cockpit upgrade, most admit the mandates are all their companies can afford right now, said Harpster.

At one recent class in Dallas, Harpster said he asked for a show of hands of operators who had already gained RVSM approval. Of about 50 people in the room, he said, three or four raised a hand. When he asked the same question about TAWS, five hands went up. He then asked the audience how many planned on installing RVSM and TAWS avionics next year. Not surprisingly, nearly every hand shot up, he said.

Part of the reason, of course, is that operators who have already gained RVSM certification and installed TAWS generally don’t attend sessions that cover such topics. Still, the example illustrates two important points: more operators than not have yet to install the mandated avionics, and the clock is officially ticking. Operators have until December 2004 to gain RVSM approval and March 2005 to install TAWS. Those who are betting on either of those dates being pushed back are in for a rude surprise, say shop managers.

Harpster said he thinks he knows why many operators have yet to get serious about RVSM, but he does not agree with the logic.

“A lot of pilots who attend the courses are aware that for domestic RVSM you can’t easily get it signed off by your local FSDO until next June, when the FAA provides guidelines,” he said. NBAA has voiced objections about the lack of uniform standards from one FSDO to the next for DRVSM approvals. While guidance has yet to emerge in any official form, Harpster said what is required for DRVSM is widely known and is not likely to be altered significantly.

The waiting game is especially perilous for operators of jets that do not have group RVSM approval, he said. Because of the extensive flight testing that must be performed and the time needed for air-data software modifications by avionics makers, an RVSM approval for a non-group-approved airplane could take a year or more.

“If they wait too long, say until May or June of next year for these one-off solutions,” Harpster said, “they may not have a system up and running by the time the deadline hits.”

Multi-item Upgrades Popular

In the meantime, avionics installers are narrowing their focus to serve the broadest number of customers. Elliott Aviation, for instance, now holds nearly 50 STCs for RVSM, TAWS and TCAS installations. The company initially targeted five aircraft marques for these avionics upgrades–King Airs, Falcon 10s and 20s, Learjet 35s, Hawker 700s and 800s and Citations through the Excel.

Alan Nitchman, Elliott’s vice president of operations, told AIN  customers have been taking advantage of the downtime for one hardware installation to have other equipment installed. “Most are opting to have a multi-item upgrade,” he said.

Among the specific STCs in Elliott’s pipeline are a series centering on the replacement of Hawker 700A EFIS and gyros with the Pro Line 21 Continuum system. STCs in the works for the package cover the Collins TCAS 4000, Universal’s TAWS with MFD-640 displays, Collins AHC-3000 AHRS and Honeywell EGPWS. Elliott is pursuing similar equipment upgrades for the Falcon 10 and Learjet 35.

Garrett Aviation, also a holder of a passel of avionics STCs, cited a drop in discretionary spending among business jet operators this year, leading to a decision to lay off nearly 50 workers.  

“We’re not where we’d like to be, but we think we’ll be back on track next year,” said Mike Anderson, director of avionics sales for Garrett. He added that the layoffs are considered temporary and the company hopes to rehire some of those employees soon.

Garrett has so far performed more than 70 TAWS installations, most of these Honeywell’s EGPWS and more recently the TAWS from Universal. Garrett has also gained several approvals for the Primus Epic CDS/R and Pro Line 21 systems, as well as RVSM approval packages using Honeywell, Collins and IS&S avionics. Garrett has issued several bids for complete cockpit upgrades.

Bucking the downward trend, Midcoast Aviation in its last fiscal year actually reported record income. In the last year Midcoast has opened a new facility at Spirit of St. Louis Airport in Chesterfield, Mo., returned three airplanes to service after major structural damage and developed an RVSM solution for the Hawker 700. That package, scheduled for group certification late last month, costs $50,000 to $250,000 and takes one to four weeks of downtime.

The new Spirit of St. Louis base is largely focused on aircraft maintenance, supplementing the company’s existing St. Louis facilities at the city’s Downtown Airport and Lambert-St. Louis International Airport. Midcoast made headlines in the last 12 months by restoring a pair of badly damaged Falcon 900s and a Gulfstream IV to service after accidents that might well have been write-offs.

In July Midcoast returned to service a Falcon 900B owned by BP Amoco that overran the runway on landing at Barnstable Municipal Airport in Hyannis, Mass., more than two years earlier. It was the first time a company other than Dassault Falcon Jet had handled such a heavy repair. During the work, Midcoast technicians fitted a new 900EX wing, an improved flap- control system, speed-brake panels and landing gear, while simultaneously making upgrades to the avionics, including installation of TCAS II, satcom, EGPWS and RVSM-capable equipment.

Also on the RVSM front, Grand Junction, Colo.-based West Star Aviation and Honeywell have teamed to develop an RVSM solution for Learjet 30-series airplanes equipped with the FC-200 autopilot and Century III Softflite wing. West Star will obtain STCs using Honeywell equipment that has already been RVSM-certified on the Gulfstream II and Citation 560 series.