Dallas Airmotive foresees black ink

 - May 16, 2008, 11:34 AM

“There are definite signs the market is improving. We’re starting to see aircraft sales pick up at the broker level and we’re holding our own in the market, at least in the first quarter of this year, and we’re hoping it will continue in the second quarter,” James Donlan told AIN.

Last September Donlan was named president and CEO of BBA Aviation’s Dallas Airmotive. He was previously with Honeywell/AlliedSignal for 22 years, most recently as vice president of sales and support at the business and general aviation division at Honeywell.

Donlan said Dallas Airmotive changed its strategic plan this year based on September 11. “We thought it would be a mirror of last year, with a fairly good first half and a poorer second half,” he said. “What’s happened, of course, is that the first half has been hesitant, but we expect the second half to pick up steam.” Pointing to a positive aspect of the industry, Donlan said OEM delivery of existing aircraft on the order books remains strong. “The fractionals seem to remain fairly strong, with orders for EJA and Flight Options. We believe the OEMs will continue to produce at or near capacity for the next couple of years, translating into a potentially steady stream of business for the aftermarket segment of the industry,” he said.

The Dallas-based company is a major independent provider of overhaul and repair services for Pratt & Whitney Canada, Rolls-Royce and Honeywell turbine engines and APUs. The company employs 1,400 people at its facilities in Dallas and Millville, N.J., and maintains a network of regional turbine centers in the U.S. and UK.

Donlan said the economic downturn has had varied effects on operators. Some flight departments are being cautious about purchases “over and above what they need.” Some larger companies have introduced corporate shuttles, and others, instead of buying another aircraft, have supplemented their uplift with a fractional share.

“We’re seeing more mixed fleets, and that makes us tailor programs more to the individual flight departments. One size no longer fits all,” Donlan said. “There have also been a lot of consolidations in the market place, and I think there will be more. It’s a painful process but I think it will make the remaining companies more responsive to their customers in the end. We are beginning to see signs of movement in the industry, and we’ve been giving a lot more quotes in the last few months than we did last November and December. We’re up 10 to 15 percent from then,” he said.

Donlan explained that there has been a significant number of aircraft put in service since 1995, particularly due to the growth of the fractionals. “Many of those aircraft are now near or out of warranty. That’s a major market opportunity for our segment of the industry,” he noted.

The fractionals, Donlan said, bring a unique situation into the mix because that type of operator places greater demand on the aircraft, often flying four times as much as the average corporate flight department. “They have special requirements that overhaul facilities typically haven’t had in the past, such as, late-night maintenance. Those aircraft are heavily used, flying maybe 1,200 to 1,400 hours a year instead of the 400 hours typical of most corporate aircraft. The fractionals are leading us to rethink some things such as pricing, downtime and the value of certain services.”

On the subject of OEMs getting into the aftermarket business, Donlan said he welcomed them. “The result is to make all of us more competitive. It will force us to provide greater value in such areas as field service, customer service, bank engine availability, price and delivery time. All of which will benefit the operator,” he stressed. “We are constantly talking to the OEMs, corporate operators and fractionals, asking where they see potential areas of increased value and how we can meet their expectations. It is our philosophy to be proactive in that area and not reactive. One example is maintenance-by-the-hour programs.”

Donlan noted that programs such as Rolls-Royce’s Power By The Hour are becoming common throughout the industry. “Independents have to work closely with the OEMs to participate in those programs. An independent provider has to be more cost conscious to be able to make that sort of program work.”