Completions & Refurbishment: Is this the 'ugly bottom'... or is there an uglier one still to come?

 - July 28, 2008, 12:29 PM

Last year, things were bad for the completion and refurbishment industry as companies were feeling the effects of the economic recession. Even so, there was an attempt by many to put a positive face on the future. With the perspective now of 20/20 hindsight, a more accurate forecast would have been, “things are never so bad that they can’t get worse.”

It all begins with new aircraft sales, and according to numbers released since the first of the year, such sales did indeed get worse last year. Despite a positive spin by former General Aviation Manufacturers Association chairman Bill Boisture that “this may not be the deepest trough in modern times,” the fact remains that billings dropped to $11.9 billion in 2002 from $13.9 billion in 2001. There was a similar drop in total aircraft deliveries–2,439 in 2002 versus 2,994 in 2001. And according to AIN’s own tracking for turbine business aircraft deliveries, there were only 872 shipments in 2002, a considerable drop from 1,119 in 2001.

The first quarter of this year looks even worse, with GAMA figures showing deliveries of just 98 business jets, compared with 173 deliveries for that period last year.

Add to that a depressing array of other negative indicators. Cessna announced earlier this year that it would implement a seven-week shutdown, which started at the beginning of last month. The Wichita-based OEM placed some 6,000 workers on furlough until July 18 and laid off another 900 people. So it should come as no surprise that Cessna expects to deliver between 180 and 195 Citations this year–at worst 110 less than were delivered last year, which was its best year on record.

The news from Bombardier Aerospace was no better. The Canadian manufacturer had announced last September the company-wide (Belfast, Montreal, Toronto and Wichita facilities) layoff of 2,000 employees, followed by an unprecedented four-month plant shutdown in Wichita, starting in late December. Then in March Bombardier announced an additional round of layoffs, this time affecting another 3,000 workers company-wide over the following 12 months. Revelation of the new job cuts came just a day after the company disclosed that, as a result of the slump in business jet and regional airliner sales, it was revising its fiscal-year forecast earnings from 81 cents to 40 cents per share.

Gulfstream Aerospace, faced with slumping sales, on May 1 announced a four-week shutdown of the initial phase of manufacturing operations at its headquarters plant in Savannah, Ga., putting more than 1,000 employees on furlough from June 30 through July 27. “With sales at a level well below prior years,” said Gulfstream president Bryan Moss, “we don’t need to build as many airplanes as originally planned.”

Raytheon Aircraft announced in May that its Hawker Horizon flight-test program was accelerating, and at EBACE in Geneva in May it announced an upgrade of the Beechjet 400A and subsequent rebranding of the jet as the Hawker 400XP. Nevertheless, the manufacturer has laid off 1,250 workers since 2001. And the company’s delivery figures continue to decline. In the first quarter Raytheon delivered 18 turbine aircraft, compared with 32 in the same period in 2001. Last year, it delivered 165 turbine aircraft, 52 less than in 2001.

Even Dassault Aviation, which had appeared to be somewhat impervious to the effects of the sagging U.S. economy, announced late last year that production will drop this year. According to Dassault chairman and CEO Charles Edelstenne, the company was expecting to reduce production from six to five aircraft per month (based on an 11-month period). Perhaps more telling is the fact that the French manufacturer received no orders from fractional ownership giant NetJets last year. In the previous year, NetJets had accounted for 34 of the 73 Falcons ordered.

Welcome to the ‘Uglier Bottom’

The situation is hardly any better in the used aircraft market. Rick Engles, president of Vance & Engles of Washington, D.C., noted that last fall there was, a two-year inventory of midsize to large-cabin business jets on the market. And he further pointed out, “Of the 10,000-or-so aircraft in the U.S. business fleet, 30-percent are officially on the market [and] unofficially it’s probably more like 40 percent.

“Back in February [2002] I thought we had hit the ugly bottom,” Engles said. “Now I think there’s an uglier bottom still to come.”

Welcome to the uglier bottom. In December, there were more than 2,000 business jets on the pre-owned market, 1,250 more than were on the market at that time in 1998.

Amstat, the Fair Haven, N.J. corporate aviation market research firm, noted at the time that resale/retail transactions for used aircraft in the first half of last year were up slightly, from 1,217 to 1,317. But at the same time Amstat also noted that the total number of business aircraft for sale had grown to 3,184, 226 more than were on the market in the first six months of 2001.

So what has this meant to the completion and refurbishment industry? Nothing good. Not only have there been layoffs by virtually all the OEMs; some smaller independent refurbishment shops have gone out of business.

Austin Jet in Austin, Texas, closed its doors after filing Chapter 7 on October 9 last year.

Palmer Johnson Savannah is still in business, but rolled out its last airplane in the fall. According to a spokesman, the Savannah, Ga.-based center turned in its FAA certificate when the new owners decided to shift the focus from business aircraft interiors to yacht interiors. “The new owners just felt that business aircraft interior work didn’t fit into their new plans for the company,” he explained.

Other independents haven’t gone out of business, but many admit to being stretched near the breaking point. Jim Renfro president and owner of Highlands Aviation in Avon Park, Fla., said the company has been in business for 27 years. “Now I’m spending a lot of time on the road, drumming up business and hanging on.”

He added, “We’re doing aircraft [interiors] that we wouldn’t have touched two years ago, just to stay in business.” He also said he has changed his customer payment structure. This includes earnest money in advance–as much as 50 percent–and a payment schedule tied to various points in the completion process.

At Southstar Aircraft Interiors in Uvalde, Texas, the workforce is down from a high of 45 employees to 32. “Our workload would be considered ‘moderate,’” said president Herb Radicke. “Nobody’s doing that well right now, but we’re staying busy.”

Ranger Aviation in San Angelo, Texas, isn’t doing much better, according to president John Fields. “We’re not exactly overrun with business,” he said. “We’re managing to stay busy, but we’re not booked up like we used to be.” And like other small independents, Ranger is accepting contracts for aircraft it might have turned away several years ago, “when you could be selective about what customers and jobs you took in.”

“It’s a little slow,” said Eddie Ima, director of operations at South Florida Completions Center in Fort Lauderdale. The company has just delivered a Challenger 600 refurb and is working on a Learjet 35, “And we’ve got a little more work coming in,” he said. “But it’s real rough.”

Bob Taylor at Wichita Executive Aircraft, formerly Executive Aircraft Corp., at Wichita’s Mid-Continent Airport said his company is surviving a double hit–the economy and bankruptcy. Executive Aircraft Corp. officially emerged from bankruptcy on December 31 after court approval of a reorganization plan. “It’s a tough environment, and without a good base of loyal customers, it might have been very tough,” said Taylor. “And being in Wichita [where three major OEMs produce business aircraft] doesn’t hurt.”

Full-service Capability a Key Success Strategy

Some smaller completion and refurbishment centers, and many of the larger independent centers have found that by offering a variety of services they have been able to attract more interior work than might otherwise be expected.

South Florida Completion Center is among them. The facility is part of the South Florida Jet Center, a Part 145 repair station that also provides maintenance and avionics installation and repair, “and that has brought in some business,” said Ima.

Denise DeYoung, technical sales and interiors specialist at Stevens Aviation, said the Greenville, S.C. facility will schedule everything from maintenance, avionics installation and repair, sheet metal re-skinning and paint to full interior refurbishments. “Exterior paint and refurbishment are actually the driving force,” said DeYoung, adding that the ability to fill the demand for RVSM, TCAS and TAWS upgrades is definitely a plus.

The so-called “one-stop shop” capability, said Shelly Ewalt, v-p of completions marketing at Duncan Aviation, is a “key strategy” at the Lincoln, Neb. facility. An RVSM upgrade, she explained, “Is about 75 percent of all the refurb packages we do, unless it’s just to change the tires.”

Elliott Aviation also finds that one area of service feeds another at the Moline, Ill. facility. The company recently opened a new $6 million completions center that includes its first exterior paint shop. “We now offer a serious alternative to our competitors,” said Elliott president Wynn Elliott. Until the center opened in February this year, Elliott could handle interior completion and refurb work and avionics, but was forced to send the airplane elsewhere for paint.

Elliott director of marketing Mike Turner recalls that the company had already lost some refurb jobs “because of that single, missing piece in the completion and refurb puzzle–an exterior paint shop.” That, he said, has changed. The new shop is under the same roof as the new completion installation hangar bay and interior components shops. Aircraft may be moved directly through an inside door to the sanding and preparation bay, and from there into the 8,500-sq-ft paint bay. The paint shop can accommodate aircraft as large as a Hawker 800.

Elliott’s new facility also includes a 15,000-sq-ft mezzanine that will allow further expansion. Whether it will be needed remains to be seen, but Turner noted that business is good and as of May, the company was booked through August with interior refurbishment clients.

Midcoast Aviation in Cahokia, Ill., is even more convinced of the importance of being able to offer a complete range of services. According to Rodger Renaud, director of major modifications sales and service, “This coming week [May 25] we have 19 airplanes coming for maintenance, and almost every one of them is also having some kind of minor cabin refurb work done at the same time. “Being a one-stop shop is a tremendous benefit and has helped keep the overall business solid.”

Larger Independents Weather the Storm

While the smaller shops have struggled, and continue to struggle, to survive the recession, larger completion and refurb centers appear to have been better equipped to deal with the economic downside, and some even believe that the recovery has already begun.

“We’re very busy,” said Turner at Elliott Aviation. In the first 13 months after 9/11, he noted, “it was pretty slow, [but] it’s picked up since the first of this year.”

In light of the depressed market, there were some concerns as to the wisdom of the February opening of a new $6 million addition as part of Elliott’s expansion strategy. But plans for the 48,000-sq-ft completion center actually began more than three years ago. When construction started it was already obvious that the economy was in recession, but after much discussion, Elliott planners, decided to move ahead with the project.

Said Turner, “We felt it would position us to take advantage of the economic upturn, with experienced people, equipment and procedures and processes already in place.”

Duncan Aviation has also been surviving the economy. “We’re busy and our shops are full with the traditional core business; Hawkers, Learjets, Falcons and Citations,” said Ewalt. She noted that Duncan has seen a number of older airframes come in for refurbishment in recent months. The owners are buying them for about half what they would have cost several years ago and they’re putting the money they saved into the interior, Ewalt explained.

And that is a change from just a year ago, she added, when most of the customers were focused first on upgrades mandated by new FAA requirements, such as RVSM and TAWS. “The interior work they were contracting was only what was absolutely necessary,” said Ewalt.

While Duncan, like most shops, has felt the economic pinch of the past two years, Ewalt said the company has kept to its philosophy of “hiring for life” and has not cut its staff, “through attrition or any other means.” And, in fact, she added, “Duncan is hiring sales and production staff to keep up with the recent growth in volume.”

At Midcoast Aviation, Renaud said that although the company “is not overwhelmed, we’re very busy through August, and steady through the end of the year.” This despite a lull in November through January “that we weren’t used to.”

In the shop now are two Gulfstream IVs, a Gulfstream III and a Falcon 900, as well as two Falcon 50s in for substantial interior refurbishments. The company also just contracted for another Gulfstream IV for a major refurb that will keep the shop busy to the tune of about 12,000 to 15,000 manhours through September.

As for layoffs, Renaud said in November Midcoast lost six people, and for about two months the company moved an overtime schedule to a standard week. “Now we’re back to our full-blown overtime schedule and it’s going really well. We’re busy and happy to be that way.”

Widebody Interiors Specialists

A number of completion and refurb centers specializing in the installation of executive and VIP cabins in widebody business jets and bizliners appear to be managing well during this recession.

“We’re going pretty good,” said Mike Ward, executive v-p and general manager of CompletionAir at St. Louis Regional Airport in East Alton, Ill. The company is just finishing a Boeing 767 and was expecting to deliver the big bizliner this month. “We’ve submitted bids on several other aircraft, and there was a 747 that we declined to bid on,” he added. “I’ve got the ground, but I’d have to have a few more of them locked up before I sink $12 million into a new hangar big enough to hold a 747.”

CompletionAir partners with Premier Air Center, a maintenance, completion/refurb and FBO sister company on the other side of St. Louis Regional. The smaller facility handles interior work for aircraft up through the Global Express and Gulfstream V. Teaming with independently owned Premium Aircraft Painting, also at St. Louis Regional, allows Premier Air Center to include paint among its aircraft services.

According to Ward, “The ‘big-bird’ business went flat for about six months, but in the past 60 days we’ve had more activity than we had in all of last year.”

Patricio Altuna, executive v-p for Associated Air Center, said business in widebody interior completion work “really dropped off in first- quarter of 2002, but in 2003 it’s been picking up.” Last year the Dallas Love Field-based company, owned by Piedmont Hawthorne, saw business fall enough to warrant mothballing of a hangar. “But we reopened it in January and we’ve been pretty busy since with a combination of refurbishments, maintenance and avionics upgrades.”

Last month the workload at Associated included a green 767-200 in for an executive interior, and a green Airbus A320 being outfitted for a head-of-state. Also in for a mix of interior refurbishment, maintenance and modification/upgrade were a 757, 737 and 727.

Jet Aviation, headquartered in West Palm Beach, Fla., has two major completion and refurb centers. One in Basel, Switzerland, completes and refurbishes both large executive and VIP aircraft and smaller business jets. The West Palm Beach facility handles completion and refurb of business aircraft, from entry-level jets to the Global Express.

According to Jim Harrison, Jet Aviation’s manager of interior completions, business has taken a definite turn for the better at the West Palm Beach center. “It looks as if everything is rolling in at once,” said Harrison in late May. “Aircraft started to move in the second week of April. Quite a few Falcon 50s and several Gulfstream IVs changed hands. We quoted on the Gulfstream IVs; missed on one, hit on another, and the third guy dropped out.” Now the center is involved in installing a Falcon 50 shell kit in a Falcon 20, doing a Gulfstream IV nose-to-tail refurb, putting new cabinetry in a Falcon 10 and performing some minor interior refurbishment work on a Gulfstream III. Harrison said the center expects to see a Gulfstream IV and a Falcon 50, both owned by previous Jet Aviation customers, roll through the hangars early this summer.

“We’re going to be busy, probably up through August,” he said, adding that he expects to be hiring in the near future, “some new installers, maybe some contracts people.” He also noted that, due to the economy, Jet Aviation had allowed a reduction in the completion and refurb workforce through attrition, though there had been no layoffs.

Large Executive/VIP Work Slower at European Centers

At Jet Aviation’s Basel facility, a spokesman said business has been very good over the past 18 months, but there are some signs of business slowing in the European market for bizliner completions. The center also used to do interior completions of green Falcons under contract with Dassault, but that too is waning. At the same time, he noted that Basel was working on interior completion of a green Boeing Business Jet, a Boeing 747 “and a few Falcons.” According to Dassault Falcon Jet president John Rosanvallon, there have been as many as eight or 10 Falcons undergoing completion at Jet Aviation Basel, but that number is now down to about four or five.

Lufthansa Technik Completion Center, formerly VIP and Executive Jet Services, was part of a restructuring move last July. The Hamburg, Germany-based division is now on equal footing with the company’s other divisions: engines, components and overhaul and maintenance.

According to a Lufthansa spokesman, a Boeing 747-400 is currently in the final stages of an executive/ VIP interior completion, and delivery to its Middle East customer is expected this fall. In the meantime, he said, “Marketing is looking for an airplane to replace it.”

Meanwhile, delivery of a BBJ2 to UK charter operator Multiflight was expected this month. Another BBJ2 for a private customer was also scheduled for delivery later this summer. An A319LR in shuttle configuration was scheduled for delivery early this month to PrivatAir for its long-range, all-business-class service operated in partnership with Lufthansa.

Lufthansa Technik has just begun completion on a BBJ for an Asian customer, and expects several more BBJs in the near future for interior refurbishment work.

Unless marketing brings in something new before the fall, that will leave only a single green BBJ in the hangars for completion. Otherwise, said a spokesman, the only aircraft scheduled to arrive this summer are some BBJs scheduled for minor interior refurbishment work.

OEMs Deal with Present and Expand for the Future

Perhaps more than the independent completion and refurb centers, those of the OEMs have struggled to adapt to the recession and resulting drop in new aircraft sales. The most visible signs have been cuts in aircraft production and layoffs, and in some cases the shutdown of production lines or areas of production for weeks or months at a time.

According to Cessna v-p of operations Craig Estep, “The Citation completions center has been affected by reductions in the aircraft production rate, resulting in reduced employment.” (In the past year Cessna has laid off more than 2,500 employees company-wide.) On the other hand, Estep said the refurbishment side of the house has been “holding even, with signs of a slight upturn.”

Cindy Halsey, v-p of interior design, engineering and development, said Cessna “always welcomes any refurb work that comes to the Wichita Service Center, especially if it’s coupled with avionics modifications.”

At the same time, Cessna is anticipating certification of the Citation Sovereign in the fourth quarter, and with orders for more than 100 already in hand it will begin ramping up to outfit the interiors well before the fourth quarter. This means the first Sovereign interiors will be done in the existing facility, pending completion of the new Wichita Citation Service Center late next year.

Gulfstream Integrates Interior Work into Production Process

At this point, Gulfstream says its completion of green aircraft is in sync with its production rate. According to customer support v-p Larry Flynn, “We are delivering and will continue to deliver completions on time and on budget, with the highest quality in the business.”

In recent years Gulfstream has reduced completion time by 25 percent, said Flynn, as a direct result of a “rollback” program that focused on transferring as many completion tasks as possible to the aircraft production line. That list includes several hundred items, including wire harnesses, lavatory, the fresh-water system and furniture attach points. The idea, he said, is that the airplane comes off the production line ready for the installation of furniture.

Also in recent years, Gulfstream has put new emphasis on the interior refurbishment of its own products currently in service. And business is good, said Flynn, with heavy refurbishment and exterior paint services at Gulfstream sites in Appleton, Wis., Brunswick, Ga.; Dallas; and Long Beach, Calif.

Later this year, Gulfstream will open a new Executive Briefing and Design Center at Alliance Airport as a “one-stop design shop for completion and refurbishment.” The center would include fabrics, graphics and computer modeling and Gulfstream anticipates the time required for selection of an interior would be no more than a day.

Dassault Falcon Jet’s green completion and refurb services have taken on a slightly different look in recent years. It was more than two years ago that the OEM bought the Atlantic Aviation facilities at New Castle County Airport in Wilmington, Del. Today, the Wilmington facility is positioned to become the refurbishment focal point for Falcon operators in North America. In the meantime, the Little Rock, Ark. completion center for green Falcons is assuming a lesser role in refurbishment and already preparing to take on interior completions of the new Falcon 7X when it is certified in 2006. At the same time, the Dassault service center at Paris Le Bourget Airport will remain a Falcon center for both green completions and refurbishment.

John Rahilly, the Wilmington center’s head of refurbishment and maintenance sales, emphasized that the role of Wilmington is not meant to replace or in any way take away from the services provided by the Dassault Falcon Jet network of independent service centers. “They are our partners, and very good ones,” said Rahilly. “Our role here is to provide Falcon operators with a company alternative. We know that some operators whose aircraft were finished by Dassault Falcon Jet will want to come back to Dassault Falcon Jet whether it is for warranty service or simply because they want the refurb work done by the same company that installed the original interior. It’s in our interest and in their interest to make this available.”

Meanwhile, the completion center at Little Rock is facing a reduced workload as Dassault cuts its production rate to meet the declining demand. In late May Rosanvallon said there are currently no plans for a reduction in force at Little Rock, but he added that it is a step to be “looked at very carefully.” If a reduction in force is considered necessary, a decision would likely be made this summer.

Expanding To Meet the Upswing

If this is, as Engles put it, the “uglier” bottom, the question is whether it is indeed the absolute bottom and the only direction now is up.

Dassault’s Rahilly believes there are positive signs that indicate that the pendulum has reached its nadir. He notes not only the very recent increase in pre-owned aircraft sales, but that recent changes in the tax laws with regard to capital gains will free up more money, financing rates are at an all-time low and the price of oil has stabilized.

“It’s been my experience that one of the first signs of recovery in the business aviation industry is news from used aircraft brokers that airplanes and money are changing hands, and news from the refurb shops that they are fielding inquiries about interior work,” said Rahilly.

There are other signs as well. Across the industry, independent and OEM completion and refurb centers are expanding or planning expansions to meet current or expected demand. Many of them, like Rahilly, believe that the economic recovery, if not already begun, is not far off.

The extent of the expansion and plans for growth are evidence of that optimism. Dassault Falcon Jet in Little Rock broke ground on May 27 for an expansion that will add 46,000 sq ft to the existing paint facility. More important, it will make room for the new Falcon 7X, with a wingspan of 82 feet, compared with the 63-foot 5-inch wingspan of Dassault’s largest airplane now in production, the Falcon 900EX.

“We have to look beyond current economic conditions and invest in our future,” said Rosanvallon. “This new paint facility will allow Dassault to increase efficiencies as we prepare for a ramp-up of deliveries of the new Falcon 2000EX.”

At the company’s Wilmington facility, Rahilly said there are also plans for expansion.
Last year was the center’s first full year of operation under the Dassault banner, and ground was broken last month for a 40,000-sq-ft paint shop–this one also capable of handling the new Falcon 7X. “It’s a major indicator of our long-term commitment to the refurbishment business,” said Rahilly. Wilmington is also in the final stages of an on-going refurbishment of all the former Atlantic Aviation spaces.

Dassault Wilmington is also hiring. In May, the facility hired Robert Flansberg as director of modifications. Flansberg had previously served as completion center manager for Bombardier at its Tucson, Ariz. plant. “We hired him to lead, and to make the business grow,” said Rahilly. Part of that mandate includes additional hiring “in all disciplines,” he added.

Wilmington is an FAA-designated alteration station and is now authorized to issue its own supplemental type certificates. Rahilly said the growth will put Wilmington in the position of handling any overflow of green completions, should demand temporarily exceed the capability of the Le Bourget and Little Rock completion centers.
Cessna Expands To

Meet Sovereign Demand

Three years ago Cessna opened its new Citation Completions Center in Wichita. Since then the company has added three more Citations to its line and last month construction began on a new Citation Service Center, also in Wichita. The 447,259- sq-ft facility, on four acres at Mid-Continent Airport, among other services, will provide interior completions for the Sovereign. The service center is scheduled for completion in the fourth quarter of next year. Until it is ready, Sovereign interiors will be installed at the existing 105,000-sq-ft Citation Completions Center. Certification of the Sovereign is expected in the fourth quarter and work has already begun on the first production interiors.

Even with the increased capacity at Cessna, the company is hard pressed to provide certain cabin components and has gone outside for certain items. Global Engineering Technology is supplying components for the Citation CJ1 and Citation CJ2. DeCrane’s Precision Pattern is providing components for the rest of the Citation line, from the CJ3 through the Citation X, including the new Sovereign. Both Global Engineering and Precision Pattern are based in Wichita.

Raytheon Aircraft, like other OEMs, is dealing with meeting the challenges of diminishing sales, and at the same time gearing up to meet the eventual demand for new airplanes.

Raytheon continues to perform all of its green Hawker completion work at its Raytheon Aircraft Services facility in Little Rock. At the same time, the company is making plans to expand to install interiors in the new Hawker Horizon. Raytheon expects to begin deliveries of the super-midsize in the second half of next year. This also calls for the hiring of an additional 350 workers over a five-year period as production rates increase. “But at this point, at the lower initial rate of production, we can accommodate the Horizon in the existing facility.”

Jet Aviation has also been expanding. In November last year its Basel, Switzerland completion and refurb center invested in computer-numerically controlled equipment, including wood-milling, laser-cutting and sheet-metal-bending machines. According to head of production Thomas Rechsteiner, the new machines are not only more cost- and time-efficient, but also allow for greater precision and flexibility.

A month later Jet Aviation’s Zurich, Switzerland facility expanded its services to include major interior refurbishment, including exterior paint. The expansion adds to the already extensive capabilities of the main completion and refurb center in Basel. At Jet Aviation’s London Biggin Hill facility, the company expanded its paint division, increasing the total space to 10,760 sq ft. “The renovation allows Jet Aviation Biggin Hill more space to work on large aircraft such as the Global Express, Gulfstream V or even the Avro RJ100,” said general manager Elie Zelouf.

A number of smaller completion and refurb facilities have seen the economic downturn as an opportunity, taking advantage of low interest rates to expand.

Rose Aircraft Companies, in the completions business for 35 years, took a major step in acquiring a 43,000-sq-ft facility adjacent to its original interior shop at Mena Municipal Airport, Ariz. The addition brings the total space at Rose to 130,000 sq ft and, according to general manager Kent Rose, it allows the company to expand its interior refurbishment and paint capacity by 50 percent.

Stevens Aviation in Greenville, S.C., has been in the process of enlarging its paint hangar doors. The job was to be finished last month and, according to DeYoung, it will allow the company to add the Falcon 900 and Challenger line to its paint capabilities. “I’m already bidding on some Falcons and Challengers,” said DeYoung. “This will open up a whole new market for us.”

More surprising in this time of economic malaise is that there was even a startup. In April, Atlantic Aero officially opened a new completion and refurbishment shop in Greensboro, N.C. The shop is in a 6,100-sq-ft hangar at Piedmont Triad International Airport and is dedicated exclusively to interior work. The shop, representing a $300,000 investment, is initially focusing on upholstery and fabric application, but the intent is gradually to expand to include full interior refurbishment work. Atlantic Aero and its subsidiaries have in the past focused on aerospace engineering and parts fabrication, as well as providing services as an FBO, an FAA-approved repair station and air-freight operator.

An Economic Turnaround

“I’ve got to admit, it’s getting better,” sang the Beatles. If those lyrics from 1967 also accurately describe the state of the economy today, then it is music to the ears of many in the completion and refurbishment industry.

And there is good news, and not merely wishful thinking on the part of the perpetual optimists.

Rahilly, now with Dassault and formerly with K-C Aviation before its acquisition by Gulfstream, points out that all the money that was made during “fast times at the dot-com high” is still there. There were thousands of individuals who made their money and got out before the collapse of the technology market. “They got out with the money and created a legacy of individuals with the wherewithal not only to purchase a business jet, but to fund the operation for some time to come.”
That money, said Rahilly, is still there and waiting, “And as sure as there are bad times, good times will follow.”

Stevens Aviation has already done 15 Avanti interior completions for Piaggio. And with the Italian company prepared to increase the Avanti production rate to 20 aircraft this year and 26 next year, Stevens is already planning a new completions center that would combine all the back shops under a single roof. Stevens is the sole Piaggio-approved completion center for North America and, according to DeYoung, “The owners are demanding the very best in interiors.”

Radicke at Southstar Aircraft Interiors is looking at a new source of income for his interiors shop in the form of the Ae270HP, new turboprop single from Ibis Aerospace. Ibis last month signed a contract with Southstar as the exclusive interior provider. Ibis expects to produce 15 Ae270HPs next year, of which 13 are earmarked for an executive interior by Southstar. The Uvalde, Texas interior shop will build and install interiors for 10 of the 13 aircraft and provide the other three in kit form for installation elsewhere.

The kit interiors include seating for five, a lavatory, two work tables, an entertainment system and a refreshment center. Ibis expects to increase production in 2005 to 35 aircraft, of which about 30 will have interiors outfitted by Southstar.

Taylor at Wichita Executive Aircraft believes the tougher times are now in the past. In May the company had just finished interior refurbishment work on a Learjet 45 and two Learjet 31s, major interior work on a Gulfstream IV and had just begun work on a Challenger 601 interior.

“Bankruptcy is an ugly experience,” said Taylor. “But we’ve gotten more business and we feel we’re going to be profitable from here on out.”

Duncan Aviation is looking forward to doing more business with Embraer. The company has a contract to produce cabinetry shipsets for the Brazilian OEM’s Legacy Executive, a business jet version of the ERJ-135. The kits, of modular design, include galley and lavatory and other systems typically incorporated into the cabinetry, from water and lighting to the entertainment system.

Duncan’s Ewalt said the first kit was to have been shipped already to be installed in Brazil in the company’s demonstrator aircraft. But Embraer in the meantime found itself with a customer who wanted his airplane “yesterday,” so the first kit is being modified to meet the new design and was rescheduled for shipment this month. “Providing the market improves, we hope to sell 12 to 15 kits a year,” said Ewalt.

Perhaps the most enthusiastic vote of confidence came from Gulfstream’s Flynn, who noted the most recent survey of NBAA’s members shows that while the market for new and used aircraft remains depressed, business aircraft owners are flying more than ever. “The business aircraft fleets are flying and the airlines are going south, and that gives me confidence,” he said. “People are still interested in flying, but not with the scheduled airlines.”

A Buyer’s Market

Without doubt, at this point the business aviation industry is a buyer’s market. OEMs are offering incentives to buyers of new airplanes, and the prices of used business aircraft have dropped in some cases by 50 percent from what they were two or three years ago.

Buyers may also find attractive the fact that the same completion and refurb centers that were talking of deliveries a year or two down the road now have virtually no backlog.

But even though the dam may have a crack or two in it, the flood of aircraft buyers remains in check. Throughout the industry, there is talk of “pent-up demand” by buyers who are waiting, money in hand, for a sign that the economy is improving.

One completion and refurb center had a recent nose-to-tail refurbishment of a Falcon 50 purchased by a client who paid almost half the asking price of the same aircraft two years ago and then put a part of the money he had saved into re-doing the interior. But such anecdotes are in short supply.

When the economy does improve, and customers return, will the industry return to business as usual? Some believe this recession will have left a mark on the completion and refurb industry that will remain for years to come.

The refurbishment side of the industry, said Dassault’s Rahilly, is likely to remain as it has been, “a wide-open game. But [these facilities] will have to be capable of providing a complete range of services, because more than ever, they’ll be measured against what the OEMs can provide.”

Flight departments, more knowledgeable about such things, are more aware that their assets are too expensive and complex to be moving around to one shop for avionics and another for maintenance. Instead, they are looking for quality one-stop-shops. A chief of maintenance or a chief pilot is not going to trust an expensive asset to a completion or refurb center that hasn’t invested in the training, engineering, tooling and equipment to do a first-rate job.

As for OEMs, Rahilly said he expects they will continue to outsource a lot of aircraft interior components, but will hedge their bets a little by retaining “a stout in-house capability, particularly in seat upholstery and cabinetry.” To a greater or lesser degree, he said, “outsourcing is with us forever.”

Both independents and OEMs will develop new relationships with vendors, but they will not allow themselves to become totally dependent on a single vendor for any particular component. At the same time, said Rahilly, “If they’re smart, they’ve kept those vendors well fed during the tough times, so they will be there and available when the good times return.”

As for the loss of experienced aircraft interiors specialists during this period of layoffs and furloughs, Rahilly believes if it does not last too much longer, “they’ll come back.” But if it continues, some of these will find new jobs in such related industries as yachting or automobile manufacturing, where the pay and benefits are typically better.

Most of the OEMs and independent completion and refurbishment centers seem to be taking the same approach to the current market challenge. Ewalt at Duncan explained: “We really believe that an economic recovery is coming. We know that these things have been and will continue to be cyclical. So during the downturn, we are retaining our employee base and expertise, finding new and creative ways to sell our product, and using the time to position ourselves for the recovery.”