Completion & Refurbishment Special Report:  Signs Of A Recovery Appearing in Cabin Outfitting Industry

 - July 1, 2011, 3:55 AM

There are growing signs that business aviation is entering a recovery period, and reports from the completion and refurbishment side of the house suggest that cabin outfitting is shaking off the effects of a prolonged recession.

Major analysts–JPMorgan, UBS, Argus, JetNet and Avinode–are taking positive if tentative positions, reporting a reduction in the used aircraft for-sale inventory and increases in flight activity. And at the European Business Aviation Convention & Exhibition (Ebace) in May, the good mood that permeated the opening was even better as the show closed.

Nine-digit jet deals were again in vogue at Ebace. Most were for large-cabin aircraft, but there were orders for midsize and smaller airplanes as well. And there was plenty of proof that a growing market outside North America and Europe–primarily Brazil, Russia, India and China–is a trend with legs.

“In 2011, the European market is still active,” said Richard Gaona, CEO of Comlux The Aviation Group, a Zurich-based aviation services company that counts among its subsidiaries Indianapolis-based completion and refurbishment specialist Comlux America. And he added, “The Chinese market is growing and the Middle East seems to be recovering despite the turmoil there.”

Comlux recently placed an order for seven Embraer Legacy 650s for its own charter arm. The first three will be based in Almaty, Kazakhstan, from where they will provide nonstop service to Beijing, among other destinations.

Flying Colours is more than happy with the Chinese market. The Peterborough, Ontario-based completion and refurbishment center specializes in Challenger 850 green completions and Canadair CRJ200 reconfigurations for executive use. Flying Colours and its Chesterfield, Mo.-based sister company, JetCorp, have already delivered two completed 850s to China and expect to deliver five more in China and another in India by the end of next year. “We have three more scheduled for 2012 delivery, and we’re negotiating for more,” said director of completion sales and management Sean Gillespie.

“Our Chinese customers like the large cabin, a range that will take them nonstop to most destinations in China, and a price in the $26 million range,” he explained.

China Poised To Become the Next Big Market

Bombardier estimates the China market potential at some 600 business jet deliveries between 2010 and 2019, and Brazilian OEM Embraer rates it at about 950 deliveries over the next 20 years. All that activity spells work for the world’s completion and refurbishment centers.

Talco Aviation and DRB Aviation recently formed a “strategic partnership” that includes a broad range of completion and refurbishment project supervisory and management services. More telling, the company has also opened the new office in Xiamen, China, not far from the (similarly named but different) Taeco aircraft heavy maintenance facility, which recently expanded to include cabin completion and refurbishment.

“A lot of Chinese buyers are starting at ground zero when it comes to outfitting the cabin,” said Talco president Tom Langeland. This, he added, is especially true of larger bizliners for which the only guidance is typically a list of interior centers approved by the aircraft manufacturer.

In Singapore, ST Aerospace is a major MRO facility that also has the capacity to handle interior outfitting for aircraft up through an Airbus A330 or Boeing 747.

Like the OEMs and completion and refurbishment centers, cabin designers recognize the potential of the China market and are designing cabins that appeal to regional tastes.

Earlier this year, Airbus announced its Phoenix cabin concept, with a color scheme and layout that will appeal to the Asian sense of aesthetics. Taeco is among the cabin outfitters that Airbus has approved and audited.

At the Aircraft Interiors Expo in Hamburg, Germany, in April, AirJet Designs of Toulouse, France, unveiled two luxury interior renderings reflecting the Asian aesthetic. The proposals–Art de Vivre and Xin Ge –are influenced by French, Italian and Chinese design styles.

Associated Air Center in Dallas is working on two completion projects for the same Asian customer, both of which incorporate the 3,000-year-old Chinese principles of Feng Shui.

Lufthansa Technik will be providing cabin outfitting for a new Boeing Business Jet destined for corporate service with the new Beijing Airlines. Also on the schedule at the Hamburg-based center is completion of an A319 for another Asian customer.

Widebody Ambitions

In fact, centers like Lufthansa Technik that are devoted primarily to the reconfiguration of single- and twin-aisle airliners for executive use made it through the recession with minimal heartburn. A small number of owners deferred delivery, but in nowhere near the numbers who deferred and even cancelled deliveries of smaller business jets.

Airbus Corporate Jet Centre (ACJC) saw business slow down “a little bit” last year, but according to head of sales and marketing Bruno Galzin, “We have green aircraft to complete into 2012 for sure [and] we’re starting to fill in 2013,” he added. “And we will deliver four cabins this year–maybe even a fifth one.”

Following the example of other completion centers, the Toulouse-based ACJC has expanded from dedicated green completion work to include maintenance checks, engine work and cabin upgrades and refurbishment.

In the past, ACJC has focused exclusively on green completion of the Airbus ACJ line of business jets, but the company is looking closely at expanding into larger, twin-aisle airliner conversions, said Galzin. “Maybe in one or two years,” he mused. “We are part of the Airbus organization, so it makes sense.” ACJC is also considering an expansion of its facilities to accommodate what it expects will be a growing demand for green completions.

Galzin noted growing demand for cabin refurbishment work, in particular during the Ebace show. ACJC delivered its eighth outfitted cabin in late May.

In the U.S., few centers are as busy as Gore Design Completions in San Antonio. In a recently expanded hangar, the center is working on three Airbus A340s and an A320, a Boeing 777 and a BBJ3. The most recent delivery was a Boeing 767 in April. The Boeing 777 and one of the A340s currently in the shop are scheduled for delivery this year. “We were so booked over the past couple of years we didn’t experience any downturn,” said co-owner and president Kathy Gore-Walters.

Following a restructuring, Associated Air Center in Dallas is resuming its place as one of the country’s premier centers. For the past couple of years Associated has been doing single-aisle airliner reconfigurations but has recently begun bidding on twin-aisle aircraft outfitting.

“We have stabilized operations here and we’re starting to bid on twin-aisle work again,” said Associated president Jack Lawless. “We are also considering partnering on some 747-8I projects. This way we would continue our single-aisle work and still support a large project like a 747-8I.”

Lawless said Associated did well in 2010, with deliveries of five outfitted aircraft. “We have a healthy backlog and things are going well for us.”

Comlux America in Indianapolis is also having a good year, according to Gaona. A new A320 completed in Indianapolis was on display at Ebace. A BBJ2 and an A319ACJ are currently in the completion process.

In the two years since it opened, the center has received approvals from Airbus, Boeing and Bombardier to provide completion and refurbishment. Comlux America is delivering aircraft–BBJs and ACJs–at the rate of about three a year.

Like some other centers, Comlux America is anticipating a growing demand for cabin refurbishment as the early BBJs and ACJs reach 12 years in service and come due for a major inspection. At that point, Comlux American CEO Dave Edinger expects a substantial number of those owners will take advantage of the down time to include cabin refurbishment. In fact, the facility recently opened a new hangar dedicated to refurbishment.

The focus at this point is on single-aisle airliner reconfiguration and refurbishment, but Gaona believes the time will come to expand into twin-aisle airliners, “maybe in two or three years.”

King Aerospace in Ardmore, Okla., has in the past been a refurbishment center for midsize and smaller business jets. During the recession when that business dropped off, the company’s extensive military contracts carried it through. Coming out of the other side, King is expanding to include refurbishment and green completion of single-aisle airliners converted to business and private use, “Maybe even an A330,” said company president Ron Soret.

He added that King has plans to build a new exterior paint shop capable of taking aircraft as large as the A319 and BBJ next year. “The idea is to be a world-class completion center; a one-stop shop for everything from heavy maintenance to green completion.”

Describing Lufthansa Technik’s current pace of completion and refurbishment, Walter Heerdt said the numbers for the center are on track and approximately the same as last year.”

He pointed out that the newest airplanes–Boeing’s 747-8I and 787–are getting closer to delivery and the facility is gearing up for its first 747-8I in mid-2012. “We’re already beyond the design phase and well into the engineering cycle.”

As an Airbus-approved maintenance center working on all the Lufthansa German Airlines fleet of 747-8s, Heerdt figures Lufthansa Technik is well positioned to do not only interior completion but also to provide maintenance and service for executive versions of the airplane as part of a total package.

More Business From Emerging Markets

Like other centers, Lufthansa Technik is seeing more business from emerging markets, said Heerdt. He added that the Hamburg facility, as well as the company’s Tulsa, Okla.-based BizJet International completion and refurbishment center, is well positioned. But Heerdt was far from declaring that the industry recovery has begun, saying simply, “We are carefully optimistic.”

Careful optimism also describes the completion and refurbishment centers that focus on outfitting aircraft from large-cabin Gulfstreams down to King Airs.

Ron Jennings, director of completions sales at Elliott Aviation, said activity started picking up earlier this year, “mostly people who had been waiting to have an interior refurbished, and others who just acquired a used airplane and want a cabin upgrade.”

Jennings said the exterior paint business has been particularly busy. “We’re now six months out in terms of paint and interior slots, primarily Challengers and Citations.” He added that most of the Moline, Ill. facility’s customers are also having some cabin work refurbishment done in addition to paint.

StarPort USA in Sanford, Fla., saw a strong start to this year but refurbishment work took a hit in early spring when owners of two airplanes in for major refurbishment stopped sending progress payments. Since then, said executive director of sales Eddie Hidalgo, “One owner has come through. But we’ve since gotten busier and when the other guy resumes payment, it’s going to be difficult to work him back into the schedule.”

Jet Aviation St. Louis appears to be eclipsing its Midcoast Aviation origins but, like its former entity, continues to grow, and did so even through the recession.

Its green completion work on Bombardier Challengers and Globals continues and even a couple of owner cancellations were barely hiccup in the work flow.

“Activity in refurbishment is strong,” said interim general manager Rodger Renaud. “And that activity is turning into contracts, not just for recovering seats but for some pretty sizable jobs.”

Perhaps more important, Jet Aviation St. Louis, like some other centers, is expanding its completion and refurbishment repertoire to include single-aisle airliner conversions to executive use. The center is currently involved in turnkey cabinetry for two BBJ3s and a BBJ2 for the parent company in Zurich where the installation is being performed. “We expect to take in our first airplane here next year.”

Approximately 60 percent of the work is coming from outside the U.S., “both green completion and used aircraft refurbishment,” said Renaud.

As for 2011, he concluded simply, “We’re going to get significantly better.” 

Interest in refurbishments has been growing, said Duncan v-p of sales John Slieter. “Our first quarter this year got busy [with] aircraft changing hands and owners deciding to do some upgrades.” Customers, he said, are coming from both the corporate and charter sides of the industry.

Corporate flight departments have been flying more in the last year, and it seems as if most of them were getting through the first quarter before deciding whether to spend the money budgeted, he explained. This has created a workload scheduled out six months for some Duncan shops, such as maintenance and avionics. And while Duncan is working at close to capacity at this point, it is mostly the result of some layoffs as well as losses through attrition when the company began pulling back in 2009. “We’re hiring again, but we’re being careful,” said Slieter.

Duncan Aviation is a cabin refurbishment center, and like Elliott, is also an outsource provider for components from cabinetry and upholstery to composite cabin shells and exterior paint.

Duncan is happy with work as a subcontractor to Dassault Falcon, doing Falcon 7X interiors at the rate of three or four a year.

Slieter concluded, “I honestly believe we’ll be up 10 percent over last year.”

The Wichita Cessna Citation Service Center reports an increase in business, “simply because a lot of aircraft owners are keeping [their airplanes],” said supervisor of sales and marketing Tom Heck. “They’ve realized that they’re not going to find a purchaser at a fair price in the near future and they want to make the cabin new again.” One of these, he added, was an all-new interior and flight deck in a 10-year-old Citation V.

There are some 5,000 Citations in service, said Heck, and Cessna recognizes the importance of customers bringing those airplanes back to Cessna for refurbishment work.

He also took note of the growing number of owners outside the U.S. who bought an airplane in the U.S. and are having it refurbished in the U.S. “There aren’t a lot of facilities outside the U.S. with our experience and expertise, explained Heck. And, he added, with the continued weak dollar compared with other currencies and that isn’t going to change anytime soon.

Kirk Rowe, president of Innotech Aviation in Montreal, is also seeing growth in green completion work from outside the U.S. “A lot of our business is from outside the U.S.–Europe, the Middle East and Russia–and particularly for Bombardier’s Global Express XRS.”

Innotech Aviation has long been a preferred outfitter of certain of Bombardier’s Challengers and Globals. “We’re now doing five aircraft a year for [Bombardier] , one more than in past years,” said Rowe.

Business is brisk enough that Innotech is now building a 26,000-sq-ft hangar that will be capable of accommodating two business jets the size of Bombardier’s recently launched Global 7000.

Growth at Innotech, he said, has been steady year over year. He added, “If the quotes we’re doing turn into contracts, we’ll be pretty happy.”

Denton, Texas-based Jet Works is looking forward to a sustained recovery, according to Marc Johnson, director of sales for VIP aircraft. “We have an MD-87 in the works and a BBJ arriving in July,” he said. “Things are definitely looking up.”

Johnson pointed out that U.S.-based completion and refurbishment centers are more aggressively pursuing clients in the European market, and Associated Air Center, Duncan Aviation, Elliott Aviation, Gore Design Completions, JetCorp (represented by Flying Colours) and Jet Works–just to name a sampling–were all well represented and exhibiting at Ebace.

Like King’s, Jet Works’ exterior paint is one of the busier shops. “Last month was the first time we’ve had an empty paint slot in a long time,” said Johnson.

“I was at Ebace last year and it was a positive show,” said Robinson Aircraft Interiors v-p of sales and marketing Shadd McKinney. “This year was even better.”

“Our pipeline is absolutely packed full,” he said of the Fort Worth, Texas-based interior components vendor. Fortunately, he added, “We took advantage of the lull during the recession to build a new 78,000-square-foot facility and we’re in a position to handle everything from cabinetry to upholstery to electrical buildup for customers from anywhere in the world.”

McKinney is at least as optimistic regarding an industry recovery as representatives of any of the other completion centers and vendors interviewed for this story. Maybe more so. “In 2010, the industry was stabilizing, 2011 is looking fantastic and 2012 is going to be even stronger,” he declared.

“Last year was the low point, and this industry is now at the beginning of a seven- or eight-year upswing.”