Piper Aircraft president Jim Bass has laid out a clear strategy for carrying the company into the next decade by expanding its line of cabin-class singles, from piston-powered models to the PiperJet. Bass said the company has no plans to adopt Cessna’s style of capturing clientele with light sport aircraft and then moving them up the product line. “Big-cabin, single-engine airplanes clearly strike a chord in the marketplace,” he said, and that is the part of the market on which Piper intends to direct its focus.
“The PiperJet is our future,” Bass said. The single-engine PiperJet prototype made its first flight on July 30. The seven-seat, $2.2 million (2006 $) compact jet is projected to have a top speed of 360 knots, a service ceiling of 35,000 feet and a range of 1,300 nm. Two more prototypes are scheduled to join the test fleet next year.
However, the “future” Bass describes is at least three years away, when the PiperJet is projected to receive certification and customer deliveries are slated to begin. While the future looks brighter for Piper–a company that has been in an almost constant state of financial struggle since the 1980s–its success is by no means assured.
The PiperJet itself is seen as a means not only to attract new customers for Piper airplanes, but also perhaps as an enticement for a new owner for the company. Since last year, Piper has been rumored to be up for sale, an assertion that company executives do not directly deny. “For the right price, any company is for sale,” a Piper spokesman answered when posed the question.
When Piper announced its jet in 2006, it also announced a strategic alliance with Honda Aircraft, covering sales, marketing and some technical assistance. It now appears that the alliance did not have a significant financial component beyond recruiting a few established Piper dealers to represent the twin-engine Honda Jet. While neither company would pronounce the relationship dead, Bass minimized it. “It was like two ships in the night that passed, visited for a while, and now have moved their separate directions,” he said. “The relationship between Honda and Piper has really sort of moved on.”
While Piper claims more than 200 orders for the 2,400-pound-thrust Williams FJ44-3AP-powered PiperJet, approximately 150 of those are “reserved dealer positions” available for resale to retail customers. Kromer said that all PiperJet orders are backed by deposits, but a Piper spokesman was unable to provide specifics or quantify the deposits themselves. How many of those dealer positions are backed with actual, meaningful deposits is the subject of speculation. In September, a Piper spokesman could not illuminate how many of those positions were backed by deposits or quantify the deposits themselves. Also subject to speculation is the wherewithal and willingness of Piper’s current parent, the investment banking firm American Capital Strategies, to fully fund the PiperJet’s development program, the final price of which could easily top $100 million.
The speculation grew earlier this year when Piper extracted $32 million in incentives and concessions, payable over three years, from the state of Florida and Indian River County to keep PiperJet production in Vero Beach. The payout coincides with the remainder of the PiperJet’s development program, which, according to Bass, projects certification in the second quarter of 2011 with deliveries beginning in that year’s fourth quarter.
American Capital acquired the majority of Piper by assuming $57 million of senior debt discounted to $34 million in 2003. One year later a pair of hurricanes severely damaged 300,000 sq ft of the companies’ production space at Vero Beach. The company was literally in tatters, and customer service and support sank to bottom-of-class levels. Owners of Piper turbine aircraft were particularly alienated.
However, since 2005 Piper’s customer service has shown consistent improvement, according to the annual product support survey published yearly in NBAA Convention News sister publication Aviation International News. “We were down and out five years ago,” Bass admitted.
Bass, a veteran senior management executive at both General Electric and Sony, was part of a new management team that came to Piper in the wake of American Capital’s acquisition. “We focused internally on changing the way we make money,” he said.
Compared to companies such as Cessna and Cirrus, Piper is a low-volume producer, and continuing to aggressively push a low-output, but a diverse product line was a recipe for more financial stress. While Piper did not abandon those smaller airplanes, its new managers immediately looked to further leverage its family of piston and turboprop cabin-class singles built around the PA46 fuselage. The strategy maximized production efficiencies and revenues.
This year Piper is on track to sell almost $200 million worth of new aircraft, with the bulk of revenues coming from the PA46 family; the $757,000 Matrix; the $1.2 million Malibu Mirage; and the $1.97 million Meridian turboprop. Piper’s total 2008 revenues will close to double those of the company just five years ago.
“Piper is producing 263 aircraft this year and 200 of those are PA46 series,” Bass said, adding that projected 2008 production calls for 101 Matrix piston singles, 21 Mirages and 53 Meridians. He added that production plans for next year include 100 Matrix, 25 Mirage and 63 Meridian airplanes.
Piper is also looking to capitalize on Diamond Aircraft’s ongoing engine problems with its Thielert diesel twin-engine trainer, the DA-42. The -42 displaced the $558,000 Piper Seminole as the preferred twin trainer at larger flight schools, but the -42’s fuel-efficient engines have been prone to failure and their German manufacturer was recently forced into liquidation.
“The Seminole had faded away,” said Bass. “We were selling 24 a year to flight schools. The DA-42 Twinstar had kicked our buttocks. Now customers and schools are coming back to the Seminole and we are happy to have them.” He predicted Piper might sell between 50 and 100 Seminoles next year.
While increased Seminole production represents a potentially important boost to Piper’s bottom line, Bass acknowledged that keeping the PA46 line fresh and relevant over the next three years, until the PiperJet starts rolling down the production line, will be critical to the company’s ongoing success. “I have a three- year river I need to cross between now and the PiperJet,” Bass said. “We are going to be announcing enhanced capabilities in the base business, the PA46 line.”
Bass also said that Piper would rebid its training contract for the entire Piper line, including the PiperJet. “Right now we train all our customers through SimCom. It is a five-day course and SimCom does a good job. But we expect a full-motion simulator and a type rating for that [PiperJet] level of sophistication from our next provider,” Bass said. “It could be SimCom. It could be anyone.”