In face of strengthening market, Piaggio struggles with production

 - September 20, 2007, 6:51 AM

For its sleek Avanti II, Piaggio reports a two-year backlog valued at more than $600 million. That’s the good news. The bad news is that despite efforts to increase production, the Italian manufacturer shows little sign of putting a credible dent in that backlog in the near future.

This is the predicament into which Eric Hinson stepped in January, when he took over as the new president and CEO of Piaggio America, Piaggio Aero’s North American business entity, in what is by far the largest market for the rakish twin-turboprop pusher.

“The ‘book-to-build’ ratio is still not what we’d like to see,” Hinson told NBAA Convention News speaking of the backlog.

Piaggio delivered 17 Avanti IIs in 2005 and announced its intention to ramp up production and deliver 24 airplanes last year. The announcement was met with some skepticism, and this time the skeptics were right. Piaggio delivered just 19.
To increase production, the company decided to build a new parts production plant in Albenga, Italy, east of its main facilities near Genoa. The facility will be responsible for most of the aircraft parts manufacture, leaving the final assembly process to the Genoa facility. Last year former Piaggio America boss Tom Appleton said he expected the plant to go on line late this year or early next year. Now, however, it appears construction will not begin until early next year, with the facility becoming fully operational in early 2009.

But Piaggio remains optimistic about its ability to build more airplanes on a faster schedule. Hinson said Piaggio has already made “meaningful” improvements on the current production line, including the institution of lean production methods. He added that if the company remains on schedule this year, “about 27 or 28 airplanes will come out of the factory.”

Next year, he said, “We plan to make 32, maybe 34, customer deliveries [and] in 2009 we should be meeting the right book-to-build ratio and deliver 40 airplanes.”

Looking forward, Piaggio has aggressively expanded its support and service network and plans to add more factory-authorized service centers to the nine located in North America and a factory service center in Genoa. Hinson said the company is considering some realignment in the North American network as well as evaluating potential additional sites, particularly in the Midwest and the Pacific Northwest. The company also maintains its own spares warehouse in West Palm Beach, Fla., where Piaggio America has its headquarters.

Worldwide, the in-service fleet of Avanti and Avanti II aircraft totals around 130, with 90 of them based in North America. The most recent coup was the sale of three Avanti IIs in Jordan, a deal that included options for six additional airplanes. It marked Piaggio’s entrance into the Middle East market. The factory service center in Genoa is only a little more than a three-hour flight from Damascus.

While Piaggio is facing a substantial backlog, Hinson pointed out that it is not alone: all the OEMs are dealing with capacity issues in today’s hot market, he said. At this point, Piaggio holds orders for more than 100 Avanti IIs. “It’s a testament to the quality of the airplane and to the maturity of the company in providing support,” he said.