Kestrel Moving To Wisconsin

 - February 4, 2012, 2:55 AM
(L to r) Doug Finn, Douglas County Board; Dave Minor, Superior Chamber of Commerce; Alan Klapmeier, Cirrus CEO; Wisconsin governor Scott Walker; and Superior mayor Bruce Hagen celebrated Kestrel’s decision to build the K-350 in Wisconsin.

Kestrel Aircraft is abandoning plans to set up the headquarters and new production plant for its K-350 single-engine turboprop in Brunswick Landing, Maine. On January 16, the company announced a $118 million deal to locate in Richard I. Bong Airport in Superior, Wis., and begin construction in June. The agreement is being financed by a variety of grants, low-interest loans, and tax credits from the City of Superior, Douglas County and the state of Wisconsin.

Assembling Sources of Capital

The majority of the funding is coming from the state, and the deal is viewed as a political plus for Wisconsin Governor Scott Walker (R), who likely faces a contentious recall election later this year. Walker said the deal could create “about 600 jobs” in economically racked Northwest Wisconsin. Kestrel is the largest private-sector job creation deal announced since he took office last year. The state is extending Kestrel $108 million in tax credits and $4 million in low-interest loans. The Wisconsin Housing and Economic Development Authority will provide $30 million in new market tax credits (NMTC) this year, $60 million in future NMTCs and a $2 million loan through the U.S. Treasury’s State Small Business Credit Initiative Program.

The Wisconsin Economic Development Corp. is extending $18 million in enterprise-zone tax credits and a $2 million economic development loan. Douglas County is providing a $500,000 loan and transferring land adjacent to the airport. Kestrel is also getting a $2.4 million low-interest loan and $3.1 million in tax incremental financing and land grants from the City of Superior.

A Kestrel spokeswoman declined to reveal how much private capital the company has raised to date, but said, “The business plan calls for an assortment of financing, [but capital from] a private-equity firm is not one of them.”

Last summer Kestrel CEO Alan Klapmeier told AIN, “Capital formation is broken in the United States. To do a program like this you need to find all of the different [capital] sources and put them together brick by brick. A large part is economic development assistance. It is just the state of business today.” In 2010 Klapmeier said that approximately $20 million to $30 million had already been spent developing the Kestrel but that an estimated $100 million more would be required to get the aircraft certified. Subsequently, the aircraft went through a significant redesign that included the engine intake inlet and firewall to accommodate its 1,650-shp Honeywell TPE331-14GR turboprop engine. “We are getting close to final configuration and we are in the last phase of airframe layout, specifically the fine points of airfoil shape and twist,” Klapmeier told AIN in July 2011. “At the conclusion of that we will start making airframe tools.”

Kestrel had hoped to fly a reworked prototype this year, but the company acknowledged last month that a first flight now is not likely until sometime next year. Kestrel is aiming to produce an aircraft with 325-knot maximum cruise speed, a full-fuel range of 1,300 nm with 1,250 pounds of payload and a price on par with or below that of a Daher-Socata TBM 850. The company has attracted sufficient financing to build a production aircraft, but needs more capital to fund the project through certification. Once in production, Klapmeier estimates a market for 35 to 50 Kestrels annually.

Kestrel will continue to keep its Aeroworks aircraft modification business at Brunswick and hopes to expand that business there. Aeroworks employs 25 people at Brunswick. Kestrel has 25 more employees at its engineering office in Duluth, Minn. Kestrel formed Aeroworks in July to install the Avidyne R9 avionics system and other upgrades in the Piper Meridian turboprop singles and piston-powered Cirrus SR22s via supplemental type certificates (STCs). Aeroworks has designed a more ergonomic cockpit for the Meridian and will offer a four-blade propeller and new cowling for the Cirrus.

Alan Klapmeier and his brother Dale founded Cirrus Design in 1984. That company is located in Duluth. Alan Klapmeier left Cirrus in 2009, and his brother was named Cirrus CEO last year after China Aviation International General Aviation (Caiga) acquired the company. Alan Klapmeier joined Kestrel Aircraft as CEO in 2010.

The original and only Kestrel prototype was manufactured under contract by Epic Aircraft for Farnborough Aviation and made its first flight in 2006. Both companies subsequently failed. Caiga bought the assets of Epic in 2010. They include the design for an all-composite single-engine turboprop called the Escape, which resembles, but is smaller than, the Kestrel K-350.

Cirrus is currently evaluating the turboprop market.