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"Aviation suppliers rise again by navigating industry change"



Monday, March 28, 2005

Aviation suppliers rise again by navigating industry change
By David Mitchell
The Kansas City (MO) Business Journal


Much of the news in aviation-related business has been bad since the 9/11
terrorist attacks devastated commercial airlines. 

But companies that supply parts to aerospace manufacturers are finding
innovative and diverse ways to stay competitive. 

The popularity of personal jets, new Federal Aviation Administration
guidelines and increased defense spending are helping boost aerospace
suppliers. 

Two Olathe-based companies -- Butler National Corp. and Garmin Ltd. -- are
experiencing record growth because of new products. 

Butler reported $18 million in revenue for the nine-month period that ended
Jan. 31, up from $7 million for the same period in 2003. 

"Our research-and-development people are always looking for what the next
product will be," said Aric Peters, Butler's director of international
sales. 

The issue of the moment is reduced vertical separation minimums (RVSM). The
FAA reduced the minimum vertical space between planes from 2,000 feet to
1,000 feet because of increased air traffic. The new standard was
implemented in January for planes flying between 29,000 feet and 41,000
feet. 

With only 1,000 feet of separation, the accuracy of information available to
pilots becomes even more important. Butler offers an upgrade program for
Learjets that includes installing equipment that provides more precise
information to the altimeter and autopilot. Butler and its subsidiary, Avcon
Industries, have modified about 100 jets in the Learjet 20 series. The
companies are working to gain FAA certification for RVSM service on other
models as well. 

"With all the added security at airports," Peters said, "more and more
high-income people who can are deciding to skip the airlines and buy their
own jet." 

Small, private planes also have been big business for Garmin, which in 2004
reported a 42 percent increase in aviation revenue, to $171.5 million.
Garmin's boom was largely because of the G1000 integrated cockpit, which
launched in March 2003 and started delivery in the summer of 2004, company
spokesman Ted Gartner said. 

The G1000 fits six aircraft models: the Cessna 182 and 186; Diamond DA40 and
DA42; and Mooney Ovation2 and Bravo. The digital cockpit's integrated fuel,
speed and weather readouts make calculations easier than with the old system
of dials and gauges. 
 
"Instead of buying piece by piece, the G1000 was designed to fit in with
that airframe, and it does everything," Gartner said. "It's all there on two
15-inch glass panels." 

Gartner said Garmin's diversity of products helped it survive the recession
after 9/11. Aviation accounts for 20 percent of sales for the company, which
also makes GPS, radios, heart monitors and other electronic devices. 

Suppliers more reliant on aviation had some tough times after 9/11, but
increased defense spending has helped the industry bounce back. 

"We're ahead of where we were before 9/11," said Torotel Inc. CEO Herb
Sizemore, whose Olathe-based company manufactures electronic components.
"The commercial side has been down, and it's coming back. Defense has been
pretty steady." 

Sizemore estimated that 70 percent of the company's products go to defense
contractors such as Lockheed Martin and that commercial manufacturers use 30
percent. 

Torotel sells its products directly to systems integrators, but the Missouri
Enterprise Business Assistance Center is helping suppliers become
integrators themselves. 

"The bottom line in the industry is Boeing and other (original equipment
manufacturers) are looking for suppliers to have higher quality and be able
to do more than produce just parts," said Dan Medley, executive vice
president of the center. 

In other words, Boeing would rather buy a preassembled landing gear from one
supplier than buying the tire, wheel and other parts from separate
manufacturers. 

Essex Industries Inc. makes stickgrips and throttles for the F-16, F-18,
F-22 and Joint Strike Fighter jets, but the St. Louis manufacturer would
like to do more. 

"It's very important for us to become systems integrators, or our components
will end up being integrated by other suppliers, and then we run the risk of
losing our margin," said Cyril Narishkin, Essex's director of brand
development. 
 
Systems integration lowers costs for the manufacturer, gives the supplier a
bigger piece of the business and streamlines assembly. How much?
Chicago-based Boeing, the world's largest aerospace company, is working on
its new 7E7 Dreamliner in Seattle. The jet is comparable to a 767, which
takes months to produce, but the Dreamliner will take less than a week to
assemble. 

"On any of the future aircraft, Boeing wants assemblies instead of
components," said Tom Rose, a Boeing supply manager in St. Louis. "Not to
make it too simplified, like Legos or building blocks, but we want to bring
them in and put them together very quickly without a lot of complicated
machining." 

Sizemore said the trend toward integration hasn't affected his business. 

"We never sold much directly to Boeing," he said. "Our sales were more
geared to people who were buying and integrating products to begin with.
You're going to sell to different people. If you were selling to Boeing,
you're going to have to sell to the integrator now."


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