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Friday, October 1, 2004

OEM Executive Roundtable: Serious About Service


Airframe, engine, and component manufacturers continue to make inroads into the aftermarket service arena. At this year's OEM Executive Roundtable, eight senior executives from top aviation manufacturers joined Aviation Maintenance publisher Nancy O'Brien and editor Matt Thurber in St. Louis, Missouri for a lively discussion of current topics. The meeting was graciously hosted by Midcoast Aviation, which provided the meeting facility and delicious meals for the roundtable participants.

Attendees: Beno�t Brossoit, vice president service centers, Pratt & Whitney Canada; Ron Chapman, senior vice president customer service, Cessna Aircraft Company; Larry Flynn president product support, Gulfstream Aerospace; Gerald Goguen, senior vice president, customer service, Dassault Falcon; Michael McConnell, vice president sales & product support, Eclipse Aviation; Drew McEwen, vice president customer support; Raytheon Aircraft Company; David Orcutt, vice president of customer support business aircraft, Bombardier Aerospace; Scott Taylor, vice president business and general aviation aftermarket sales and account management, Honeywell Commercial Aerospace.

Matt Thurber: What is your company doing to make sure older airplanes remain safe and reliable and still deliver good service?

David Orcutt: From a safety standpoint, there's no question there, we will continue to support the aging aircraft, the older aircraft. When I talk about older aircraft, I'm talking about aircraft in the 20-year realm. The fourth- or fifth-tier owner isn't necessarily an older aircraft, but when you're talking aircraft that are 20 years old, then that's the area you're talking about. Safety is no question. We continue to put out bulletins for the older aircraft from a safety aspect. Reliability, there's less emphasis on that. We'd like to believe that as the aircraft is older, it's at a mature level because there isn't a lot of significant push from our standpoint to improve the reliability when they're running at 99.6, 99.7 percent. From a strategy standpoint, we continue to look at that, there are better ways to do that because our issue as an OEM--and I think a lot of others--is they go to the secondary gray market for the parts, they use the mom n' pops out there for the repairs, in many cases that they use our free advice all the time, and that's the significant issue because we have to carry that staff onboard, so we continue to look at other ways of doing that to the point where our sister company Regional Aircraft has developed a separate organization called OPAT to support regional aircraft. It's totally separate from the mainstream, and that's their sole purpose, and they are running it as a profitable [entity]. So we are looking at the model, and then talked to the operators with respect to that, and overwhelmingly the operators have said, yeah, as long as somehow we're tied to it as an OEM, we don't want to be handed off to someone who walks away. The parts issue is a difficult one for us, we work with the gray market to insure that there are parts out there, and that's hard to do at times, and we have a couple of smaller projects on right now with the [Learjet] 23-Series where we're looking at getting alternate suppliers, and some of these pieces are no longer supported at all. So we are still doing that, but it is limited. Safety--no question. Reliability--there isn't a lot going on from that standpoint unless something jumps up, and from a parts standpoint we will handle on a case-by-case basis.

Nancy O'Brien: Are you readily signing licensing agreements to PMA manufacturers for some of those older parts?

Orcutt: Yes

Thurber: What about forming groups for older aircraft, could that be a revenue opportunity?

Orcutt: Certainly that's what we're looking at, right now, the regional people have a pilot program for a year now that seems to be successful, we're reviewing it. And there are other third parties out there that have done it very successfully as a revenue-based [model].

Larry Flynn: We're doing the same thing, we've already shifted the Westwind product support over to GDAS [General Dynamics Aviation Services]. We have shifted and are in the process of shifting our service work on the GIIs and GIIIs over to GDAS. We're shifting the parts, people, the engineering, the COMSCAN machines to the GDAS sites. I think they enjoy that a little bit better than being in the [main facilities]. So we've shifted in that direction and so far, so good. Parts wise, we're a little bit different. We're still doing the parts for ourselves. We have initiated a parts-pricing program that's called Meet the Quote. We will meet the quote of anybody that sells parts. The customer just has to verify that it's a like part with the same cycles and that type thing. We initiated that to try to get back some of that business and win back the support of our customers. So, we've been doing that about six months now. That's been very popular.

Thurber: So it's almost like you're creating a separate service network for the older aircraft.

Flynn: Well, the GDAS mission is two-fold, one is to support the entire Gulfstream fleet, but we are putting an emphasis on the older airplanes so we've more room for the new airplanes at the Gulfstream sites. And if you go to Savannah there's 40 or 50 airplanes there, just...something has to give and the right priority is to do the new airplanes there. We are shifting it slowly I guess is the best way to put it.

Thurber: Cessna has lots of airplanes in the fleet. How are you dealing with these issues?

Ron Chapman: Very much like Dave, I think for all of us. Service bulletins are available on all the airplanes and that's a continuing activity. We make manuals available to anybody at a price. So technical data isn't an issue. The parts issue is probably the toughest one. We certainly attempt to keep parts available for any age airplane as long as it's got any predictability. The problem is if you get a request that's for a part you sell every five years, you're not going to have it in inventory. And the second issue that I see, with the acquisition of a lot of old-time suppliers, even though we may have had business arrangements with them, the new buyers of those companies are making some fairly dramatic changes. Either the parts aren't available or they're available at a price that tells you they really don't want to make them available. We can't control the price but we certainly can attempt to control the availability. And all the airplanes are welcome at our service centers, but as you go through that fifth-, sixth-generation owner, more and more of his maintenance is going to be done on a local basis.

Thurber: But you'll still support that local maintenance entity with the data, parts, and support they need?

Chapman: Absolutely. We'll sell parts to anybody. Manuals are available to anybody. There's technical hotlines available to anybody. So that is not an issue.

Thurber: Are any companies charging for tech support?

Chapman: Certainly thinking about it, but we haven't yet.

Flynn: We do. We have for several years. Most phone calls to supply technical data or troubleshoot, there's a charge if your airplane's out of warranty, we've been doing that for several years. As long as it's a reasonable fee, the customers are okay. When we first started that, we had to find that reasonable ground. The people on the phone are very flexible with dealing with that, particularly the first six months of doing that. [Also], we've reached a reasonable fee. With the amount of phone calls that we get, there was no way not to charge for that. So we charge for the, like if somebody wants an extension on the maintenance for their next maintenance visit, we'll charge for the research, write the letter to the FAA. Somebody wants to buy an STC, we'll certainly sell it, but we're going to sell it for a price. An engineering repair on a damaged airplane, same kind of thing. Particularly when it takes up engineering time, then we're charging for the time. But we've been doing it for several years, it's been very successful.

Thurber: Is the fee dependent on the situation, the amount of research?

Flynn: Yes, we have a standard fee basis for the different disciplines, engineering being the highest. The person on the phone makes that determination of what to charge.

Drew McEwen: We roughly have 40,000 airplanes to support, and we really look at our strategies and we've made it public that we're going to support the 1947 piston Bonanza, the Hawker 1As. It is difficult, but we really look at out-of-production, current-production airplanes a little different. Out-of-production, we continue to say that we will always find a way to procure those parts, even though the customer might not like the price, the customer has to understand they're older airplanes versus current-production, it's pretty easy to support those airplanes.

Strategies on the service side, we're starting to focus, when you have close to 40,000 airplanes out there, the issue tends to be are the ma and pas really doing the right thing to make sure that those airplanes are being well maintained? I think that's why we've had a strategy of having independent service centers to help go and focus more on the large fleet. We're unusual because we do have a larger mix. I would say though if you pull the piston products out of it, there is a strategy to do some more. We're looking at strategies to increase our presence there in the service market for the pistons. And of course on the jets and turboprops, we're going to continue to expand that presence somewhat. Those are strategies we're looking at. Parts, it's difficult for everybody for out-of-production, and we continue to find suppliers that are really good in out-of-production, and we're looking for alliances for those that specialize in various products. There's specialists out there in almost every product line that we manufacture.

Beno�t Brossoit: We also have quite a diversified fleet out there. We have over 30,000 engines, 8,000 customers, only 3 percent of them are fleet operators, which means that we have one hell of a challenge to support this fleet. Our first strategy has been to develop a very extensive network so we have 21 PWC-owned facilities, 15 designated shops, trying to get as close as possible to the operators, so that even as you go into the third-, fourth-, fifth-generation, people can find Pratt Canada-approved services close by. I think the second aspect is education. We've been doing several operator conferences. We just had one in June in Vienna, on the PW100, trying to share best practices with our operators, in terms of maintenance practices, how they can reduce the cost, improve time on wing. That has proven to be a very good approach, to educate people, to touch these smaller operators that you a have a difficulty touching otherwise. From the component standpoint, we're committed to supporting our products, no matter how old they are, either to a new part, but we've also launched ACS, Aerospace Component Services, which is a separate P&L under PWC that will sell new parts but also some used and exchange parts, and that also helps drive some of the costs down and makes some of the more difficult parts available to the networks. Under ACS, we have a distribution center in Muskegon, Michigan, which is really driving a lot of this activity. So, one stop-shop, people can call and have access to either new parts or new or exchange parts.

Thurber: Didn't Bombardier move a parts warehouse to the U.S.?

Orcutt: We're in the process of doing that. We announced a parts logistics organization, and we'll be putting in a parts warehouse with Caterpillar, it's a joint venture with Caterpillar in Chicago and in Frankfurt. We're in the process of doing that, should be online probably by first quarter of 2005. Going back to the parts issue, one of the issues that we face with the older operators, when there is no longer a system in place to replace a particular failed component, to get a vendor on board, you now have to go through a pretty extensive non-recurring exercise to get them on board. What that does is automatically boosts the price up for that part or replacement system. So there's quite a bit of pushback from the operators because they're used to paying a dollar here, now all of a sudden because of nonrecurring costs, it's gone up to $10. That's probably the biggest education that we have with operators, the system's no longer available, we have to bring in a new vendor, they've got to invest nonrecurring, they can only amoritize it over so many aircraft. So that gets passed on to the operators, there's no way around that in the big picture. And that's probably the biggest [issue] we have to face with older aircraft.

Thurber: So how do you educate operators of older aircraft, especially those who aren't making a big effort to stay in touch with the OEM?

Orcutt: We go out to all the technical committees, we have regional seminars, we have our advisory board meetings, and we use that format to educate the older operators on what we are doing. But too many times you don't see a lot of communication with the older operators, you just don't see them at the seminars, you don't see them in the technical meetings, it's a difficult one to get the message out. So it becomes a one-on-one type of issue [more] than it is an outreach type of communication.

McEwen: We are relying on our field service organization to communicate to our jet and turboprop operators, we've got strategies to make sure that we are more customer focused. It's been pretty easy to talk to a customer in the last couple of years when Raytheon hadn't been doing too well, Raytheon Aircraft that is, and let them know that on parts that are unplanned, we can't afford to keep every part in stock. Once you are really just honest with the customer and tell them this is an unplanned part, we can't stock the whole airplane for every model that we've ever built, and this is what it's going to cost, and we're going to assume that we're going to built two or three, in a lot of cases, though, we only want to build one, otherwise our inactive and excess inventory continues to climb. We show the customer this is what it's going to cost us to build one, we haven't had this requirement in 12 years, why would we want to stock another one for 12 years? I think once you're honest with your customers...and that's where we've really tied in our field service organization to really start communicating to the customers and having that relationship so when these issues do happen, the field service person talks to the customer, and that's working well for us.

Orcutt: I have to agree with Drew. When you lay it out from a business standpoint to the operators, normally they understand. I was put in a situation about a year and half ago and was getting beat up fairly hard over support of our older aircraft, a 23 Series. There were about eight operators that were complaining, and we put it back to them and related it to their business. There were two software manufacturers in there and one was an aircraft manufacturer and they operated 55s and 23s. And so, how many of them supported their products longer than five years and not one of them could raise their hand. And so when you put it back in reality and perspective, they backed off significantly. So, it's an education.

Scott Taylor: From a parts and equipment supplier's perspective, another aspect is to continually invest in alternatives or upgrades to whatever they have on their airplanes. I'm speaking avionics or engines, giving them an upgrade path if something does become obsolete, and that happens far faster in the avionics world than it does in the engine world, but on both sides, to continually invest in technology to give them the follow-on solution, to keep the airplane flying. We've got many examples of that on the avionics side. On the engine side, upgrade programs and retrofit programs to keep the airplanes flying as well as providing service, programs like our MSP [maintenance service plan] program. And cost predictability for the operator, so at least they understand when they sign these contracts what the life-cycle costs for that particular piece of equipment will be.

Thurber: It's because you're making these upgrades that everybody's airplanes are flying so much longer.

Gerald Goguen: I think certainly that contributes to the fact. In our case we are supporting the out-of-production [airplanes], the 10, 20, 200 Series, but the aircraft by itself, on the Falcon 20, with the SSIP [supplementary structural inspectionprogram] that we have, you can take that out to 60,000 cycles. The Falcon 50 will soon in a matter of a month have an SSIP for an extended life. These aircraft will probably have other cockpits and other powerplants for sure. In the out-of-production area especially on parts, what we've done in the last few years, we've set up two locations, one at Le Bourget [Paris] and one in the U.S. in Wilmington [Delaware] and we've developed more of a rapid manufacturing process, because we have intact all of what we call the industrialization process of how to make every part we ever made, ever. So we set up a system that as we run out of parts, we have a system that allows us to make the part today, which might be 30 years later than it was originally made, and the technology probably changed a little bit, in many cases it has. We're still looking at, we still have a team of people on those models that looks at reliability, designing off of the aircraft some components and parts which are now today essentially obsolete, there's newer technology, especially pressure switches and small things, they were great in 1970 or the late `60s but there's better today. So we're considering to do that. Part of the difficulty of managing that and planning it is that we as a manufacturer, we don't have visibility of the total consumption in that group of aircraft because there is a lot of activity in the gray market or third-party, what takes place, and makes it difficult to plan what levels you actually should have, there's a limited knowledge.

Thurber: You're not getting any data back from that community.

Goguen: That's right. And sometimes...we updated a fuel pump to a brushless type, that became an on-condition pump versus one that came off at a specified time, a good improvement, but not necessarily everybody will rush to put it on the aircraft. So we're learning how to approach that. The documentation we provide, it's sold, we issue bulletins, and today we handle that group of customers the same as if he just bought [a new airplane]. Because it's the same system, it's processed the same way. I think it's time probably in the not-too-distant future, we're going to be separating some of that, similar to what Orcutt and Larry mentioned. It's a different group.

Thurber: Is there a process where if someone looks for the original fuel pump, they'll get a message that there's a new one?

Goguen: We provide information in many forms to the operator. It may or may not be a full service bulletin, or it may be something we call a service advisory, we have multiple ways of communicating this to him, and even when someone purchases and provides the part. What happens often, especially on an out-of-production, more than half the time the people involved in either making the purchase or decision on what to do probably are not the maintenance professional. We're structured to communicate with the maintenance professionals with the airplane, and every month it appears to be a little bit less than that. So we provide everything, we give informational seminars, we mail the information to him, but who is actually the audience reading and taking it in? Also, it's an audience that doesn't understand or...

O'Brien: Who are they?

Goguen: It could be a maintenance provider or it could be the pilot or his contract copilot who may have an A&P.

Orcutt: Theoretically, they can't put a part on the aircraft unless it's in the IPC, unless you have an engineering release. So if you want to get it out there, it has to go in the IPC, and is so noted in the IPC as a preferred part. Also, your front-end people normally taking the order usually have the notes on their screen that indicate that this part may have been superseded by....and so they offer it right there. From a legality standpoint it's got to be in the IPC or it has to have an engineering disposition to do a one-off. The protection is there, SAP [software] fixed all that for us. And in fact SAP did help us a lot from that standpoint.

Chapman: The Citation is 32 years old, we've got lots of piston airplanes that are much older than that, which we continue to support by manufacturing parts in small numbers. The best-selling airplane that we've got is a pretty small number. I think we're all doing a remarkable job of supporting airplanes in the numbers we produced over the age that we've done it. And we do it not only in parts but technical support and continue to invest in those airplanes with engineering support 30, 40, years after we produced them.

Orcutt: I totally agree with you. We as OEMs are doing a far better job of supporting the older aircraft than the operators themselves of supporting their own aircraft. That to us is a bigger issue, of getting the operator to take responsibility for the ownership of the aircraft. That I think is a bigger issue from an OEM standpoint than getting a part or getting technical help. I know we all face that when we're dealing with a pilot who's operating a 30-year-old aircraft and knows nothing about it, and basically, hands up, it's your problem, fix it. It becomes very frustrating from an OEM standpoint, those 30-year-old aircraft.

Taylor: I think we're all getting a lot more sophisticated in supply chain management as well, the OEM contracts, most of them, have requirements for having product available for a certain period of time. We certainly have gotten a lot more sophisticated in supply chain management for lifetime buys, predictability, those sorts of things, so the whole industry continues to improve on our ability to support older airplanes.

Thurber: Michael, what about Eclipse?

Michael McConnell: We're very fortunate in some ways in that we've been able learn from this team as we've studied and watched what has occurred and what is currently happening with older aircraft. I think Dave really hit upon it, aging operators who operate aging aircraft is the issue. Eclipse has a fundamental advantage because we have a clean-sheet design, so we have designed for operators with much higher utilizations. This means we tried to design something akin to a six-seat 737, which is very different from other, older OEM designs. We have customers that intend to operate our aircraft almost like an airline and hopefully they'll be very successful in doing that. If they are successful, then we'll have an aging problem very, very quickly. So we have in place today several things: one is, we're already looking at lifetime airframe extensions with fatigue testing that will go on well past type certification. Second, I'm glad to hear that SAP is being used widely because we implemented SAP two years ago and we're implementing the MRO module of SAP. We're already starting to train our A&Ps on SAP, almost 18 months prior to delivery. We've also gone to great strides to try to build in systems that allow for a complete window into our entire fleet of aircraft and have this window show the "as-built" and an "as-maintained" record of every aircraft. Eclipse's design as an all-digital airplane allows us to communicate with the product, which in turn allows us to keep complete records of as-built versus an as-maintained condition on things like software revs, what is the serial number of an LRU on the airplane, etc. These ultimately should effect how Eclipse will deal with aging aircraft, regardless of how soon we have to deal with this issue.

Goguen: That brings up our newest airplane, on the 7X that's being built now. The support going forward will be very different. That was built, we use CATIA, we're the inventors of CATIA, and we have other tools like Inovia and Delmia, and we have a new tool for the support of that airplane, PLM, standing for the product life-cycle management. Going forward, there will be no paper files. Every serial number is essentially a computer record. And that will be available, wherever the support organization gets the call, we'll have everything in that aircraft, the engineers will go ahead and see what's there, what my configuration is, make a change, point click, put boxes in, [prepare] wires, but not the way we do it today. It revolutionizes the way we support the airplane. I've been involved in it for about three months now, looking at how we're going to restructure ourselves to do this because it's quite different than what we've classically organized to support airplanes.

O'Brien: Does it have onboard health monitoring?

Goguen: Yes. The aircraft will have multiple computers that you download this information. The PLM system is primarily to perform structural analysis, if the airplane is damaged by a vehicle driving into it, if you have to do a structural repair. And that's a process, you need to stress the load data, this changes drastically the whole flow of work. And reduces it significantly. As time goes on and there's a new regulation and a new box, you need to add something, maybe make a change. It'll be very different in the sense that it will be quicker, more efficient, and the operator will have essentially a real-time digital record, cradle to grave, of the aircraft.

Thurber: Are OEMs adding more health-monitoring capability?

Flynn: On the G 550 it's live from the cockpit down to our technical operations. The airplane's transmitting down to our computer screens what's going on in the airplane, we're troubleshooting live via that and the flight phone.

Thurber: Do operators subscribe to this?

Flynn: It's free of charge, during warranty. We haven't got beyond the warranty period of the G550.

McConnell: All of this is designed into the Eclipse. This is clearly the future, and the Eclipse 500 is designed to have data captured and trended, which ultimately takes costs out. It's just so expensive to maintain aircraft the old ways, especially large fleets of aircraft, and the digitization of aircraft fundamentally reduces the recurring costs of production and operations. This allows us to introduce new terminology like TCO (total cost of ownership), the total cost of supporting the aircraft. It provides a customer experience that is a new order of magnitude because as Larry said, the aircraft's talking to us. It is analogous to the story on the Boeing 777, the replacement part can be waiting for you at the jetway before the aircraft even arrives.

Thurber: Does this offer good opportunities downstream to maintain communications with your older aging fleet operators?

McEwen: Our Horizon is the same thing, a totally out of the box different support structure altogether. We are looking at strategies to take some of that technology and put it in current-production aircraft. Raytheon has that technology, we've really been working with them because they do it for the military, for all these jet fighters, these jet fighters are so electronic just like our new aircraft are, the part's sitting there waiting for that customer, and you've got a crew there ready to fix it. That's something we're looking at as well for our older technology. I think that long term this industry's seeing more now in technology than we've ever experienced before, and you look at the tools and the ways that we're thinking outside the box. Ten years ago it was just the same old status quo. We talked about how our industry was so far behind. You look at automotive, and you say, "geez how can these guys do all that?" We're finally getting there with aviation. I think that you'll see quantum leaps in our entire products in the next ten years that we'll kind of look back and go, "wow, we finally did something different." I think it's an exciting time.

Taylor: One of the implications of this is, how do we make sure that the schools are training their A&Ps because an A&P yesterday is not the same skillset as an A&P now, not two years, five years from now, I'm talking right now. As these aircraft start hitting the fleets, there's a whole new skillset that's required and I'm not sure that the schools have that in their curriculum.

O'Brien: We've lost a lot of people, if we're able to offer this technology, it might be more attractive. We're going to be able to lure some of them back. We really need to educate those schools, that's really going to be the job of you folks.

Flynn: If I could tie that thought back to something, which has to do with whether or not an operator ought to have a director of maintenance. And what that DOM should be capable of. The operator should be and is interested in reliability and availability. Availability being the number of days a month the airplane is ready for a mission and reliability is making the mission. It is clear to me that if you have a DOM, your reliability and availability will be significantly better than if you don't. And if you have the right technician with the right skillset, your reliability and availability will be significantly better than if you have the wrong technician. If you look at going from a GII where you needed a hands-on A&P maintenance person to a G550 where you need a computer genius, there's a big swing in events here that's going on. The G550 has five times more software than a GV. Five times. So it's a significantly different airplane to be thinking about as far as reliability and availability. I think it's an important point. Because we offer these fantastic warranties for five years, I think there's an assumption made by the people buying the airplane that that means you don't need a maintenance person on the airplane and that's a bad assumption.

Orcutt: I would agree with that. We see it in spades. You can look at an aircraft performance and you can almost dictate or tell immediately someone who's managing that aircraft seriously or not, just by the component removal rate and the warranty costs. It almost jumps right out at you. The value of a chief of maintenance, the right person, you can't say enough about it. They'll pay for themselves in spades time and time and time again. The person that you need today is not the kind of person that you needed ten years ago. The aircraft are electronic aircraft. You need someone who can understand that and interpret that more so today than ever before. It's a significant challenge from us as OEMs, handling that.

Taylor: It's a challenge for manufacturers of the equipment as well, we've got a cadre of field service engineers, and those same people that have been around, they have to be trained as well, and you get to the point of maintaining the 25-year-old airplane and staying on top of the airplane that just got delivered and that entire spectrum of equipment functionality. It's a challenge.

O'Brien: Does it make sense for A&Ps to have levels of certification?

Orcutt: Being the chairman of PAMA [Professional Aviation Maintenance Association], I certainly support that. I look around here, if all of us would put our resumes down, you would probably see a whole listing of other schools that we have gone through, other training, that doesn't have any bearing from a licensing standpoint, and somehow that needs to be captured to give the recognition so that you know the person working on the aircraft, this person's gone far beyond that basic training, and it's recognized right up front. I certainly think there's value in a certification program beyond what the FAA's offering today or even tied in with the FAA. We will probably all agree that the regulatories have gotten behind the eight-ball in the certification of AMTs as well as the training. It goes back to what Scott said earlier, the schools are only training to the regulations because that's what they have to and there isn't a direct incentive on their part to train beyond that and in order for them to do so they're going to have to raise the price of their school and now it becomes a cost-competitive issue. That's what I think is slowing up bringing back the level of expertise to our more-needed requirements.

McConnell: I'm very encouraged to hear you say that. In all of our meetings with the FAA on type certification, we have asked the FAA for these things. We absolutely recognize that dope and fabric is out of touch with today. I mean, you might as well be on Mars compared to the Eclipse 500. Our airplane is primarily electronic components, electronic diagnosis, even if it's just understanding what a USB port is and where is the connection, which is the primary mode of diagnostics in our airplane, a tablet or laptop PC and a USB connector into the maintenance bus. So we've asked the FAA to look at this. It has everything to do with how the airplane's going to be maintained in an airworthy condition.

Goguen: To that point, on our newer technology airplane, we've done a detailed analysis of the knowledge levels, tasks, skills for the person who needs to support this aircraft, especially in the avionics/computer end of the airplane. It's difficult to know where the cockpit ends and where the cockpit begins. Having gone through that in detail, we know that the classic approach we use with the initial type of training--which we're working with the training partners to expand and deal with that--we find today that we augment that by something we call our entry-into-service program where I take one of our experts or sometimes two and marry them up with this customer and give them a lot of training in a short period of time on a practical basis. What I've learned about this, we can't wait for the FAA to come up with something because once we deliver the airplane we have this very good five-year warranty. If they don't do it right, we're going to end up paying for it. We have to do everything possible to help them do it right. As the months go by, I think as an industry, I'm hoping we're all going to get a little smarter how to be efficient at getting these people trained. I know what we're doing, you're probably doing similar, it works, but it's not the most efficient, it's very effective but it's very costly.

McEwen: Training is one of our areas that all of us are going to be focusing on more. I know we're focusing on it. Look at your own employees, what their job responsibilities are now. When you put CRM in place, they now have to type, you have the technical guys having to type, they're not used to that, that's not in their job description, it never was, it wasn't in our job description to sit there and do e-mails and to learn how to type. The point is we're having to change our job descriptions from the maintenance side all the way through the entire organization. If you want a great example of what's going on in training, look at what Gulfstream's doing through FlightSafety and how they're doing hands-on. And I think that it's just a matter of time before we all start doing some hands-on training at the factory instead of just having classroom training, you've got to have some actual experience. We're exploring those opportunities.

Thurber: It's interesting you bring this up because big hue and cry is how to train pilots who will fly these small jets but they don't seem to be concerned about the maintenance side.

McEwen: We're teaching that. Sorry, we're back to dope and fabric. We had to put on specific training for our new technology airplanes with composites, and the training that we're now doing on composites, where we have specific classes, it is amazing how we had to teach the FAA all about this. So we have to be the leaders, we have to educate them and show them.

Orcutt: We've had to teach the FAA on software loads. It was something they had no knowledge of, and even today it's almost an individual education from FSDO to FSDO to FSDO. And software loads is a fact of life for the electronic aircraft, it's not going to go away, it's going to stay here and it is still a major hurdle with the regulatory people, and how do you do that? To your point, I think the FAA's always been probably more focused on the pilot aspect because it's more in the forefront from an accident standpoint without the same focus on the maintenance person. The maintenance has got to be revamped or looked at differently than what it is years ago. It's long overdue and it's hurting us and all of us are having to band-aid that to make sure our products are working properly.

Taylor: The good aspect, though, is as systems get more advanced the amount of information that is available to the mechanic, the diagnostics available to more quickly assess a problem and take action, is far greater than it ever was before. It's predictive, not reactive. And so it's just a matter of obtaining the access and knowing what to do with it. In the end we will be a lot better off than we were ten years ago.

Flynn: We call it triple T, it stands for total technical training, it's been in place for three or four years. We co-develop and co-teach the classes with FlightSafety. The classes have my technicians and the customers in the class at the same time. It works out real well. The practical part of it is, either they come over to the Savannah service center, or we leave a green airplane right outside of FlightSafety. And FlightSafety built a small maintenance hangar where we're putting components over there. We've got a wing over there, we've got a landing gear, wheels, different electronics, they have a fixed training simulator, a non-motion training simulator just for the maintenance people plus they get live simulator time. If you go into our classroom, it's all computer, every seat has a computer and the computer's up on the main screen.

Thurber: It's a separate building, mechanics are not lumped in with pilots.

Flynn: What I see is an incredible increase in the number of attendees. The flight departments didn't used to send their people to maintenance training and now they're doing it in a big way. Training with my technicians has been a real plus for the customers and for my technicians to get to know them better.

Thurber: Do you capture feedback from customers?

Flynn: There's an exit interview form for every training event so that we keep improving, and as the airplane matures, any in-service issues are fed back to FlightSafety on a weekly basis. So if we have a new issue with the airplane the next week's class knows what that issue is. So we keep current with what's going on each week. It's a nice closed-loop system, which is really important particularly when you're entering a new airplane into service where it's unknown what's going to break. We're within a week's time getting that information back to the customer base.

Goguen: We're doing a very similar [operation] in Little Rock. We have a training center with FlightSafety, now we're developing the materials, providing them all the information, how we want it taught, the requirements for the non-motion fixed training device, because the fixed training device has really become critical especially for maintenance technicians, he has to develop some confidence in himself, go up to this computer in the airplane with his other computer or just take it direct and know how to query that system and understand what it's telling him and what it's not telling him. You have to do it once or twice, you just can't have somebody explain it to you. And so, we're putting all that together. One thing, Larry was saying, people are coming back. On the new aircraft where we provide the training and pay for it and often it's full, but after one, two, three years the operators investing their own money and continuing to train their own people, it's not at a level that makes me very comfortable. I think it's probably true of all us.

Flynn: I would say that the trend is in the right direction. I particularly see it on the GV, we've got 200 of them out there, we've been out there about seven years. The training is good, so we're getting a lot better penetration and we pitch it at every forum that we're at and any chance that we get in front of the CEO, the director of flight ops, we are pitching the maintenance side of this thing from a reliability and availability standpoint. And I think it's easier when they spend $40 million to keep up with it than if they spend $10 million. The trend is in the right direction, but I agree with Gerry, it's not where it needs to be. So the amount of investment that's put in an airplane and the amount of investment they put in pilot training, it's not right for the maintenance side of the house either to not even have one or to not send them to training, it doesn't make any sense at all.

Orcutt: We do our own training and we do a lot of the same things that Larry has done. Fixed training devices are a must. We've believed in that probably for the last ten years, because you cannot replace the hands-on, the touchy feely. But that is intended to imprint in the brain the way it is in the cockpit. Engine runups, we do taxi testing, the whole bit. I agree with Gerry, I continue to be concerned with the amount of returns, after the first five years, that third-, fourth-tier owner, you don't see them coming back at all. Yet they will invest in the pilot training, they will invest a significant amount of money but they will not invest in a relatively small number to support a technician...and one of the issues I think is if you look at the ratio of maintenance people in a flight operation versus the amount of pilots there are in a flight operation, it's probabl--I'm going to take a guess on this--it's probably four to one. There are always alternate crews. But there's usually just one maintenance person, so if they lose that maintenance person for a five-week initial course, they're down. So it becomes a scheduling issue as well as budgeting issue, because when times are tough, the maintenance training budget is one of the first things that is hit. We have tied our training budget into our SmartParts program, where you pay by the flight hour, and that has helped protect a lot of the maintenance training budgets from getting slashed. Because it's in that hourly pay. That has helped a significant amount. But it's still not what it ought to be.

Thurber: Why do pilots go to outside training? Because of insurance. The FAA has been lax in requiring recurrent training for maintenance personnel.

Orcutt: There's no requirement. They still avoid that issue.

Flynn: One other piece of training that's worthy of note is cabin training. In the large cabin airplanes, it is critical. We have probably gone overboard on putting gadgets in the back of the airplane at the customer's request. We're trying to streamline that and make recommendations for what should be in the cabin. We've had customers ask for enough equipment, you end up handing them about 10 remote controls. I'm not exaggerating. We run around the world trying to help them make their DVD player work. We're streamlining that, we're trying to use less vendors in the back of the airplane and create, give them what they want technologically and make it a lot easier to operate. But then you also look at the galleys and what's going on back there. With FlightSafety we have a full-time staff that does cabin training, even to the point of evacuation into a pool in Savannah so that they can get water evacuation training.

Thurber: Maintenance people have traveled with the airplane and done cabin service. Is that a trend?

Flynn: It's there. Part of our entry-into-service checklist is to ensure that the CEO has been trained in the cabin. Absent that, a lot of them are afraid to train them. So we do that. And then I would say a fair amount of people take a maintenance technician with them on the international trips.

Orcutt: We see that as well, but you also see the push not to because that gives up a seat in many cases. Depending on the trip. I have to agree with Larry. One of the biggest challenges that we face as an OEM is not so much the green aircraft as we call it, it's the interior of the aircraft. We have more issues today with the interior just because of the type of vendors that are brought in, the variance involved with the various systems. We're all becoming toilet experts, water experts, cabin management experts, things we thought we'd never have to do because the industry has changed. It's in our forefront today. It becomes the challenge, getting the operator up to snuff from that standpoint, because very seldom are two aircraft the same because they get to select the systems that are in there. We've tried to standardize that with some success, and we'll continue to do that. You're also seeing a change with the vendors. Many of the cabin-management people are now with major vendors so hopefully that's going in the right direction. It just makes it extremely difficult to support the aircraft from an interior aspect.

O'Brien: I met a GIV technician who flew with the aircraft, and it was grounded for two problems, the Airshow and coffeemaker didn't work. The tech wasn't trained on Airshow and the coffeemaker.

Flynn: We're pushing real hard to standardize the interior, we call it a premium package. Eighty percent of our customers are ordering that. What they get with that is a simplified cabin and common components. Even the coffeemaker would be the same, rather than your favorite espresso machine that when it breaks, you can't replace it. We're standardizing it, we're showing the benefit of that to the customers. We will build a custom airplane, we have no problem doing that, but you can't support it nearly as well and it's not going to be as reliable. We've made big strides in the last five years, we're up to about 80 percent premium package. And then you can stock coffeemakers in Geneva, when you have a standard cabin. You cannot stock them on one-off airplanes. They learn the hard way that the one-off isn't going to be as reliable or as available.

Orcutt: From a green aircraft standpoint, we have enough redundancy in the aircraft where the flight crews can pretty much hide what's going on in the cockpit from the end-user and they can keep the aircraft going, especially with redundancy and the MMEL [master minimum equipment list]. There is no MMEL for the rear of the aircraft. The end-user becomes the MMEL, and that's very unpredictable because yes, the principal says, "I'm not taking the aircraft with a flat-plate screen that's inoperative or a coffee pot that's inoperative." And so it is really an interesting one to handle from time to time.

Thurber: Michael, who's going to be the trainee for all the electronics on the Eclipse? The pilot, the owner?

McConnell: Just like Bombardier, we're doing our own pilot training, as well as maintenance training. The maintenance program somewhat resembles the pilot training in that we send the pilot or A&P home-study materials prior to their arrival at Eclipse. Before a technician comes to Eclipse for the two-week maintenance course, they will take a test. If they don't succeed, they will go back and study systems or whatever area they need a refresher on before they arrive at Eclipse. All in all, it's a pretty simple airplane, there's no hydraulics, so from a design standpoint it was designed to be easily serviceable, simple. But the electronic component is one that an A&P needs to be up to speed. We also have a program for our larger customers that includes an after-sales support program. For instance, an hourly fee could cover guaranteed uptime. Recurrency training can be done in two ways, it's included when you buy the after-sales support product. We're looking at maintaining this currency via the web, say on video, so we try to use technology to scale as much as possible. I don't think that's anything new, but we also believe that hands-on is very important, so a second path is for different customer segments, once a year we will go to their place of operation and open up the airplane with them to walk them through things and say, "how is this happening, did you comply with this SB, is the as-maintained as we show it, we are seeing this and this in the field?" Our thought process is how many times can we touch the customer and provide that positive experience, and this is one of the ways we're thinking about doing that.

Thurber: So you're going to audit your customers?

McConnell: Certainly not, I don't like the word audit, customers certainly wouldn't like the word audit, but it is an opportunity to touch the customer as often as possible and integrate our service findings into their operations if they are interested in that. We are going to know much about our airplane, almost real-time. How that translates to a better owner experience is the real message.

Thurber: Maintenance documentation is getting increasingly interactive, but are OEMs using that to close the feedback loop with customers? Where are we at in terms of that kind of feature?

Flynn: We're making a significant investment in a new product called CMP.net. We've had a computerized maintenance program for 34 years called CMP, it was mainframe-based, 98 percent of our customers are on it, we own it, and we supply them with an analyst that helps them keep up on their maintenance documentation. So we're moving toward a web-based product. We'll still provide the analyst, but a lot, lot more features to this thing. We've already demoed hundreds of customers, we just had our operators conference, proof of concept is completely done, we'll enter it into service in the fourth quarter. It'll also do all types of airplanes, so our intent is to offer to a flight department for every type of airplane that they have so that they can all be on one. These flight departments are all on different systems because each OEM offers a different product, so we're attempting to offer that opportunity to go on to one system. We think we've got a very viable solution, we think it's the best thing out there on the market. Being web-based it's real time. The technology [AvTrak] we're using for the web works on a slow dial-up modem. It flips the pages quicker than anything I've ever seen. AvTrak is a vendor of ours. We own the product, we own the software, it's not a joint venture.

Orcutt: We just recently switched over to CAMP through a number of customer audits, etc., and looking at a number of different systems and due diligence. We had our own system. We felt that was the best direction, from a web-based standpoint. The issue, what is our core business and how do we want to play with that? With CAMP being web-based, the information is as real-time as you can get. It just seemed like it was a smart move for us to go rather than trying to reproduce what CAMP had already developed. With respect to the manuals, though, most of our manuals on the current production aircraft are web-based today. So the electronic user comments are there, they're real time, as an operator goes through the manuals on the web he can change or put suggestions in accordingly. And that gets flowed right into the system automatically. The manuals on the web are here to stay and I see us increasing on that, but I also see that we will continue to provide hard copy as well as web-based. I don't see that going away for a number of years yet.

Flynn: We will still offer the paper copy, but our intent is to go to this system, but we will offer paper copies. But we anticipate, particularly international customers still want to get paper copies.

Goguen: For our out-of-production, we have all our manuals on the web. And you can get them as paper, you can get paper or plastic, and we have them on CDs. The current production is in a format, what we call our FIELD (Falcon Interactive Electronic Documentation), and we've had that for a number of years, so that's quite good because it has electronic wiring diagrams and you can search any key word to see where all the references are, you can look at a part number and find the IPC and find the maintenance manual and find the maintenance procedure, it works very well. And we have that on all the current-production. It will be moving to a DVD format here probably by the end of the year, because we'll be embedding video clips of specific maintenance procedures, and that will be able to hold more data. On the recordkeeping, we have been with CAMP for many years and we're working with them today, they have a web-based product that we're connected to. And we've worked some with Avtrak to collect their data so the customers have some choice as to what they want, how they're going to operate the airplane. As time's going on, the recordkeeping and the documentation, it's basically all electronic and web-based, very similar to the airplane. But paper, we continue to have paper available, and that's simply because there are customers who want to have it. The number is decreasing every year, and it's getting smaller, and there's some point in the future, at least two, three, five years, I don't know where it'll be, it may not be...

McEwen: We support current-production, we have CD and paper, we also will be web-based at some point. We do have strategies, we are moving forward to be web-based. On out-of-production and possibly smaller airplanes we are looking at other alternatives, but the cost to continue to update all of these various models and the amount of the decline in our subscription services tends to, first off, it's pretty hard to make revisions on every single product that you built, and we are looking at strategies on some of the older out-of-production airplanes to possibly just be a web- or CD-based. We're looking at that, only because the cost to get the customer the most accurate information, a lot of that has to do with IPCs, because it affects parts returns, it affects downtime. The smaller older airplanes for the most part, it still is a disservice to the customer, and yet, internationally they almost still need paper, and we're thinking maybe we give them a $400 laptop as well. We might explore something quicker than the others will. It is a matter of time before the next generation...look at my kids, they don't even write anymore, they just type, they're on the computer, it's a matter of time before it all happens.

Orcutt: There's still a high degree of computer illiteracy out there with a lot of the old school. And to go fully is going to take some time. One of the strategic moves we made with the [Model] 300 is we provide the computer with it, with everything loaded, and that was a way to force the operator to go there. If you're going to wait for him to do it on his own, it isn't going to happen. There's a computer, there's all the software, you can get a hard copy but here it is, it's yours. And that's something, I think we need to continue doing something like that as an industry to push the industry, direct the industry to go that direction.

Taylor: One of the things you end up having to do is you have to start charging to get to the point where it forces them, because the amount that you have to pay for a paper manual is the same as buying a laptop down at the store, and that just gets them off the fence. From a Honeywell perspective, we've digitized all manuals, everything is either CD-ROM or sgml. And we've also made them available on the web through E-engines. We've also invested in troubleshooting systems like Spotlight that has helped enable the maintenance technicians in troubleshooting. And we will continue to evolve with technology because as we talked about earlier, the more information you get electronically, the more capable the flight department is to do their own maintenance, which means that's a phone call that doesn't go to a Honeywell or Gulfstream or Dassault FSE [field service engineer] that doesn't have to go fly there and fix the problem when it should have been done by the maintenance department. It's kind of a cycle that we've got to accelerate to get costs out of our business to keep aircraft flying at a price that's affordable.

Chapman: We've had Cescom since the Citation came out. We converted the paper system to an online Internet system the first of the year. We beta tested it for about four months and quickly converted about 65 percent of the customers from the paper system to the Internet. Our manuals have been on CD for a long time, but I think interestingly enough there's a lot of people who are going to move slowly in some things, from paper to the `net. And at least our opinion is you've got to continue to give those people choices. We may differentiate them from a pricing standpoint, but we'll continue to offer paper. I think one of the things that has been interesting for us is we've had an online ordering system for a long period of time. Wholesale customers use the online system. Retail customers want to talk to you on the phone. They will not place orders electronically.

Taylor: In the avionics business for Honeywell, our experience is that the Bendix/King product lines, that category of operator, they've moved quickly to online ordering. I think we've gone from a very small number like less than a million up to about $50 million a year that is now being ordered completely through the `net. But when you go to the higher end of the market, it's the same, they want to talk to somebody, they don't want to be ordering anything on the `net as the systems, products, and interfaces are more complex, requiring more communication to ensure the right equipment is being ordered.

McEwen: We're finding something different with our Hawker customers. What we've given, which seems to be working, is the ability to do more than just parts. You have your warranty adjudication and all your filing and everything web-based, they really are using it. We've grown our web business in the last four years to where just on the parts side it was in the low 30s and now we're in the high 60s and it continues to increase. But that's two different tools. One, if we have a larger operator, say, with maybe two to three airplanes, we give them a lot more than what we would just a onesie retail customer who can just go to our retail website. That's the difference, what you can give your customer, that makes a difference as to whether they utilize you or not. Other tools, to where they really have access, their billing, everything, all data pertinent to doing business with us. Versus just our retail web, I would say we've got a pretty good robust system and it is working and we've got promotions out there to entice retail customers. We're now like Aviall where we do free shipping on all ground orders and it's amazing, we get more business when we announced that in January, it's still going on, we did more business just in the first quarter of this year than we did in almost half of last year. And it's really picking up steam. Our business continues to go web-based for everything we're doing.

Chapman: Our experience is a little different. We do about 85 percent of our wholesale business web-based. But at the retail level, first of all they're not ordering for stock, they're ordering because they have the requirement. They want to talk to a human being on the other end of the line that they know, trust, and that will shepherd that order through for them, and so that continues to be the retail order mode, not fax, or any other form of communication. They want to talk to a human being.

Orcutt: What we've found, we've got the computer on the aircraft, we've got all those systems on the aircraft, the guy troubleshooting the aircraft, he's got all the manuals right there on the computer, all he needs is a cell phone, he can talk to a body, versus stopping, walking to the shop, waiting to get on the web, it's easier for him to do it right there, especially when the aircraft is traveling, it's more difficult when they're on the road. They're using the front end, the people, to order parts.

McEwen: You don't need a parts clerk, and you're there at the airplane, and you're there in your web manual. We're tying ours together right now to where, go ahead and click on the part and it automatically starts the process.

Brossoit: We're also heavily web-based and we've integrated technical manuals, warranty, part ordering all as part of the web. We're really seeing a trend and it's being used more and more. I would say the vast majority of the activity today is web-based. [We have] the electronic inspection workbench for our overhaul facilities. And what that does, it really gives the people in the shop receiving an engine complete information electronically on configuration, configuration graphs, instructions through service bulletins, and so on. So it takes out all the paperwork out of that system, all the cross-referencing, trying to understand, especially for older products what you're really looking after, and what's in the engine, and drives the time to access all this information down significantly so we've been developing that technology with Avexus, a California-based company, and we have been rolling it out in our main centers, PWC-owned centers, and in the fall we're going to be rolling it out to designated facilities. So if they want to work with Avexus and have access to that information, they will be able to deal directly with Avexus. It's going to be a major opportunity to drive costs down and simplify the whole engine configuration data through our service network.

Thurber: Will it help DOFS share information with P&WC?

Brossoit: Absolutely. All these systems have sort of a closed-loop approach so you can learn as you go. And they can make changes as required so if there's any errors or mistakes or whatever, there is a way to feed it back in a closed loop. It's fully integrated with the SAP system. That's really what Avexus has done very well and they've got a lot of background in this MRO business and have been able to give us a solution that connects with our system.

Thurber: How is Eclipse going to address maintenance documentation?

McConnell: If Eclipse is anything, it's about our technology lineage and how that translates to innovation and value. Again, software is just software to us and we intend to have as much of a paperless aircraft as possible. We can do this because we're a clean sheet. With what I've heard today we would also like to drive our customers to paperless, worldwide. The Eclipse value philosophy is not to make a giant profit on maintenance manuals, but truly try to move our customers along with the industry to more of an electronic because then it becomes a more perfect union of maintenance records, compliance with regs. We think there's a tremendous value in that, and that's part of our value proposition. Everything we're doing is around paperless, everything we've written is around paperless, there are parts of this that are difficult for us to talk about because we don't have TC [type certificate] yet. To say this is what we're going to do, well some of this the FAA still has to say okay. We didn't just think of this yesterday, we've been working for three years on many of these topics, but until we get TC, who knows? We feel pretty darn good, with regard to our paperless approach all the way to electronic logbook. That's a very key component to what we do. It allows us to have far greater access and control over who actually works on the aircraft so that we know, have you been through the current training, [and we] are aware of the most recent maintenance communications. In all respects, we think this is good news that the industry is moving towards these types of electronic types of processes and as-built versus as-maintained.

Thurber: You're talking about limiting access to the documentation by serial number?

McConnell: No, I wouldn't say access, it is more ensuring that the documentation you're releasing is the right documentation for the aircraft being worked on, as it's been maintained.

Thurber: How are relationships between OEMs and entities that service aircraft on your behalf changing? OEMs have gained a lot of ground with their own facilities, but also important relationships with independents that service your products. What are key factors in making sure they deliver good service to your customers?

Chapman: We've got authorized service facilities, established through a mutual-selection process, both they want us, and we want them because of their capabilities and geographic locations. It's a contractual relationship and they meet minimum requirements for technical training, parts inventories, tooling, and various other requirements for which we audit a minimum of once a year. And so the relationship is both very businesslike and hopefully mutually beneficial. In the Citation product line, the service facilities are very stable, most of them have been with us for years and years and it works well for them and works well for us.

McEwen: We use a wide variety of authorized service centers, factory stores, we've got 12 factory stores and the remaining of our 97 are independent authorized service centers. We have put out programs in the last two years to really raise that level of service to our customers. We've now got Platinum. We had Gold Bar, and that's really in the areas of making sure that they have appropriate spares. Spares tends to be one our biggest issues of getting the stock of appropriate spares for that region to provide the highest level of service to our customers in the field. As well as training and tools and facilities. So we've got a lot of requirements that we do measure and do audits on our authorized service centers. And those audits are also done the exact same as our own factory stores. Our strategy is quite unique that we put our breadth of products, everything from pistons to jets, it's pretty hard to control that whole environment so we elected to use independents to do that. On the higher volume products like the pistons with the Barons, Bonanzas, we are looking at some different strategies to touch more of those customers. That is one of our biggest issues. We're able to touch all of our jets, all of our jets we are making contact with those customers. The King Airs, we're doing a pretty good job, but it's difficult, and the props, when you got tens of thousands of props, it's difficult. Just like Ron said, Cessna's got like 250 service stations for the smaller airplanes, but I think the issue is, and it goes up to the jets as well, how do you get the ma and pas, and is there a level of service, if there could be some type of recognition, that if they really do this training and they really do have the right tools to maintain your product...I think as an industry we are better off finding some mechanism to entice the ma and pas, and it would be nice if there were more regulations. It's in all of our best interests to make sure that these airplanes as they get older are really getting looked at by experienced and qualified people. And that's one of the issues that we're looking at strategies, for all those smaller airplanes that are out there. Because we just don't have our hands around those airplanes, and we think that we can get our hands around those airplanes with some different strategies.

Taylor: From an avionics and engine and APU standpoint, we instituted the STAAR program a couple of years ago on the engine, and just rolled APU into the program and will be rolling avionics into it in early 2005. It's basically a method for auditing the service center network and maintaining a quality standard that we need to have in the industry. And we've been working with the OEM service centers as well as the independents to roll this program out. It took a little while but it's up and running now. It's geared at keeping quality as well as managing the number of service centers that we have out in the industry.

Thurber: What's been the reaction to these types of programs? Resistance to being audited?

McEwen: They welcome it. It's amazing how service has really come to be the differentiator for all of us. And I think that our providers see that as well. They do want to be the best. And a lot of it's driven by competition. We all use essentially the same airframes, dynamics, and powerplants, and avionics. I think service is where we're really going to be competing. Support and service.

Taylor: There's an investment to get to the quality level that people want to have and it's not fair for some companies to have made that investment to get to the quality level whereas there's somebody else who hasn't made the investment in training, test equipment, hangar space, etc., and they're competing on price, which isn't fair to those who have invested to maintain quality of service. Again, we must drive to keep quality service in the network.

Thurber: So it's more equitable for the more recognized STAR participants to be recognized for their efforts.

Taylor: Right. Honeywell wants the operators to recognize through this program that here are the companies that have made that investment in training and all the other aspects that you would want to audit. That they've made it and therefore there should be a benefit to the service centers for having gone through the STAAR program because they eventually will start bringing more and more business to their centers from operators who trust their quality of work.

McEwen: You market those, you market those levels of service. I think it really pays off. Every one of our authorized service centers are really striving to be Platinum now because they want that recognition, not only do they really number one want to satisfy the customer and continue to get repeat business but they want to satisfy the OEM and make sure that they're the top level for performance. They're great programs.

Thurber: Does Pratt & Whitney Canada have different levels of recognition for the DOFS?

Broissoit: No. We have from my understanding anyway a pretty traditional auditing process. And again I think where we're really trying to make these folks on top of tooling, the quality, the services, and all of this, is we currently work with them at making accurate information available, readily. That's why I talk about the Avexus approach, to give them an edge, an opportunity also to drive their costs down and the quality of the services. It's one more benefit [of working with OEM].

Thurber: What's Gulfstream's standpoint, in that it doesn't have a lot of relationships with independent service centers?

Flynn: We really have a two-pronged approach here, a lot based on geography. If you look at the United States, 75 percent of our fleet is based in the United States. So in the U.S., we feel like we have an opportunity and an obligation to work on our own airplanes. We don't want to throw that obligation off to a third party. We're right in it with our customers, working on the airplanes, and we have about 70 percent market share. We've chosen to do the work ourselves, rather than authorize third parties. In the U.S. there's really only one authorized third party that's been with us for 30 years, which is Pentastar Aviation. Outside of the United States, we've gone from six authorized facilities to 17 in the last three years. Airplanes are flying more internationally, we're just setting up locations as we go to support the fleet. But a big investment in time and money, getting an additional 11 set up in the last three years. We did choose, however, in London to set up our own service center. We had a long-standing relationship with Marshall Aerospace, they chose to get out of the Gulfstream business, so we chose to acquire a maintenance facility from Signature Flight Support at Luton and do our own service work in London. That's worked out real well. We just opened it up last year and we doubled the size of it this month by acquiring a second hangar. That's worked out quite well. The rest of the globe is more about third-party. We do not have the expertise to go set up a service center in South Africa. We just don't have the expertise. But we're fortunate enough that there are Gulfstream operators down there that can help us to get a service center. It's a two-pronged approach to how we do service.

Thurber: Not enough activity to open a company-owned Gulfstream facility?

Flynn: Not if you just worked on Gulfstreams, there wouldn't be. You'd have to chose to work on other types of airplanes to support it. But in the London area and Europe, plenty of Gulfstreams to work on, it's been a great opportunity for us, it's been an easy environment to work in, folks speak English, we speak English, that's worked out well. We also bring service centers to the airplane. We have a full-time company-owned airplane that will take people, parts, information, technicians, anywhere in North America free of charge to fix your airplane. We call this service airborne product support. Primarily warranty, but the person answering the phone can choose to do it on an airplane outside of warranty, all models of airplanes. We've been doing that for about two years. That's a pretty significant investment on the service side of it.

McEwen: We also do something similar, but it's an AOG team. I think most of us have something like that, where on a moment's notice, the technicians can head out to the field and help a customer that's stranded and maybe take the appropriate technicians, appropriate parts, what have you.

Thurber: Where does this decision get made, at what level?

McEwen: We have a charge. We will send it for anyone that wants it.

Flynn: We do it two ways. We have an 800 number and the person that answers the phone can dispatch the airplane. We've got 11 service centers where we can dispatch people and parts to fix the airplane. And at any time I'll bet we have 50 to 100 people on the road helping the operators in their hangar. Any given time I've got at least that many people on the road. That way they don't have to fly the airplane to me, it's cheaper to send a technician up to them to support the airplane.

Orcutt: Mobile repair parties are a must in this business and it's one of things that we require all our independents to have, part of the deal, you're going to be a service facility, you have to have a team set up to go. We can't be everything to everybody, we can't be everywhere. Operators want choices. They don't always want to be forced going to the factory. They want competition, so our independent structure is fairly, I think 31 independents that are out there worldwide, more internationally than we are in North America, but we've got at least I think seven or eight here in North America, and again primarily because the operators want choice. But the MRP's a requirement, and we monitor, we audit, we feedback. And we have short-term contracts, basically year-to-year basis with the independents, where if we see a performance trend going south, we have the opportunity to rethink whether we want them on board or not.

Goguen: We have 27 authorized service centers around the world and we have three factory-owned stores. The authorized service centers, they're contractual relationships, there are requirements for training, tooling, documentation, and we also have a requirement, an insurance requirement, to cover the indemnity for these folks, which could be significant. Of this group, I'd say about 15 of them, maybe 16, are heavy maintenance facilities, large facilities. And the others scattered around probably heavy/light maintenance facilities in different parts of the world. As new airplanes are coming out, most come up to the bar as far as making investments, you have investments in training, investments in tooling, equipment, but as another year passes, I'm not sure that's going to continue, it's an economic matter for these independents. The new aircraft require from the front end there's a higher investment level. From the other side, we have these long warranties. And they tend to be much more reliable and require less scheduled maintenance. So you're investing a lot of money to be in a business that's potentially contracting. So it's not always where the desire will be.

O'Brien: They can't realize a return for a while.

Goguen: In the past, you could rationalize this, I think. Because there's roughly 1,600 Falcons flying around the world. And you can, depending on the market and the area, you could make sense out of this. As we go forward, it becomes more difficult to do that. We may get more involved in different parts of the world, simply because we need someone there, and it's a practical impossibility that somebody will step up and do what we need.

McConnell: Because we're a new company, we don't have the luxury of brand equity that all these OEMs have built. So we made a decision to build our brand on what happens after we deliver the airplane. I think that's ultimately what we're talking about here, about the customer, what the warranty is, are they happy with us, is every invoice a negotiating event. So we, after a lot of arm wrestling and hand waving, we've decided to invest in a service center network, factory-owned initially, pretty daunting task, but again we believe we'd like to own as much of the customer experience as possible. Now, you may have to have another strategy that says I want to be able to provide the best level of that ownership experience that we possibly can, but the fact of the matter is that we have corporate flight departments, we have large customers, and infrastructure, and if the airplane is easily maintained and designed for maintainability like you say it is, why can't I work on it? So, there's no reason they can't. So we have a strategy that is aligned with, not authorizing service centers, but authorizing a person. They can go to our training, and then they're allowed to submit warranty claims, and they're allowed to access the electronic logbooks, they're allowed to do basically anything on the airplane. And we're talking to Pratt to see how much they would be allowed to do on the engine. So this is a bit of a new strategy and it's all from not having to enter into 27 authorized service contracts. At the end of the day, if Cutter Aviation wants to start working on our aircraft, that's fine, but as long as they've gone through training, they can buy any required documents. But you have to go to our training, that's a pretty important component. But then you're given access to either an aircraft or you're given access to a fleet of aircraft, depending on what level of training and what relationship you have with us. But that doesn't mean that someone is an authorized service center.

Thurber: What are they going to call themselves? Eclipse trained?

McConnell: They would just call themselves Eclipse-trained. On their web site can they advertise that they're Eclipse-trained? I can't stop them from doing that if they paid to go to maintenance training. The issue is not necessarily who works on the airplanes and who doesn't or who we limit or who we allow. The issue for us is about our customers. What do our customers want? And if they say, I love this FBO and I want him to do all my stuff, okay, our focus is more on the customer, what do they want, how do they want it maintained? How can we work with the operator and the customer to make sure the airplane is maintained? If the aircraft is being designed as we think it is, then one should be able to do that.

Orcutt: The real value of the independent network is when the aircraft is in warranty, where they can get compensation for performing benefits on your behalf. Because anybody can work on the aircraft once they've got the repair station license, and we as OEMs cannot stop them from doing that. But to compensate them for warranty work or to do service bulletins that are being [created] by the manufacturer, those will continue to be from our standpoint authorized service facilities. But once the aircraft is out of warranty, if they want to go down the road to somebody who has the aircraft on his repair certificate and he wants to do service bulletins that aren't under warranty, we certainly wouldn't be in a position to stop him and we'd support it.

McConnell: From a customer's perspective, he simply says, "don't tell me that the guy is allowed to submit a warranty claim or not, I really don't give a crap. That's your problem. My airplane is broken, and you told me you would fix it. How are you going to do that?" That's the real issue. We are trying to turn this around, into a customer focus. And not get operators concerned with all the back-end hieroglyphics that goes on to make sure someone can submit a warranty claim..

Thurber: What about insurance issues?

Flynn: I checked with our insurance people to get an answer to the question. Product-liability wise there are less insurance companies this year than last year that provide that coverage. However, we're able to get it at a competitive price. We're just monitoring the situation. That trend is concerning. It hasn't cost us yet. But with less people out there who want to do it, it would intuitively tell you that it could be an issue coming. On the hull coverage, we don't see any issues. It has no affect on airplane sales, it has no affect on customers. We don't know of an issue there.

Goguen: It's the same when I checked. The hull insurance issue, with customers we're not aware of any problems with anyone. What Larry was saying, there are fewer underwriters at the moment. And I think everyone's watching it, but at the moment it's manageable, not really an issue we have right now.

Orcutt: The other thing we've heard is the premiums have gone up since 9-11, so as a result of that, the entry point is maybe a little more difficult for people purchasing aircraft. It's more of an awareness of reality today versus what it is. I don't see it having a significant impact like fuel prices.

Thurber: Do underwriters appreciate your efforts to make sure your airplanes are properly maintained?

McEwen: Unfortunately that's been a differentiator between those facilities that can do great maintenance and those that don't. Those that don't are undercutting substantially in the competitive marketplace those that can provide the best service. And as an industry, that's where somehow the industry has got to start regulating these ma and pas to make sure that our airplanes are getting maintained at a level that they need to be maintained. And that's a big issue.

Flynn: There's an alarming trend here that ties some of these thoughts together. There are some great authorized third parties out there that are highly monitored by the OEMs. But there's another type coming to market, small service providers that are taking on big jobs, major modifications. Some of these don't have the proper insurance, they don't have the proper training, they don't have the proper documentation, and some of them don't even have a repair station license. Yet they're doing these major mods and then they get halfway into it and we get a phone call. They don't have the tools, they don't have the equipment, they don't have the expertise, and they expect us to drop everything we're doing with our own customers and come help them, and quite frankly, we're not helping them.

Orcutt: We become the bad guy. Larry is definitely right, it's becoming more and more of a problem. It's one of the reasons why with our independents we require an insurance premium on board and that culls out a lot of the ma and pops that are out there because a lot of those smaller shops cannot afford that. One of the things that we're beginning to get news of is our risk-management people in the corporate office are asking, "is that the right premium?" And if anything, they want to raise it as a result of what's happening in the whole world.

Thurber: How do you educate your end-user to look for high quality?

Flynn: We're doing our best to educate through our area meetings and operators' conferences, and in a down economy, cost-conscious customers are not asking the right questions. They only start asking the right questions when something goes wrong.

Orcutt: Normally, those situations we're involved in a bidding process, like everybody else is, so the operators makes a concerted decision on where they're going to go. And through that bidding process you try to lay out all the discriminators that you have to provide as an OEM that perhaps the other guy may or may not be. Hopefully they're making the decision with all the information. But it comes down to, as Larry said, a cost decision.

Goguen: This whole thing becomes more a price decision, it's not a value. It's just price.

O'Brien: Is price or turn time more important?

Goguen: Seldom is it turn time. Definitely the price. They don't have the cost basis of an authorized service center. Occasionally they succeed. And, they're wonderful, but as soon as something goes wrong, one of our phones rings. And we're the bad guy for not doing something.

O'Brien: Ultimately, you guys still have a black eye when people do bad work. That's a real problem.

Flynn: The other place it's showing up is when the airplane is changing hands, we do a technical appraisal of the airplane and do a thorough logbook research and they're finding out the hard way that they had an avionics installation and they put an antenna on the airplane and they didn't do a fatigue and damage-tolerance analysis on the hull, or they recovered the seats or moved the seats and found out they're 16-g seats and they get to redo them. We're very familiar with specific third parties that have done this work and done it wrong. Because they did not know, and the customer gets to pay twice. So there's some of that going on.

Chapman: I would add that between the insurance and the investment in tooling, inventory, and training required for quality maintenance, I don't believe anybody makes a great deal of money on maintenance labor. And so, when owners take their airplanes to facilities that offer labor rates substantially less than the norm, there's a reason for that lower rate. There's a cost reason why that rate is substantially lower, and that ought to be kind of the first clue to begin to ask some questions. Unfortunately, these facilities then experience a degree of difficulty, whatever that might be, and the phone rings at Cessna. We then help them through the difficulty and or advise them they've already done something they shouldn't have done, which is going to cost the customer more money, and again, the sad thing is, more often than not, Cessna is viewed as the bad guy because you won't bend and accept what has already occurred.

Thurber: How do you educate the people who don't come to your meetings? Or who won't call you?

McEwen: It depends on your products, you look at our Baron, Bonanza, King Air, there's so much experience out there. The kind of parts we're getting are issues in the manual, because of parts supersedure issues, but the general maintenance, they're very simple airplanes, they've been out there a long time, they haven't changed much. But wait until you start getting into some of the bigger products and they really do call you. Our authorized service centers really know how to use the factory for support because they don't want to waste their time. And yet the ma and pas are out there probably wasting their time and not even sure of what to do and they just kind of go about it.

Goguen: But the airplanes are returned to service. Someone signs and stamps it, and that is frustrating. But it takes place. It's not obvious that we need new regulations for anything.

Orcutt: We as OEMs aren't the problem. We have our own quality checks internally that are important for us from a liability standpoint. It's the other guys--they don't have any of that--the industry needs to be looking at.

Goguen: Our internal standards exceed all the standards multiple times. Especially when it comes to a major repair. How the engineering is performed, how it's reviewed, the stress and load analysis and how that's done, there's a very detailed process that we all have to follow and it's very rigid and it's not very flexible for a reason. But, if you're not us, unfortunately, you can return to service an airplane that's seriously damaged and fly again.

McEwen: I think that we as OEMs haven't stepped up to communicate what capabilities and what things we have. For example, repair design authority, your engineering where an airplane's out in the field. I am amazed at how many customers still don't know that we have that ability. Now, we provide that to anybody and everybody. I would sell that to a ma and pa to make sure that airplane gets fixed correctly. Maybe when they become A&Ps, they don't know they can go to the factory. The factory has a lot of services that they can provide anyone to make sure that--now, they're going to have to pay for those services--but it's there, but I know that we at Raytheon Aircraft need to do a better job of marketing and that's one of the things we are focused on is marketing of repair design abilities. People still don't know that we do that.

Thurber: This ties in to the old topic of the technician shortage.

McConnell: We have plans to do a scholarship, a couple of them, and to actually design part of the electronic course, electronic diagnostics, using our aircraft.

O'Brien: Is there a technician shortage?

Orcutt: Today for us it's not apparent. We're able to find the people as we need to by working with the schools and the various headhunters that are out there. But intuitively we believe there will be [a shortage] in the future, watching the demographics of the industry and the people that are out there. We think it's going to become what you're talking about in a few years, but today we're holding our own. It was starting to show its head three years ago. The whole economy has taken that pressure off from the shortage. If the flying starts picking up the way it was three years ago, five years ago then you'll be right back there. From our perspective we're able to fill our shops without a great deal of effort.

Broissot: I would say in the large centers, easy. But as we see a lot of aircraft being redeployed at these exotic places around the world and there's a need for us to have a local presence, this is more of an issue right now, getting certified people in those locations. Africa, China. It's a lot more difficult, it's still going to be an issue. Even here locally. We're working very hard with local universities and training centers. So far we're holding our high end, but it could quickly become an issue.

Thurber: What is the level of flying activity compared to pre-9-11?

All: [It's coming back. Roughly back at pre-9-11.]

Flynn: All these people will fly these airplanes the same amount of hours at $2 a gallon as they will at $4 a gallon. There's a big message there. People don't want to be on the airlines. They want to be in these airplanes.

Goguen: Your question on the shortage. The entry level, if you need a new hire, it's not too hard. The shortage tends to be finding people with the skills and experience. Sometimes it's difficult to the point where I'm just looking at this room, this big training room that we're sitting in actually. Probably all of us have training locations on site because we're taking people in, having to train them and bring them to these levels. Because you're not going to get the time anywhere else. It's more specific to the products we have.

McEwen: We don't see it. It's kind of ups and downs. Next month we could have an issue, finding the right technicians. Internationally, we've made a switch in the last two years. Cultures have been in Asia and Japan, the people that we brought in and stationed there as really true experts and we couldn't do without the expats. We've gone away from utilizing, in fact, by the end of this year, we will have all expat packages out of the world and they'll all be local. In fact, we're hiring our last local right now in Japan, where we had an expat. I think it's interesting how the cultures have changed where we now are able to hire locals, and we are hiring them away, they've been working on these airplanes, they're in these countries. That's really changing because I'm now able to put two people in each country versus just having one because of the price of those expat packages, which is, that was one of the first initiatives I took was, do we really need to do it? And we changed it. But it's pretty darn easy to find locals in other parts of the world that have the, you can find good ones and bring them in for additional training because it's all about training. I think domestically we're going to have a harder time getting people for the demand versus internationally. I don't see the issue that much internationally right now, but you do have to do some training, actually domestic and international. That's where you've got to use your authorized service centers or whoever your provider is to help you over there, they are your alliance to help your customers and I think they really know these people that you're hiring. Technical expertise internationally is out there, maybe it's because of our product. In Japan, it's pretty much all government, it's King Airs that we're servicing, and the candidates that we had for that country were all highly qualified for the King Air.

Thurber: Is there anything anyone is doing specifically to enhance the technical expertise of the people you employ or to help the schools?

Orcutt: Where it makes sense we continue to work with schools. We send them copies of our training manuals so they can use them in their classrooms. We send them surplus inventory that's been labeled as scrap so they can use it as training aids. We have some alliances with some schools that work with us very closely on course curriculum, etc. but it's clear their hands are tied, so it is a superficial effort, to be honest about it.

Chapman: One of the things that we're doing, though we have not yet formalized or implemented it, is working with an A&P school and a training supplier, who are in the process of developing a computerized maintenance training program. With this program, we can take students who go to school part-time, offer them OJT part-time and supplement this with computerized training that is taken at their own speed and ultimately they obtain their A&P within X period of time. We'll also use that same device to train existing A&Ps in our service center network, on some of the new model training.

Thurber: Cessna is doing this by itself?

Chapman: Yes

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