Aftermarket: Business Aircraft Cabin Refurbs

Used aircraft sales are booming and with that comes a growing trend for new owners who want to "pimp their rides." Smart shops will be ready to help guide novice customers through this arduous process.

Thanks to a combination of inconvenient airline schedules and increasingly restrictive TSA regulations, global businesses are flocking to the only way they can realistically meet their travel demands — they are buying airplanes. Sales for both new and pre-owned turboprops and jets are "through the roof." And it doesn’t look like it’s going to slow down anytime soon. Good news all around.

The booming pre-owned sales are especially welcome for companies that complete cabin refurbishing because that’s where the majority of their work comes from. "What I’m seeing on the refurbishing side is it’s a very, very high percentage of people that are doing interiors are people who just bought used airplanes," explained Roger Renaud, senior VP, green completions programs for Midcoast Aviation, Inc. "They have a different idea of what the floor plan should be or the colors or number of seats — things like that.

"When it comes to current aircraft owners, I see most of those ‘retrofits’ being technology purchases," he added. "New phone systems, satellite TV, cabin data or whatever. There are lots of technology update opportunities, but not many owners want to change the soft goods [upholstery, carpeting, etc.] in the airplane. They don’t keep it [the aircraft] that long and once they have it they don’t want to put it down for cabin refurbishing."

So just how big is the retrofit business opportunity? Well, according to a November 2006 presentation given by Kevin Michaels, principal and co-founder of AeroStrategy, Inc., the global market for aircraft overhauls and refurbishing is around $6.2 billion a year. And approximately 21 percent of that total is earmarked for interiors, cabin electronics, avionics upgrades and paint.

The really good news is it’s only going to get better. AeroStrategy’s 2006 forecast showed that this segment of the MRO business will grow at around four percent yearly and will be worth nearly $9 billion by 2015 — cha ching!

Opportunity Isn’t Just Knocking

It’s literally banging on your hangar door. And while that is a very good thing, it does present a new set of challenges. According to the experts I talked to, one of the biggest challenges is the fact that these "new-generation owner/operators" lack familiarity with this side of the business.

As Renaud stated, the biggest opportunity for significant cabin retrofit business is coming from companies and individuals who are buying pre-owned aircraft. And a lot of those buyers are first-time owners, which means retrofit and refurb shops are going to be relied on to give them more guidance and help throughout the project.

As one shop manager put it, "These new owner/operators don’t understand what goes into a cabin or aircraft refurb project. A smart shop will take the leadership role and be ready to help guide these new customers through the process. Like the rest of our business; it’s all about relationships and trust." In fact, with all the options available today for cabin retrofits, even operators who have "done this before" will still appreciate all the help and guidance you can offer.

So what can your shop do to be ready to take optimum advantage of the business that’s out there? Plenty. One of the first is to be ready to ask a prospective customer a lot of questions. "We usually don’t work directly with the aircraft’s owner, it’s usually with someone representing him — whether it’s a chief pilot or director of maintenance. But typically what we do is ask some questions first," Renaud said. "What is the aircraft’s mission? What are they trying to accomplish? Are there any ‘special needs’ the owner has? Is the airplane on a charter cert? Things like that."

Chartering is becoming an increasingly popular option for owners these days. And it’s a critical question that needs to be asked up front. You need to not only know if the aircraft is currently under a charter certificate, but also if the owner/operator is even considering it for the future. "What I’ve seen happen is the shop is given a budget but didn’t know to ask if the aircraft is going to be part of a 135 certificate," explained Mike O’Keeffe, SVP, Banyan Air Services. "The project gets done and there are no burn certs so the aircraft can’t be chartered."

If you are redoing the upholstery a big "favor" you can work on any customer’s aircraft that is on a 135 certificate and order enough extra material to redo a couple of the seats. Charter customers can be awfully hard on that stuff and the color variances of dye lots can be dramatic. What you get today may not match fabrics or leathers you get next year.

"Good project planning starts down at the rivet level and what the customer wants and needs done on the airplane. Then we work backward from there," Brian Husa, completions sales representative for Duncan Aviation said. "If there’s a phase inspection or large inspection coming due on the airplane soon, does the customer want to complete that at the same time? We want to do it smart and try to consolidate as many things into the downtime as we possibly can.

"For instance," he continued, "if there’s an inspection due in six-months, but the airplane is going to be down for three months, we may suggest that they complete that work at the same time so when the airplane is delivered they will have as much ‘clean flying’ in front of them as they can.

"Once we’ve defined those types of things, we need to ask about the budget. It is very important to set the expectations right. I can’t remember, in my 27-years, the price ever being much less than what you thought it was going to be — it’s always more," Renaud said. "And it’s just as much to help the shop’s rep as it is the owner’s. Set the expectations right so that you’re not spending more time trying to explain things than you are managing the project."

What are Customers Looking For?

"One thing we feel is big — at least in the beginning — is a shop’s reputation," O’Keeffe said. "We do a lot of cabin refurbishing projects for aircraft we are selling. We’ve learned that the differences between a good interior and a bad interior can be somewhat minor and much of what helps us decide on a shop is their reputation along with word-of-mouth recommendations from past customers."

In fact, every shop representative and customer I talked to shared the same recommendation: anyone who wants to succeed in the cabin refurb business needs to be ready with a list of recent referrals. "I want to see a list of referrals and testimonials — how comfortable is the shop in giving them to me?" O’Keeffe said. "We’ve run across many smaller shops and the guy you are speaking to is not only the owner but the guy who does the work. We learned the hard way that it’s hard to run a business and do all the work at the same time."

"We look for a shop that has the capability to handle other issues if they come up," said Kyle Slover, director of maintenance for Volo Aviation, LLC. (See Change Agent, page 38)"If you’re sending in your aircraft for paint and when they strip it they find corrosion, can they fix that? I’ve heard horror stories about people taking an aircraft into a shop and they get into the project and they find they have to demate the wings or something and they need engineering resources and the aircraft ends up sitting there for a long time."

For Slover, and the majority of customers for that matter, it all comes down to trust. "What I am responsible for is a rather expensive asset and what I’m looking for is really kind of an asset protection policy to make sure that the shop I select can handle everything that may come up in the scope of work," he added. "I don’t want to take the risk of putting our airplane in a facility that cannot support it."

Aviate, Communicate

The next most important thing a shop can offer a customer is communication. "This is key to success on both sides of the project," Husa said. "The more successful shops have gone as far as to have a single point of contact. A project manager to look over everything and really advocate internally for the customer at all times and then to communicate to them the full progress or issues as they come up.

"It needs to be at all levels," he continued. "Oftentimes we are dealing with three or more individuals inside the customer’s organization. There’s a fine line between what is the right amount of information and what is way too much, which just confuses the issue."

And good communications is not just phone calls and e-mailing updates. It starts with creating a plan that everyone involved understands and agrees to. You need to have everything spelled out — every expectation, every milestone date and every detail. Nothing is left to assumption. "I think having the scope of work and expectations down in writing is key," O’Keeffe said. "You talk to a lot of shop owners and sales people and they agree to a lot of things but no one puts it in writing. That’s a big mistake. That’s one thing that sets a professional shop apart."

Slover explained that Volo Aviation takes communication so seriously that they go so far as to have put a representative onsite at Duncan Aviation while their Falcon 900 and Gulfstream IV were undergoing extensive refurbishing in 2006 and 2007. "We sent people to basically monitor the process the entire time," he said. "We have on-going communications so both parties can state their expectations, figure out project milestones, and make quick decisions on colors, fabrics, locations of equipment — it’s all happening real-time and not adding to any possible delays.

"Another thing that helps is if the shop has to produce any written instructions or documents like flight manual supplements or instructions for continued airworthiness. We have been able to save ourselves from problems a couple of times by being onsite to review these documents before they go to the FAA," Slover added.

Slover shared a story of how this kind of involvement helped avert what could have been a serious oversight. When they decided to add electronic flight bags (EFBs) to their G-IV, they were using a previous STC to mount the EFBs on the yokes. The installation went fine, but when Volo’s representative reviewed the documentation he discovered that the STC stipulated that the aircraft still needed to carry paper charts. "It [the restriction] was intended to get removed once the original STC was obtained," he explained. "It just got overlooked. If we hadn’t spotted it, it would have gotten to the FAA for our ops specs approval and they would have said we still needed paper."

What if the customer doesn’t have someone they can spare to spend months at your shop? If you’re not big enough to give them a dedicated project manager, it might be worthwhile to hire an outside contractor. You and the customer could possibly split the cost. If the project is big enough it’ll probably pay for itself in time savings alone. Even if there’s not a designated customer representative onsite during the whole process, you need to have significant project milestone dates targeted and communicated so the owner’s chief pilot or DOM can be onsite for inspections and approvals.

"You have to look at the refurbishing project like you’re working on decorating someone’s home, they are trusting you with their most personal space...if you fail you can be sure that everyone will hear about it."

And don’t ever make the mistake of telling a customer that something is going to be done when you know for a fact it isn’t. "If something’s going wrong, it’s easier to call the customer now and tell them rather than trying to put it off," O’Keeffe said. "Don’t wait until the day they come to pick up the airplane to tell them something is wrong." And yes, that does happen — in fact, it happened to O’Keeffe.

As O’Keeffe tells it, he and the interior shop told the aircraft’s owner that the airplane was "ready for pick-up." So they jumped on an airliner and flew from Florida to where the airplane was being done. When they arrived they learned that it would actually be "at least another week" before it was done. "Now they had two very angry customers on their hands," he said. "The shop’s manager didn’t want to call me and make me mad by telling me the airplane was not ready, he waited until we flew half-way across the country to do it."

Setting Your Shop Apart

While there’s been a lot of valuable information shared, the simple fact is you can take steps long before a customer flies in to help put your shop in a position to cash in on the cabin retrofit and refurbishing boom. Here are a few valuable tips to help you make the most what opportunities come your way:

• Prepare a list of recent customers to use as referrals. If they don’t want to be contacted, just ask them for a short testimonial letter. It’s also a great idea to have photos of the before, during and after of each project.

• Ask the prospective customer detailed questions about how the aircraft is used now and how it may be used in the future. Also ask what systems they may want to add in a year or so. It can save money and time to pre-wire for anticipated equipment additions.

• Prepare a complete list of items to help prospective customers plan each step of their project. And the more detailed you make it the better.

• Create a calendar of project milestones that spells out who will be responsible for what decision and when. Again, because you will be working with a number of people in the owner’s company, this needs to be very detailed.

• Complete a highly detailed pre-disassembly inspection of the interior and exterior of the aircraft including the avionics and antennas. Note anything that needs repaired and the condition when the aircraft arrived. If it’s not on your "to-do" list then tell the owner. Every owner thinks their airplane is "perfect" when they dropped it off. (Digital photos are great.)

• Once you get started, communicate, communicate and communicate some more. Provide consistent updates to your customer on every detail on the project. Even small changes can make big differences in the final product.

• The project plan should also specify which person in your shop is responsible for making all the logbook entries as the project goes along. DO NOT leave this important task until the end. The lack of current paperwork is a leading cause of delivery delays.

• Speaking of delivery delays, don’t wait until you’re passed the promised date to have a contingency plan in place that states who will pay how much if the aircraft’s owner has to charter another airplane. And if you’re going to own-up for missing the date, why not put in a bonus clause as an incentive to beat the deadline? It’s worth asking.

• Create a contract that clearly states the goals and commitments for both parties. You’ll be amazed at how much smoother a project goes when people have to put their signature on a piece of paper.

When you sit back and look at it, these steps really aren’t anything new. The biggest key to being successful in this facet of the business is remembering that doing a cabin retrofit or refurbishing project is the most personal kind of work you can do on someone’s aircraft.

"You have to look at a refurbishing project like you’re working on decorating someone’s home," a shop owner said. "They are trusting you with their most personal space. And once they give you that trust, you must do everything in your power to show them that they were right. If you fail, you can be sure that everyone will hear about it."