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Sunday, April 1, 2007

Editor’s Notebook: Consolidation

Joy Finnegan, Editor [jfinnegan@accessintel.com]

Buzzwords in the aviation industry are a dime a dozen. But consolidation is one buzzword that continues to bring features and benefits to the industry, and its customers, that might not have been foreseen.

It also seems to be something more than a trend. Something that will continue to be a key factor in the aviation business for years to come. I’m not a clairvoyant by any means, but I do see the merging of like-minded businesses or even complementary businesses continuing.

Several recent examples come to mind including the company featured in our cover story this month, Landmark Aviation. We called the story "Three Histories — One Vision" as a tribute to the work Landmark’s management team has done to ensure that the histories of the three separate entities that became Landmark: Garrett, Piedmont Hawthorn and Associated Air Center are respected and remembered.

Consolidations are nothing new. They have occurred throughout the history of the aviation industry. But it seems that some companies have made a template for successful non-hostile, take-overs or consolidations.

Again, Landmark is a case in point. Three unique companies, each with strengths and weaknesses was combined together into one company in 2005. Roger Wolfe, CEO of Landmark, and his team have done a remarkable job of integrating those three companies into one. Landmark merged these three different businesses to become a juggernaut in the aircraft service and support world, able to work on everything from Boeing and Airbus aircraft to corporate jets.

Respecting and remembering the work and history of the individual parts of the new whole seems to be key to successful consolidations. Still, it’s also imperative that a new identity emerge and encompass all of the companies. As Wolfe said in the article (see page 12), at the time all the companies came together, they actually shut down most of their businesses and took several hours to hold company meetings to discuss the vision of the leadership about what the newly formed company’s goals were and what their path ahead would be.

This brings to mind the America West/US Airways merger. US Airways is working hard and fast to meet an internal goal of merging certificates in the second quarter of 2007. Some of the remaining integration items include migrating reservations into one system and working out labor contracts, including a contract with the maintenance team. "We still have some work to do," said Doug Parker, chairman and CEO of US Airways, at a recent media event in Phoenix, Ariz. Although the merger hasn’t been a cakewalk, US Airways is making money and that is the goal.

Parker also said that even though their recent attempt to take over Delta did not work out, they are not out of the market for other opportunities. "We have a propensity for risk that makes sense. Consolidation is the right thing to happen," he said. "If something happens, we’re going to be involved. When it happens is the real question." Parker did say that he didn’t see anything happening in the near-term.

Another recent acquisition involved Gulfstream’s purchase of WECO, an overhaul facility specializing in electrical accessories, electronic accessories and instrument service. Gulfstream had a need that WECO fulfilled. Synergy is the name of the game in consolidations. Gulfstream needed more product support operations on the West Coast, and having worked with WECO for years, saw the benefits of integrating that business into their own to help support their customers.

Maybe your business is next. I know ours could be. Our parent company, Access Intelligence could be grabbed up and although the thought is somewhat worrisome, perhaps that worry is unwarranted. If the merging companies follow the examples here, we’ll have a good chance of merging into something bigger, better, and stronger.

At Press Time...

As we headed to press for this issue, it was reported that Dubai Aerospace Enterprise (DAE) was in active discussions with the Carlyle Group, owners of Landmark Aviation, to acquire the company. It was reported that DAE was interested in the MRO businesses of Landmark. DAE was reportedly not interested in the FBO businesses of Landmark. In addition, DAE was said to be in talks with Standard Aero to purchase the Canada-based company as well. By the time this magazine is in your hands, we may well know more about the progress of these talks, and any possible outcomes. Check our daily Web news for updates at www.aviationmx.com