As work progresses to restart the German production line of the Fairchild Dornier 328Jet, the aircraft's new manufacturer has booked about 25 firm new orders.

Just two years after Fairchild went bankrupt; things are looking up for the 328Jet program. AvCraft Aviation, based in Leesburg, Va., purchased the rights and assets of the 328 and 428 program from the bankruptcy court in January 2003. The assets included 18 unsold, but completed 328Jets and five planes in various stages of completion on the production line in Oberpfaffenhofen, Germany. AvCraft later purchased 12 additional planes - four 328 turboprops and eight 328Jets - from the court administrator.

In the past year, 13 of the 18 planes have been delivered, said AvCraft CEO Ben Bartel. The remaining planes are 90 percent sold, Bartel told CRAN. Eight of the planes were delivered to China's Hainan Airlines.

When the lights were turned off in Oberpfaffenhofen, five planes were in various stages of completion. One plane was 80 percent complete while the most incomplete was 20 percent assembled. The first of these planes will roll off the assembly line in October. The last of these should be completed next February. The ramping up continues at the German plant. With 250 workers back on the job, Bartel said managers would begin hiring additional 175 workers to restart the assembly line. AvCraft plans to complete its first built-from-scratch plane in the fourth quarter. It will take the crews about one month to build a plane, he said.

"We have deposits on 20 to 25 planes," Bartel said. "Within two months, we will be at 45 orders."

The German production line can turn out 54 planes a year with two shifts.

Fifty percent of the new 328Jet orders are from airlines while corporate and public sector buyers have placed orders for the other 50 percent. Bartel would not disclose his buyers.

Since AvCraft purchased the 328 via bankruptcy, it is not saddled with the development costs of the plane. The sales price of the 328Jet is less than what it sold for in 1999 when it was introduced, he said. The pricing "seems to be working," Bartel added. He declined to disclose the sale price.

AvCraft needs to sell between 10 to 20 planes per year to break-even. "Getting this thing off the ground has been difficult. We are making our numbers. It is nice," Bartel said.

"We are not in the airframe delivery business. I want to be profitable. I want to sell value. I believe if we can sell value. The profit will take care of itself. That has been my whole business background," said the former investment banker and cable television entrepreneur.

"I am not in the market share business against the Brazilians [Embraer] and the Canadians [Bombardier]. I don't have the product line and I don't have the infrastructure. So, why compete? We are selling a niche product. I have never been a good mass-market type of player. I have been a niche player."

The niche that Bartel and others describe is the turboprop replacement market.

The competition is the old 30-seat turboprop, he said. The 328Jet is designed to seat 32. Competing models from Embraer and Bombardier are designed to handle longer distances. The 328Jet, on the other hand, works best on shorter routes - 300 to 600 miles. It also has "very robust take-off and landing performances that nothing else can touch which enable it to handle more remote locations," he said.

"We like the airplane. Our customers love the airplane," said Jim Rankin, president of Skyway Airlines. The regional carrier of the Midwest Air Group [MEH] flies 10 328Jets. "It has performed well for us. It is very roomy. It is quiet. It has performed very well for us on our type of routes - short routes of 250- to 350-mile segments."

Skyway was the world launch operator for the 328Jet, and it also had firm orders for the 44-seater 428, before Fairchild canceled that program.

The CRJ 440 is a Bombardier with fewer seats installed to stay below scope clauses. "It is not an aircraft designed for small community service," said Tulinda Larsen, an analyst with Back Aviation Solutions. "The ERJ 135 is a good replacement for turboprops, but it is really part of a larger series rather than just designed as a turboprop replacement. "I think they can competitively price the [328Jet] to be a true turboprop replacement. I see that as their role. There is definitely a need for turboprop replacement aircraft that is not a turboprop," Larsen said.

Over the next five years, AvCraft estimates that regional jets will replace 153 turboprops - about 30 planes per year. Bartel estimates that the total market for the 328Jet or similar planes will be about 60 to 70 per year. AvCraft estimates that half of the sales will be to non-airline buyers. "If we can sell 25 airplanes a year, we are doing okay.

"I can't build too few because it will run people off," he said. "I can't build too many because it will choke the company with capital demands."

There has been some concern that the recent decision by Delta Air Lines [DAL] to terminate its code-share partnership with Atlantic Coast Airlines [ACAI] could dump 30 328Jets on the market. Atlantic Coast has been flying the 328Jets for Delta Connection. The sudden glut on the market could dampen AvCraft's future sales prospects, Larsen said. Delta and Skyway are exploring a new partnership. The scenario calls for Delta to assume the leases from Atlantic Coast and then assign the planes to Skyway (CRAN, April 12). Rankin told CRAN the two sides continue to talk.

However, Rankin will hold off ordering any new 328Jets until he is certain AvCraft will be building the plane on a long-term basis. "We have been pioneers for the aircraft a couple of times. It has been rough on us. We are taking a little more of a 'wait-and-see' approach instead of taking a leadership role."

To assure continued production of the aircraft beyond what is setting on the floor in Oberpfaffenhofen, AvCraft has placed an order for new jet engines with Pratt & Whitney. Last week, AvCraft took steps to bring the production of the wings in-house. Bartel said the tooling used by the original wing builder did not have the capacity to build another 300 to 400 wings. EDAG Engineering + Design AG, of Fulda, Germany, will provide the tooling. AvCraft crews will assemble the wing at the Oberpfaffenhofen facility.

AvCraft has signed post-sales support agreement in Europe and North America. Aero Dienst, of Nurnberg, Germany, will offer maintenance support in Europe. AvCraft has signed an agreement with BAE Systems to manage the spare parts for both the 328 turboprop and jet programs.

To handle servicing and maintenance, AvCraft is renovating 200,000 square feet at the former Myrtle Beach Air Fore Base. The facility replaces a completion center in Texas and a service center in Ohio - both the original elements of AvCraft when it was formed in 1999. Currently, 20 people work at Myrtle Beach servicing turbine-powered aircraft. AvCraft will also complete the interiors for any non-airline 328Jets that have been sold to North American customers.

Describing himself as an opportunistic entrepreneur, Bartel came to the aviation business because he was disappointed with the servicing of his own plane. Coupled with his nature as a perfectionist, Bartel is building a post-sale infrastructure to create lasting value and exceptional customer service.

To increase future aircraft sales, Bartel said the firm last year set a course to improve the reliability of the plane - something that had been allowed to slip because Fairchild was distracted by financial problems. After examining every complaint raised by operators, the AvCraft crews last September identified 17 problems that impaired the plane's reliability. By June, he said, the maintenance staff will have issued service bulletins addressing each problem. "The operators are telling me the airplane is becoming more reliable. Is it where it needs to be? No, but we are aggressively addressing the reliability problems."

Airline operators of the 328Jet have encountered problems with the Pratt engine. The engine was designed for lighter corporate use and could not handle the longer hours of commercial flying. Bartel said the fourth update of the engine is now being tested. The problem was compounded when Pratt did not have spare engines readily available to swap out and keep a plane in the air. Bartel noted that every single plane - there are about 200 of them - is now flying.

"Since AvCraft took over we have seen some improvements in the customer service end," Rankin said. "We still have high expectations that it will continue to improve, especially if the plane gets back into production."

"I continue to make mistakes," Bartel acknowledged, "but I am making fewer of them. So far, I think we have done pretty good on our decisions."

>>Contact: Ben Bartel, AvCraft, (703) 669-0980; Jim Rankin, Skyway, (414) 570-2300; Tulinda Larsen, Back Aviation, (202) 783-5052.<<