The rescue and return to production of the Dornier 328Jet reads like the script from a soap opera. And it looks like having a happy ending
When AvCraft came to the rescue of the Fairchild Dornier 328Jet at the end of 2002, few people were confident the project would be revived. But to the credit of the small team of executives and engineers at the plant in Oberpfaffenhofen, Germany that remained faithful to the little regional jet, AvCraft looks like it can pull it off.
Although the revival is not fully implemented, it is well on its way. Two significant orders have been secured and completion of already-assembled airframes acquired as part of the deal with the Fairchild Dornier administrators is underway. If all goes to plan then the final chapter should begin early next year, when production of all-new aircraft is due to begin.
"By the end of the year we should be employing 300 people," says Wolfgang Walter, managing director of Germany-based AvCraft Aerospace and AvCraft Support Services, which run the 328Jet programme in Oberpfaffenhofen. This is up from the skeleton staff of 200 workers kept on during the insolvency period that started in April 2002.
But it has been a long and challenging road to reach the current position. The development story of the Dornier 328Jet and its turboprop predecessor reads like a script from a soap opera. The aircraft's origins can be traced to 1986 when the 328 turboprop was unveiled as a revolutionary 30-seat airliner, intended to catapult its builder - Dornier Luftfhart - back into the forefront of regional aircraft production.
Dornier was the last manufacturer to enter the 30- to 40-seat turboprop market with its Pratt & Whitney Canada PW119-powered 328. The company knew that to compete against established players such as the Bombardier Dash 8, Embraer EMB-120 Brasilia and Saab 340 it would have to design significant advantages and the latest technology into the 328.
Development was hesitant and prolonged, and the new aircraft did not enter service until October 1993. By then the world had been introduced to the regional jet by Canadair - today's Bombardier CRJ. Not long after, the decline of the turboprop market set in and demand for new-build propeller-driven airliners began to dwindle.
By mid-1996, 328 sales were stalled at around 100 units - well short of the 400 forecast at its launch 10 years earlier - and Dornier's then parent DaimlerChrysler Aerospace decided to sell to US manufacturer Fairchild Aerospace, which acquired an 80% stake of the loss-making company. Almost immediately, plans were unveiled to revive the 328's fortunes by developing a jet-powered version powered by the 6,000lb-thrust (27kN) P&WC PW306B. Significantly, this was the first firm plan for the development of a regional jet in the 30- to 40-seat category (below the CRJ), as it emerged well before Embraer decided to create a 37-seat version of the ERJ-145. Named 328Jet, this proposal - which was to all intents simply a 328 with pylon-mounted PW306Bs replacing the PW119s - became a reality in early 1997, and flew for the first time in January 1998.
Limited appeal
The 328Jet was well received in the market, with orders standing at over 40 aircraft by the time deliveries began in July 1999 to US launch customer Midwest Connect. However, compared to its most direct competitor, the ERJ family, the 328Jet's market appeal appeared limited as it had no larger or smaller siblings. To overcome this, Fairchild Dornier (as the manufacturer was now known) unveiled plans - later abandoned - for a stretched 44-seat model, the 428Jet and sought to augment its airline sales by targeting the business jet market with a corporate model named the Envoy.
But Fairchild Dornier had much grander ideas about becoming the third force in regional jet manufacturing - an ambition that would ultimately be its downfall. This expansion was initiated in May 1997 with the launch of the 70-seat 728 regional jet, the first of a planned family of 60- to 100-seat jets. But despite a massive launch order from Lufthansa, sales were slow and the slump in airliner sales after 11 September was the final nail in the coffin of not just the 728, but also Fairchild Dornier, which filed for bankruptcy in April 2002.
At the time of the collapse, a total of 109 328 turboprops and 86 328Jets had been delivered, and a further 53 328Jets were on order. Although production had at one point been running as high as five a month, sales had dropped off and deliveries to a key customer - Hainan Airlines - had been held up by Chinese import restrictions. "The 328Jet was really a victim of other parts of the company and a lack of focus. With all the emphasis on new programmes like the 428 and 728, no one paid attention to the existing ones, which hampered the 328Jet," says Walter, a long-time Dornier employee.
Following the manufacturer's insolvency and appointment of an administrator, Walter, at that time the programme manager for 228/328 aircraft at Oberpfaffenhofen, set about saving the programme. "I negotiated with banks to retain key personnel and the design approval certificate, which enabled the programme to stay alive. This ensured that airworthiness approval remained in place for the 328 turboprop and 328Jet," he says.
The entire Fairchild Dornier business was broken into three parts: the 328Jet programme, including engineering and customer support; the 728 programme (eventually acquired by China's D'Long Aerospace, which itself recently entered bankruptcy) ; and the Airbus component production business and maintenance facility at Oberpfaffenhofen (bought by RUAG).
Walter set about trying to find a financier to rescue the 328Jet, as he kept the business ticking over with 200 staff. "This was down from 850 prior to bankruptcy, and was the lowest number possible," he says.
From the moment of insolvency, all outstanding orders were eliminated and production halted. Walter concentrated on keeping operators of the in-service aircraft happy until a buyer for the business was found. When production was suspended, 18 completed 328Jets were awaiting delivery to customers, and five additional airframes were at various stages of build on the assembly line - dubbed "work in progress [WIP]" aircraft.
Saviour found
After making presentations to several potential buyers, by the end of 2002 Walter had found a suitable saviour in the form of US entrepreneur Ben Bartel and his company AvCraft Aviation, which operated a 328Jet completion centre in Tyler, Texas.
Bartel, who "took a seven-figure hit on the Fairchild Dornier bankruptcy", says that having a German business background - in the 1990s he revived a bankrupt former East German cable TV company - made him uniquely qualified to attempt a rescue of the 328Jet programme. "My background is that I build companies...and saw this as an opportunity," he says.
The deal between AvCraft and the administrator was agreed in January 2003 for an undisclosed sum, covering the Dornier name, the 328Jet (including type and production certificates) and stalled 428Jet programme, as well as production tooling, components and spares stock, the 18 whitetails and five WIP aircraft.
The deal also included the type certificate for the 328 turboprop, as well as customer support responsibility for both types. AvCraft also took on the lease of a number of buildings occupied by the 328Jet business at Oberpfaffenhofen.
The purchase was formally unveiled in March last year, as Bartel and Walter led the effort to rebuild the 328Jet's reputation and customer base. Sales and marketing activities are headquartered at AvCraft's offices in Leesburg, Virginia, in the USA, while the Oberpfaffenhofen plant concentrates on readying whitetail aircraft for delivery, completing the WIP airframes and relaunching series production.
AvCraft is pursuing the dual market theme initiated by Fairchild Dornier, with the Envoy corporate model offered alongside the baseline airliner version, priced at $14.5 million (equipped with standard interior) and $11.5 million, respectively.
"I expect 30-35% of 328Jet sales will be for non-airline use," says Walter. The revival of earlier plans for the stretched 42/44-seater is also being considered.
In July 2003, AvCraft was able to land its first order for the 328Jet, an important follow-on deal from Hainan Airlines for eight aircraft, plus five options. The airline is a major customer, having taken delivery of 19 328Jets by the time of insolvency. The eight aircraft were delivered from the batch of whitetails, with deliveries beginning in September last year, and all have now been handed over. In May this year, Hainan firmed up its five options and placed options on 15 more 328Jets, taking its total commitments for the twinjet to 47 aircraft. The five firm orders will be delivered from the stock of whitetails.
A second key order came at the 2004 European Business Aviation Convention and Exhibition in May, when UK executive jet operator Bookajet - which is rebranding as Club328 - concluded a deal for six Envoys, plus seven options. Configured in a 14-seat executive layout, the Envoys will serve the company's on-demand charter and corporate business, and will also fly for its Geneva, Switzerland-based partner, members-only airline Club Airways.
Deliveries to Club328 are to start imminently, with two aircraft being taken from the whitetail batch, and the remainder of the contract fulfilled through the completion of the WIP airframes. Since acquiring the programme, AvCraft has taken orders for 22 328Jets and options for more than 20 more, and Walter says a further 50 aircraft are "under final negotiations".
In addition to the 18 whitetails that came with the purchase of the programme, AvCraft also acquired marketing rights for eight 328 turboprops and four 328Jets (including two of the lower-weight -300) that were awaiting placement with new operators at the time of the insolvency. This batch includes three aircraft that were never delivered (one turboprop and two jets). Four of the secondhand units - two turboprops and two of the 328Jets - have been placed and negotiations are ongoing to find homes for the rest.
The decision to take on these extra units, Walter says, was driven by market demand: "By placing these aircraft we are able to stay in touch with the market and our customers. A 328 turboprop customer today could be a 328Jet operator tomorrow."
Series production
With orders in the bag, AvCraft is moving forward with efforts to revive series production of the 328Jet early next year. The first stage will see completion of the five WIP airframes, work on which began in early June, more than two years after production halted. "We are gradually ramping up our employee levels from the 200 we had during the insolvency period as we prepare to start full production at the end of the year," says Walter. The staff level is now at 280 and "should reach 300 by year end", he says. Walter envisages that no more than 450 people will eventually be employed - about half the number allocated to the programme when run by Fairchild.
The first WIP aircraft will be completed as an Envoy corporate model, and is due for delivery to Club328 in November. The last WIP aircraft will be handed over in February. The five WIP aircraft (serial numbers 3220-3224) have sat on the assembly line for over two years, frozen midway through production in the condition they were in when work stopped in April 2002. Walter says that for revival of the line it was not just a case of starting up where the workers had left off: "On each airframe, we got the production drawings out and rewound the process by about three months," he says.
One of the major issues that had to be resolved before series production could be resumed was to find a new wing supplier. Before the insolvency the work was undertaken at Fairchild Dornier's US plant in San Antonio, Texas, having been transferred from Oberpfaffenhofen during 2000. After the bankruptcy, the assets of the San Antonio plant were purchased by M7 Aerospace, but AvCraft was unable to agree terms with the new owners for continued wing production.
After evaluating "attractive offers" from other potential suppliers in the USA, Germany and eastern Europe, Walter says the decision was made to bring the wing production back to Oberpfaffenhofen alongside the final assembly line, as it is "more efficient" and "will help us to lower the cost of the aircraft". Around 40 people are being recruited to handle wing production, many employees that were previously laid off. Walter says that the availability of experienced workers at the plant will enable AvCraft to increase the production rate more quickly and effectively than if the work was allocated to a third party.
AvCraft says the move requires an investment of c3.6 million ($4.3 million), and it has contracted Fulda, Germany-based EDAG Engineering & Design to produce new wing tooling. "We stopped negotiations with M7 about acquiring the old tooling," says Walter, adding that the plan to build a new set was made after determining that old equipment had "insufficient life left. The new tooling will save us time and cost in the long run."
Andreas Dorst, head of production at AvCraft Aerospace, says new wing production starts in November, with assembly of the first all-new-production 328Jet (serial number 3225) starting in January. "Wing/fuselage join is due in the second quarter of next year, with delivery to customer scheduled for June 2005," he says. The aircraft is already allocated.
"Our production rate is driven by the suppliers," says Walter. "We plan to deliver at least 12 aircraft next year, and our goal is to increase to 18 and then 24 aircraft annually," he says, adding that a maximum rate of 54 a year is achievable. Bartel says: "If we could eventually be driving 45 aircraft out of there every year I'd be very happy".
According to Walter, material flow has been changed as part of a drive to improve the efficiency of the production line. "The production cycle time is 66 days, and our target is to get it below 60, which will be better than before the insolvency," he says.
Long-term contracts
Much of the 328Jet is supplied by outside contractors, with, for example, fuselage subassemblies being manufactured by Aermacchi in Italy, incorporating structures produced by OGMA of Portugal.
Walter says the aim is to stay with the existing suppliers, and negotiation of long term contracts has been under way for seven months to cover the WIP airframes, the launch of new production, and to expand the spares holding.
"We have signed a 'declaration of interest' with Aermacchi, but we're still negotiating a long-term contract," says Walter, adding that "a deal has been agreed" with engine builder P&WC to cover completion of the WIP aircraft, but talks continue on a contract for the series production aircraft. "We have a path to conclusion with all the suppliers except one," says Bartel. "We have now made the decision to go elsewhere and selected three companies to have a look at [taking over the contract]."
Walter says that, while production was suspended, efforts were made to improve "field issues" to boost reliability. "One of the biggest issues was a problem with an electrical component that contributed to 80% of the failures in the fleet. An improved version has been developed which is about to be introduced," he says.
AvCraft has also worked with P&WC to resolve problems that some carriers have suffered with the P306B. Walter says the engine manufacturer has developed a design improvement which is being rolled out across the fleet, and is confident it will resolve the problem. "We have also developed a reduced-power take-off procedure which will help to mitigate the problem," says Walter.
The company is meanwhile working on clearing the aircraft for steep approaches to enable it to operate into restricted airports like London City.
AvCraft has shored up the 328/328Jet fleet's support with a deal for North American operators to be served by a Washington DC spares centre managed by BAE Systems. This was previously based at Fairchild Dornier's San Antonio plant. Another spares centre for the rest of the world continues to operate at Oberpfaffenhofen.
Meanwhile, AvCraft has relocated its Tyler operation to the former Myrtle Beach AFB in South Carolina. Dubbed AvCraft Support Services, the facility opened in May with US Federal Aviation Administration/European Joint Aviation Authorities approval. It will be the worldwide completion centre for all non-airline 328Jets, the factory-owned maintenance provider for North American 328 turboprop and 328Jet operators, and will also undertake third-party work.
"The 328Jet programme is seen to be moving from a survival mode to production mode," says Bartel. "So far, we are ahead of where we thought we would be at this point." The tools are now in place for the 328Jet to fulfil its potential and only time will tell if it can be as successful as its saviours believe.
MAX KINGSLEY-JONES / OBERPFAFFENHOFEN
Source: Flight International
