The View From Kerrville

How dumping the J-model and flushing contract work brought Mooney back into the black.

During our recent visit to Kerrville, we spent a couple of hours talking with Mooneys new president, Christian Dopp, who took over the companys reins last year.

Dopp, 26, is the son of Paul Dopp, the principle and majority shareholder in AVAQ Mooney, the investment group which purchased the company in late 1997.

Whats the current ownership status of Mooney? Weve been told that the French investors who bought the company during the 1980s are still involved.

Thats correct; minority interest is still held by French investors, the majority interest is held by our investment group, AVAQ Mooney. Our investment group has five minority investors. The Dopp family has the controlling interest.

For several years, we heard repeated rumors that Mooney was about to declare bankruptcy. But it never happened. What was and is the companys financial status?

When we did due diligence before the purchase, we recognized a lot of things that were wrong with the company, on both sides of the house, contract and the aircraft manufacturing side. Since 1984, the French had put in excess of $26 million in equity into the company. They finally sobered up in 1996 and realized it was just a nice hobby for a couple French folks who had too much money.

We have started to turn that around. The companys first profitable quarter was just recently. Actually, it wasnt a quarter, it was four months, running from just prior to September through November.

Mooney was certainly selling airplanes during those years. Why was there no profit?

Most recently, the previous owners brought in a lot of outside contract work-for Boeing, for Raytheon and so forth-and they were thinking, well, lets take our excess capacity and make money doing this.

They built up a great backlog but there was no margin. They had thousands of additional parts to keep track of and they didnt have the systems to do it.

All kinds of things just got worse, all the problems were exacerbated. So our focus was to flush that contract work out of here and fix the core business, which is the aircraft product line.

Does just flushing the contract work mean that there’s profit in making four-place airplanes?

Well, thats only part of it. The other part obviously has to be improving how we do things and the whole build process and rearranging the flow.

This company started with the short-body airplanes then introduced the long body Bravo and Ovation. The production line was a hodgepodge. It was never streamlined to optimize flow and to keep the cycle time as short as possible. Thats the key to profitability.

Which brings to mind the demise of the J-model, probably the best seller in Mooneys history. Why was such a popular airframe dropped?

The margin on the J-model is just not there. It wasnt even breaking even. In our estimation, on every J-model the company sold, we lost money. By comparison, for every Ovation or Bravo we would build, we would have to build four or five J-models respectively to get the same margin.

Using the same manpower, that means if we were building 10 Bravos and 10 Ovations a month, we would have to build 40 or 50 J-models [Allegros.] It didnt cover the overhead and it just didnt make sense.

The J-model is a product that had its time, but unfortunately, the time has passed.

How about the 252/Encore? It was recently re-certified then just as quickly dropped from the product line.

The 252 was and is a great product. When the previous management brought it back, I think they saw a niche for it. But the niche in that market is at a price point a heck of a lot lower than we were selling it for. We have found that buyers who want top-end performers are willing to spend the dollars for the Bravo.

A big driver here, too, is getting the commonality of the long-body airframe. Youre setting up machines in the shop now for basically one airframe. With both the short body and the long, the build times were up over 4000 hours.

With one airframe, you shrink your cycle times and you get your inventory turns up higher. The entire economic argument against the short bodies was just too strong.

How about the J-model for a low-cost, high-performance trainer?

Thats something we have discussed. Is there demand there and if so, at what price? Can you get the economics to do a limited run? We just don’t see it right now for the J-model. But it could happen sometime. I think the Eagle is more likely.

We do see an advanced training requirement of some sort, not just for piston airplanes but for turbines, too. If you look at the military now, for every two pilots theyre training, theyre losing three.

There are significant pilot shortages. Delta Airlines and other airlines are talking about starting their own internal training programs and these are going to require airplanes, so the demand for advanced trainers may be good in the long term.

While Mooney hasnt had the four-place, high performance market entirely to itself, it certainly has dominated the field for the past decade. How do you see the Cirrus SR20 and Lancair Columbia shaping up as competition?

We don’t see Cirrus as being a contender, really, at any point and Lancair still has to overcome issues related to marketing and production.

Were not confident that theyre going to perform to the degree that they need to to achieve a market presence. So for us, its not so much seeing them as competition as it is redefining our own product line and offering better value for the money.

In soft times, typically, weve found that the wealthier buyers are always there for the high-end products. The Ovation, for example, has had a considerable price increase but continues to sell well.

And now were going to provide a performance increase on that airplane commensurate with the price and offer the Eagle for the entry-level market. Then weve got to consider the next product.

And what will that be?

We have begun the preliminary feasibility study and we think the airplane will be a four-place pressurized design. We havent defined whether it will be a composite, metal or a hybrid of the two. But its a product that will certainly have more performance and cabin room than the Bravo.

Wed like to get the tail on the right way and make it look like a Mooney. Were not interested in making a 301 or something that looks like a Beechcraft. We don’t see it being a six-place design, either.

Will it be turbine powered?

Right now were still talking piston engines. The turbine option isn’t all that attractive. The PT-6 isn’t an option in this airframe, although supposedly Garrett is working on a new-generation turboprop.

And, of course, youve got Williams out there working to sign up anyone they can. [Under a NASA grant, Williams International is developing a lightweight, inexpensive turbofan engine.]

Do you think Williams will deliver on the cheap turbofan and if it does, will the single-engine jet be the airplane of the future?

Theyre going to need significant economies of scale to get that thing down below $100,000 per engine. Hopefully, its something we can see in the 10-year range, but I don’t think were going to see it in the five-year range.

As for the cheap single-engine jet, look at what happened with the Vantage program. Theyve got the whole thing scrapped. The Vantage has obviously fallen short in the market. Theyve spent a lot of dollars achieving nothing other than a lot of hype.

Can a small company like Mooney afford the capital for a major project, such as a clean-sheet jet design? And is the market potential there to justify it?

The thing youve got to remember is that the single-engine turbine is a different market segment; its the owner-flown versus the professionally flown airplane. The length of trip is what matters.

On a 200-mile trip, better and more reliable piston engines can work better than turboprops. On longer stage lengths, the turbines all weather capability begins to make sense. But right now its one extreme or the other and the options for turbines in the light market just arent there yet.

As for the investment, its considerable. Look at Pipers Meridian program. Thats a $13 million project thats basically certification of an engine thats already been around. A clean sheet-design with a new engine, I would think youre probably going to spend $30 to $50 million plus. If you could do it for $30 million, that would be impressive.