High-Performance Aircraft Manufacturer

The Client

The client is a globally recognized luxury boutique Manufacturer of High-Performance General Aviation Aircraft. The Company has a single manufacturing facility. The client brand is a storied franchise, with each airplane being hand built by skilled craftsmen. The Company’s airplanes are sold worldwide through domestic and international dealers and, in some markets, direct factory sales.

The Challenge

The client had experienced a steady decline in sales over the past few years, and it had been operating in a cash negative position for more than two years. The Company did not have control of its manufacturing costs, and there was little understanding of the Company’s business problems and changes needed in the various functional areas. There were voids in the Company’s senior leadership, and the Board of Directors and parent company were in need of counsel and direction regarding a go-forward strategy.

The Solution

Phoenix was engaged to provide an interim CEO, and later an interim CFO, to lead the business, provide a turnaround strategy, and implement the changes needed to support the strategy. All aspects of the business were analyzed, including assessing the market for the Company’s aircraft, its distribution strategy and channel management issues, the internal operations and manufacturing processes, the methods for capturing, reporting and managing its manufacturing costs, the competitive landscape, the product attributes required to update its aircraft, and the strengths and weaknesses of the key management personnel. Within three weeks of assuming the CEO role, a near term strategy was presented to the Board which included a breakeven analysis. In addition to specific recommendations, this report defined the fixed vs. variable costs, the related variable margins, and clarified for the Board and management the level of business required to operate at a cash breakeven.

During the engagement, the general aviation industry fell victim to the same economic malaise that had affected most other upscale discretionary consumer products, such as yachts and recreational vehicles. There was an unprecedented rapid downturn within the industry, exacerbated by a decline in the global economy, and a loss of inventory financing by some of the Company’s key dealers. A strategic plan was developed to preserve the business and to better position the Company for a strong rebound when market conditions improve. This plan included a hibernation period to minimize the cash burn while maintaining key customer support and parts supply, as well as other key functional strategies for the Company when it emerged from the hibernation period, which was anticipated to be nine to fifteen months. The hibernation plan was successfully implemented with the expectation that the Company will emerge with a stronger management team, strategic direction, and disciplined financial operations process.