FEBRUARY 2008: AVIATION
TAKING FLIGHT
Epic’s Victory is an experimental kit-built plane
with a base price tag of about $1 million.
Photo courtesy of Epic
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Desire for smaller, faster, cheaper planes fuels a
growing composite aircraft industry centered in the Bend area.
By Kathleen Newton
Last October, Indian billionaire Dr. Vijay Mallya — who
founded India’s Kingfisher Airlines, one of the largest
customers for Airbus — invested $200 million for a 50%
stake in Epic Aircraft, a high-performance kit-airplane
manufacturer that has been making industry waves from its Bend
headquarters.
Mallya and Epic president and CEO Rick Schrameck immediately
announced plans to build certified aircraft to feed the demand
for fast, sexy personal and corporate aircraft in North America
and Asia.
Then in late November, general aviation icon Cessna paid $26.4
million for another Bend company — Columbia Aircraft
— a bankrupt manufacturer of fast single- and twin-engine
general aviation aircraft.
For decades, Oregon flew under the radar of aerospace
manufacturing as defense contractors and commercial aircraft
firms in California and Washington led the industry. The only
players in the state were Boeing’s component plant in
Gresham and Van’s Aircraft, which produces experimental
aluminum aircraft kits at its facility in Aurora. (Experimental
aircraft is rated airworthy, but not fully certified by the
Federal Aviation Administration.) The rest of the field
consisted of parts makers.
Dave Hice, Epic general manager.
Photo by Lance Hardy
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But that’s changing as several new aircraft makers have
come to Oregon in recent years, bringing with them experience
with advanced-composite technologies. Now that experience is
placing them directly in the path of industry growth.
A composite-aircraft manufacturing cluster has blossomed in
Bend, and others are emerging in Scappoose and the Columbia
Gorge, evidence of a boom in Oregon’s $1.6 billion
aerospace sector. Although state employment officials estimate
industry jobs at fewer than 3,000, experts say that figure
doesn’t reflect the full impact of parts makers and
service companies in areas from Portland to Salem, Astoria,
Albany, Scappoose and Clackamas. Many are reporting banner
sales. (See sidebar, page 24.)
This activity, along with the recent flurry of investments in
Oregon companies, suggests that the state may be on the brink
of securing a global presence in the manufacture of
advanced-composite aircraft.
The move to composite aircraft is being driven in large part
by the rising cost of fuel. Aircraft made from composite
materials are lighter and more economical to fly. The American
Composites Manufacturers Association reports that nationally
the use of composites in aircraft is growing at a rate of 20%
annually. Helping to fuel this growth are new categories of
light jets and sport aircraft recently authorized by the
FAA.
These new aircraft also feature cutting-edge electronic
instrument systems that put enriched flight and navigation
control data at a pilot’s fingertips. As a result, the
new aircraft are smaller, lighter, faster, safer, more
cost-effective and easier to fly than in decades past.
It’s a trend that seems little hampered even by a
shortage of skilled workers and the rising cost of plant
development.
Oregon aerospace firms report record sales, plant
expansions
Although Oregon’s aerospace manufacturing
industry is still relatively small, a large number of
aircraft and parts makers are reporting significant
sales growth.
Robert Whelan, senior economist with consulting firm
ECONorthwest, says his best guess at the total
economic output of the state’s aircraft and
parts makers is $1.6 billion, based on 2006 numbers.
Many firms involved in the industry also produce
parts for other uses, he notes, so exact figures are
difficult to obtain. However, anecdotal evidence from
companies around Oregon paints a promising
picture:
• Garmin
AT in Salem, which designs and manufactures
aviation communication, navigation and surveillance
products, is expanding its facility by 54,000 square
feet. The company expects to double its 190-person
staff by 2010.
• Lektro, a family-owned
company that manufactures electric aircraft tugs,
completed a major expansion of its plant in Warrenton
in 2006. Its sales grew by 40% in 2006 and were on
track for another 40% growth in 2007.
• Precision
Castparts in Portland credits its commercial
aerospace business for a 52.4% increase in sales
since 2006.
• Composites
Universal Group in Scappoose, which makes
advanced- composite aircraft components, is planning
a 50,000-square-foot expansion in 2008. Sales have
grown at a rate of 25% to 30% annually over the past
few years.
• Pacific Cast
Technologies in Albany, which makes airframe
and engine components, plans to build a new $5
million state-of-the-art casting furnace that will
double its capacity. “We have every reason to
believe today’s booming aerospace market is
sustainable for many years to come,” says
company President Randy Turner.
• PCC
Structurals in Portland (a subsidiary of
Precision Castparts) employs more than 2,500
statewide making, among other things, structural
castings and fasteners for commercial jet engines.
Its customers include Boeing and Airbus. In November,
chairman and CEO Mark Donegan reported the company is
experiencing “a very strong, unprecedented
cycle.” In its fasteners line, he says,
“we can barely meet all the demands out there
right now.”
• Evergreen
International in McMinnville is a global
aviation services company with annual revenues in the
$800 million range. It has the contract to fly the
planes that will transport Boeing Dreamliner
components from contractors around the world to
Boeing’s assembly plant in Everett, Wash.
• Oregon Iron
Works, with 300,000 square feet of highly
diversified manufacturing operations in Clackamas and
Vancouver, is the primary supplier for the U.S.
Ground Based Missile Defense Program, builds space
launch towers and platforms, and recently helped
develop an unmanned seaplane for the U.S. Navy.
• Van’s
Aircraft in Aurora is reportedly the
world’s largest maker of aluminum kit-built
aircraft, with annual sales of $30 million to $35
million.
Kathleen
Newton
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OREGON’S NASCENT AVIATION sector until recently was
largely unknown and focused primarily on build-it-yourself
experimental kit aircraft.
Things began to change around 1990, when Lance Neibauer, a
California entrepreneur who manufactured high-performance,
kit-built experimental aircraft made from advanced composites,
let it be known he was looking for an affordable plant site.
Neibauer, who now lives in the Bend area, recalls that
officials from Redmond pestered him for months, eventually
winning him over.
“There is good flying in central Oregon,” he says.
“I decided, since we could go anyplace for our plant, it
might as well be a nice place.”
So Redmond became the home of Lancair International.
Eventually, Neibauer branched out to build certified aircraft
and founded Columbia Aircraft down the road in Bend. Its planes
— also molded from lightweight, advanced composites
— became highly coveted by performance junkies. The
Columbia 400 model, priced at between $490,000 and $600,000,
holds the title of world’s fastest certified
piston-driven airplane.
The Bend cluster grew again when Greg Cole, an engineer who
had worked for Lancair, founded Windward Performance there and
began building composite-based sailplanes. Aircraft parts and
service enterprises also set up shop nearby.
Then came Epic Aircraft.
Rick Schrameck, a turnaround specialist who had made his
fortune in Silicon Valley, had owned two Lancair planes. He
believed that U.S. general-aviation manufacturers were out of
touch with customers. So he decided to design a line of fast,
hot-looking, kit-built experimental aircraft that his customers
would build and fly. He would use his customers’ feedback
— and the kit-sales cash flow — to work out the
design kinks, and then invest that into a line of planes that
could be government certified. And he’d do it all in a
relative nanosecond, by aviation industry standards.
Schrameck engaged Lancair to help him develop his prototype
and opened the Epic Aircraft plant in Bend in February 2003.
His line eventually included both prop planes and light jets.
By 2005, Epic was already in the black.
To get around the tortuously slow process of FAA certification
in the U.S., he began working with Canadian officials in
Calgary to get his planes certified there — a process
still under way.
People took notice — among them Indian liquor and
airline mogul Dr. Vijay Mallya. He and Schrameck plan to sell
Epic’s certified airplanes to private and corporate
customers in India, where distances are vast and good roads are
not.
According to Schrameck, that market alone promises to generate
from $200 million to $400 million in annual sales. And some of
that production may be done in Oregon.
Schrameck says sales of his kit-built light jets, which are
priced in the $1 million to $2.5 million range, also are
exceeding expectations: During two 2007 aircraft shows, Epic
wrote $63 million in orders. The company plans to manufacture
30 of its kit aircraft in 2008 and has a two-year order
backlog.
High-rollers, fed up with flying commercial and willing to put
in some weeks at the Bend plant building their planes under the
watchful eyes of Epic technicians, are discovering that the
small jets can get them where they want to go fast, in style
and for not much more than the cost of a beach house.
“We are seeing that our particularly unique segment of
the market is incredibly strong,” says Schrameck.
Now flying under the Cessna banner, the former
Columbia Aircraft turns out high-performance
certified aircraft from its Bend location.
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BUT WHILE EPIC WAS SOARING, Columbia Aircraft across the street
was facing cash-flow problems. This past fall, the company
filed for bankruptcy protection after a series of problems that
included poor cost containment, inadequate productivity and a
hailstorm that damaged dozens of planes. Several potential
buyers, including composite aircraft maker Cirrus,
jockeyed to buy the assets. Cessna was the ultimate winner.
Some locals expressed concern that the sale might mean hard
times for Bend’s aviation cluster. Cessna’s
management, however, says jobs won’t be eliminated.
Cessna CEO Jack J. Pelton had been eyeing the acquisition for
at least a year. He wanted to enhance Cessna’s line with
Columbia’s two models, the 350 and 400, which are faster
than anything Cessna was building.
According to Cessna spokesman Doug Oliver, many Columbia
owners were former Cessna owners who made the switch when they
wanted to step up to high-performance planes. Cessna, whose
entire existing line was made of aluminum, was also buying
Columbia’s composite expertise.
“I’m sure we both have things we can learn from
each other,” he says.
Photos by Lance Hardy
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According to Oliver, there are no plans to move the plant
— now adorned with a Cessna sign — out of Oregon.
Its 400 employees will be retained, and more may be added.
Oliver says the goal is to increase production from its current
level of one plane a week to 200 or 250 a year, for potential
sales of $100 million or more annually.
Dave Dennis, CEO of Oregon Aero in Scappoose, says he is
preparing for a huge spike in his composite aircraft parts
business in light of the Cessna deal. Oregon Aero provides
certified seats for Cessna planes.
“We have so much explosive growth going on. The general
aviation business is really opening up,” he says.
The manager for one of Boeing’s parts suppliers, PECO,
which does $60 million a year making parts from
advanced-composite materials at its Portland plant, also sees
exciting times ahead.
“Over the past 40 years, the aircraft industry has
generally gone in 10-year cycles,” says PECO’s
business unit manager Dave Freund.
“Now it has just taken off in a new direction and I
haven’t seen much to indicate that it is going to peak
anytime soon.”
But the composite aircraft makers are still dwarfed by the
scale of Boeing’s 120-acre Gresham facility, where the
company’s 1,575 workers produce large structural
components that go into all of Boeing’s commercial
aircraft. The plant, where the rows of aluminum alloy
components look like a gleaming dinosaur bone yard, uses 308
Oregon suppliers and contributes an estimated $174 million to
the state’s economy.
Boeing, however, has no plans to grow that facility.
“This industry is cyclical,” explains plant
manager Jenette E. Ramos. “So we’re being very
careful about our growth. I’d like to think of us more as
being a stable business for the long term. We’re really
trying to improve our productivity within the confines of the
walls that we have today.”
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The Lancair plant in Redmond, started by Lance
Neibauer, was the founding company in the aircraft
manufacturing cluster in the Bend area. Lancair
manufactures kit-built experimental composite
aircraft.
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DESPITE ITS RECENT GROWTH, Oregon’s aerospace sector is
not without its potential perils.
According to Joseph C. Bartels, the new owner of Lancair,
which does about $15 million a year building airplane kits at
its Redmond plant, further expansion of Bend’s aircraft
manufacturing cluster could be hampered by rising land and
development costs.
He says he had to give up on one expansion plan because of
high land costs and planning hurdles. “There is a very
high cost of living in Redmond,” he says.
Company founder Lance Neibauer agrees.
“Bend has changed, and not for the better,” he
says “Now it’s a destination resort. You
don’t do manufacturing in Aspen.”
Neibauer says that, if he were planning to build or expand a
plant now, he would instead look to lower-cost areas.
“I might look to Baker or La Grande or
Prineville,” he says.
But experts say the greatest challenge to sector expansion may
be the scarcity of skilled workers.
“This is a new industry,” says Neibauer,
who grew his workforce largely by training his own
employees.
“We did have some composite training through Central
Oregon Community College for a while, but that went
away.”
In most cases, composite companies have addressed their labor
issues by growing their own — a process that Neibauer
says can take six months or more.
Robert Whelan, senior economist with Portland consulting firm
ECONorthwest, agrees that industry growth may depend on solving
the workforce problem.
“Frankly, if we had the people, Oregon’s aerospace
industry would be much bigger.”
Kathleen Newton is a journalist based in Tillamook. She has
been a business editor at The Los Angeles Times and owner of
two Oregon weekly newspapers.
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