Ontic's Rapid Expansion In Resupply
Most aging airframe stories these days have to do with high-priced avgas and airframes sent to the desert. But Ontic Engineering, a Southern California parts and components re-manufacturing and service specialist, is seeing its business expand by keeping “mature” airplanes flying, even through a recession.
In 2006, the now 37-year-old company had $30 million in revenues, based on acquiring the intellectual property rights to mature product lines, when it was purchased by BBA Aviation, says President Peg Billson. With a capital infusion from the privately held BBA, Ontic began an aggressive buildup of its licensing agreements to manufacture, engineer, sell, distribute and provide service and support of parts and components for aging airframes. By 2010, revenues had grown to $120 million.
“Our goal is $400 million in the next 2-3 years,” says Billson, who was Eclipse Aviation’s chief operating officer until joining Ontic 18 months ago.
Ontic’s licensing agreements predominantly cover components for aging U.S.-based aircraft, although the big push now is to acquire rights to keep parts and components for European suppliers in circulation. Military sales are predominantly made directly to U.S. services or through the Pentagon’s Foreign Military Sales office, but they also include the U.K. Defense Ministry. They support everything from early F-15A/B fighters, CH-47s, KC-135 and C-130 tankers to Patriot missile launchers. The C-17 may not seem “old” but it already is being supported by Ontic’s license-manufactured components.
The company’s business base opens after an airframe has passed through the initial years of its maturity in the market, when OEMs already have harvested early aftermarket sales. As fleet sizes and utilization rates diminish, Ontic steps in. At this point, with only sporadic demand, OEMs are likely to be ready to step aside from the high cost associated with small-lot manufacturing.
“As they go out of the business, we go into the business,” says Billson. “We ensure the availability of [OEM]pedigree parts to the end user for the long-term.”
While OEMs may shun the expense of keeping large inventories of obsolete parts, a warehouse with the hard-to-find is Ontic’s stock-in-trade.
Turbomachinery, engine and auxiliary power unit components, landing gear, fuel-measuring systems, electromechanical actuators, heat exchangers, emergency oxygen systems and hydraulic/pneumatic/fuel valves, actuators and fluid controls form the basis of Ontic’s product offerings. But a hefty portion comes from the repair and overhaul of engine and environmental controls, wireless smoke-detection systems and airborne radars for military and commercial customers. “As time goes by, fewer people know how to solder a resister board,” Billson says. Because Ontic’s 300-plus employees include technicians who do, electronic box repairs bring in $10 million in annual revenues.
Distribution is provided through listings with major service providers such as Aviall and ILS, but Ontic also maintains direct contact with major users of older airframes.
While Ontic’s business model rests primarily on acquiring licensing rights, for which it pays the OEM royalties, the company also directly buys manufacturing rights.
Military airframes account for 40% of Ontic’s revenues, with business aircraft and commercial transports and freighters accounting for 30% each.
The company holds roughly 100 licenses to manufacture 4,500 part numbers from Tier 1 suppliers, including GE Aviation, Honeywell, Goodrich, Hamilton Sundstrand, Moog, Crane Aerospace & Electronics, Eaton, Parker, Meggitt and Curtiss Wright Controls.
Ontic’s base is at Chatsworth, Calif., but its agreement to acquire GE Aviation Systems’ legacy fuel-measurement business, originally Smiths Aviation, will open a management operation in Cheltenham, England where the old Smiths business is based, and brings with it access to legacy platforms from Airbus, Boeing, Eurofighter, AgustaWestland and BAE Systems. Ontic is developing a site in Singapore to support the new fuel-measurement work.
Ontic also operates a maintenance, repair and overhaul business at Houston’s Hobby Airport, primarily to support Hawker business jets.
Billson says she faces little competition from the makers of Parts Manufacturer Approval parts because PMA providers concentrate on higher-turnover products.
As expansion boosts employment, Ontic is not having trouble attracting talent, Billson says. About 70% of her employees come from other aviation companies. And Ontic is not burdened with a graying workforce. “We have all age demographics,” she says.
SOURCE: Aviation Week & Space Technology Jun 06 , 2011
by: Michael Mecham
Printed headline: Opportunities in Obsolescence