Air T, Inc.

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Air T, Inc.

3524 Airport Road
Maiden, North Carolina 28650-9056
U.S.A.
Telephone: (828) 464-8741
Fax: (828) 465-5281
Web site: http://www.airt.net

Public Company
Incorporated: 1980 as Atlanta Express Airline Corporation
Employees: 390
Sales: $79.5 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: AIRT
NAIC: 492110 Couriers

Air T, Inc., is a North Carolina-based aviation company involved in two business areas. Operations of the largest unit, Overnight Air Cargo Services, are conducted by a pair of subsidiaries, both of which perform contract deliveries for one customer, Federal Express Corporation. Flying out of North Carolina, Mountain Air Cargo, Inc. (MAC), maintains and flies a fleet of more than 60 small aircraft, owned by Federal Express, making more than 100 flights each day to some three-dozen cities in the eastern United States, Canada, Caribbean Islands, the Bahamas, and South America.

CSA Air, Inc., based in Michigan’s Upper Peninsula, also provides express cargo carrier flight and maintenance services for Federal Express, operating a comparable fleet of 29 Federal Express–owned planes, which make more than 50 flights a day to cities in Michigan, Wisconsin, Minnesota, Illinois, Indiana, South Dakota, and Canada.

Air T’s second unit, Aircraft Ground Service Equipment, does business through subsidiary Global Ground Support LLC, an Olathe, Kansas-based manufacturer of ground support equipment sold to airline, airport, and military customers around the world. Global makes and sells a variety of aircraft deicers, scissor-lift trucks used to provide catering and cabin service to airliners, and tow tractors. The company has also used its de-icing technology to produce decontamination systems for nonaviation usage. Global also provides training and support services and supplies parts for the equipment it manufactures.

FOUNDER ENTERS AVIATION FIELD: 1979

Air T was founded by David Clark, who was born in North Carolina in 1922 to a family well known in political circles. His great-grandfather was a former North Carolina governor and a U.S. senator, while his grandfather served as chief justice of the North Carolina Supreme Court. His father was mayor of Lincolnton, North Carolina, and served in the North Carolina General Assembly.

A bomber pilot who served in the Pacific during World War II, Clark earned a law degree from the University of North Carolina School of Law in 1950 and maintained a law practice for the rest of his life. Like his father he also served in the state’s General Assembly for several terms and twice made unsuccessful bids to gain a seat in the U.S. Congress.

In 1973 he made his way to Washington, D.C., albeit as a businessman, establishing David Clark & Associates to manage some property his wife inherited. He also became involved in any number of real estate development projects as far away as Alabama and Florida. In 1979 he tried his hand at the aviation field, teaming up with two other men to form Sunbird Inc., a small commuter airline that operated out of Denver, North Carolina’s Little Mountain Airport.

Sunbird barely survived, leading a hand-to-mouth existence, but undeterred Clark continued to invest in it and other aviation ventures. One of his Sunbird partners owned Mountain Air Cargo, a Denver freight carrier that served FedEx as well as other express carriers such as Emery and Purolator. For his own part, Clark began buying into M.S. Maintenance Aircraft, a small maintenance company. Clark gained control of Sunbird, MAC, and M.S. by the end of 1982, and the following year brought them together within a holding company, Hope Springs Aviation, Inc., that he ran as chief executive.

Later in 1983 Clark engineered a reverse merger with Atlanta Express Airline Corporation and took the company public. Atlanta Express had been incorporated in 1980 but by August 1982 the regional commuter airline was forced to suspend more than half of its flights, terminating service to such airports as Columbus, Georgia; Chattanooga, Tennessee; and Charlotte, North Carolina. The company began actively seeking a merger with another airline, a search that ended with the Hope Springs combination, which subsequently became Air Transportation Holding Co. Inc. In 1999 the name was officially shortened to Air T Inc.

The commuter airline business did not pan out for Clark, its failure leading to a loss of $1.3 million in fiscal 1984 for Air T. He gave up on the business and Sun-bird was divested. The freight business, on the other hand, was thriving, due entirely to the explosive growth of FedEx. MAC had performed well, and FedEx kept assigning aircraft to the company. In fiscal 1985 Air T rebounded to post a $340,000 profit.

Clark was in his mid-60s when he was involved in an automobile accident that left him a quadriplegic. Instead of retiring, however, he continued to plot the course of Air T, delegating day-to-day responsibilities to some of his top lieutenants. The company began to refocus during this time. In 1989 MAC expanded its freight business by acquiring Michigan-based CSA Air Inc, which became a direct subsidiary of Air T the following year. The year 1989 also saw Air T begin a three-year effort to divest ownership of almost all of its aircraft. It was left with three company-owned cargo planes, mostly flying a fleet of aircraft owned by FedEx consisting of Cessna single turboprop planes and Fokker twin turboprop planes.

The acquisition of CSA led to a net loss of $3.68 million in fiscal 1989, but Air T rebounded in fiscal 1990, earning nearly $400,000. The company was heavily dependent on its business with FedEx, which had the right to terminate its agreement with Air T with just 15 to 30 days’ notice. To achieve some measure of diversity and hopefully begin to become less dependent on FedEx, Air T in October 1993 formed Mountain Aircraft Services (MAS) to provide commercial and military aircraft with parts and engine repair services in both North Carolina and Miami.

In 1994 Air T agreed to move the MAC aircraft maintenance facility and a MAS repair station to the Global TransPark, a new all-cargo airport located in Kinston, North Carolina. Two years later Air T relocated operations to a new 66,000-square-foot facility at the site. The company had expected other aviation companies, as well as just-in-time manufacturers looking to take advantage of the shipping advantages, to join them at TransPark but found themselves virtually alone when they moved in. Indeed, the remotely located Global TransPark would become a disappointment and a political sore spot in North Carolina, although in the early 2000s there was still hope that the site might yet catch on.

COMPANY PERSPECTIVES

Air T Inc. operates in two industry segments, providing air cargo services to the air express delivery industry through its wholly owned subsidiaries, Mountain Air Cargo, Inc. (“MAC”) and CSA Air, Inc. (“CSA”), and aviation ground support and other specialized industrial equipment products through its wholly owned subsidiary, Global Ground Support, LLC (“Global”).

CLARK DIES: 1997

Air T’s revenues improved steadily in the 1990s, reaching $35.4 million in fiscal 1996 while net earnings totaled more than $1.6 million. Business took a dip in fiscal 1997, revenues falling to $35.1 million and net income to $1.3 million. Shortly after the fiscal year came to a close at the end of March 1997, Clark engineered an acquisition that he hoped would greatly enhance the balance sheet. Air T agreed to pay $54.8 million in cash and stock for Piedmont Aviation Services Inc., a cash-strapped Winston-Salem, North Carolina-based company that sold and repaired charter planes. Not only would Air T expand its customer base beyond FedEx, but Piedmont would likely be able to send work to sister units at the new facilities at Global-Trans Park.

Shortly after he signed the letter of intent, however, Clark was hospitalized with severe bronchitis. Soon the doctors discovered another more serious problem, an ulcer. They thought they had the ulcer under control but it began bleeding unexpectedly and, despite an operation, Clark died.

A year earlier Clark added his son, 39-year-old Walter Clark, to the Air T board of directors in the first step to groom him to one day take over the company. With his father’s death he was thrust into the role of CEO and chairman of the board. When Walter Clark earned a degree in economics from Duke University in 1984 he had already been involved with some of his father’s real estate ventures, and upon graduation he continued to develop and manage condominiums until 1990. He then went to work for the real estate interests of a family friend for several years before finding himself running an aviation company while receiving a crash course on the business from his father’s chief lieutenants.

With a new man at the helm at Air T, and one who was relatively inexperienced in that industry, Piedmont officials began having second thoughts about the sale. In truth, David Clark himself had entertained some misgivings while in the hospital, telling his lawyer that they needed to take a closer look at the Piedmont transaction. In the end, both parties agreed that the wisest course of action for the time being was to scuttle the deal.

Fortunately, Air T had an experienced management team. Just three months after the Piedmont acquisition was terminated, the new CEO and his team completed a more manageable purchase. Acting on a suggestion from a board member, George Prill, a former president of Lockheed International, Air T in August 1997 bought the Olathe, Kansas-based Simon Deicer Division of Terex, Inc., at a cost of $715,000 in cash. Simon Deicer was the world’s second largest maker of aircraft deicer trucks, its acquisition adding about $10 million in revenues to the Air T balance sheet. The business was subsequently renamed Global Ground Support LLC.

At the time, management anticipated that Simon Deicer would be just the first of a number of acquisitions, possibly outside of the aviation field, that Air T would make in a bid to become less reliant on FedEx. They did not materialize, however. Instead, the company continued to enjoy an excellent relationship with FedEx, and Global Ground Support provided a modicum of diversity. The new unit contributed $12.8 million in fiscal 1998, or 25 percent of Air T’s net revenues of more than $51 million. MAS, in the meantime, experienced nearly a 10 percent increase in revenues to $4.6 million. Air T’s net income also improved to $1.7 million in fiscal 1998.

Air T invested in new product development at Global in fiscal 1999, resulting in the introduction of three new deicer sizes, 700-, 1,200-, and 3,200-gallon versions that opened up new markets for the unit. Furthermore, Global developed a line of scissor-lift catering and cabin service trucks to become involved in the aviation ground support field, and American and Continental airlines became the first customers for these vehicles. Because the demand for deicer products was mostly limited to North America’s fall and winter seasons, the addition of ground support vehicles helped to keep Global’s production facilities busy throughout the year. The research and development expense, combined with a dip in deicer sales due to three consecutive warm winters, cut into profits in fiscal 1999. This was offset somewhat by the winning of a military contract to sell deicer trucks to the U.S. Air Force, but Air T still experienced a drop in earnings to $523,000 on revenues of $52.1 million.

KEY DATES

1979:: David Clark and partners form Sunbird Inc.
1983:: Clark acquires Atlanta Express Airline Corporation and changes name to Air Transportation Holding Company.
1989:: CSA Air Inc. acquired.
1993:: Mountain Aircraft Services (MAS) formed.
1997:: Simon Deicer is acquired and becomes Global Ground Support, LLC.
2003:: MAS is sold.

In fiscal 2000 the Air T name was adopted. MAS enjoyed a particularly strong year, increasing revenues to $9.2 million, and Global improved its contribution to $17 million, but the bulk of the company’s revenues came from its air cargo subsidiaries, which combined for the bulk of Air T’s more than $58.8 million in revenues. The importance of Global continued to grow in fiscal 2001, when sales jumped to $31.4 million, a major reason why Air T experienced an increase in revenues to $70.2 million and a net profit of $1.3 million on the year.

As it did with all companies in the aviation industry, the terrorist attacks on the United States of September 11, 2001, had an adverse impact on Air T, as reflected on the company’s balance sheet in fiscal 2002 (the year ending March 31, 2002). By posting a slight increase in revenues to $71 million and essentially maintaining net earnings, Air T enjoyed a highly successful year given the circumstances.

MAS SOLD: 2003

In 2003, Air T management decided that MAS no longer factored into its long-term plans. In order to focus its resources on its cargo and ground support vehicle businesses, the company sold MAS to the unit’s executives and a group of investors for $1.85 million. While Air T revenues fell to $56 million in fiscal 2004, net income posted a gain to $1.7 million. The next year sales grew to $70 million and net income increased to $2.1 million. These results demonstrated the wisdom in the MAS divestiture. A year later revenues approached $80 million, while net income held steady at $2 million.

Global was making inroads around the world, winning contracts in the United Kingdom and China. The unit also secured a three-year extension on its Air Force contract, supplemented by sales to the U.S. Navy. Nevertheless, the livelihood of Air T remained very much dependent on its work with FedEx. The relationship of some 20 years appeared as solid as ever. In fiscal 2006, for example, CSA was named FedEx’s Feeder Aircraft Operator of the Year.

Ed Dinger