Mooney Aerospace Group Ltd.

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Mooney Aerospace Group Ltd.

3205 Lakewood Boulevard
Long Beach, California 90808
U.S.A.
Telephone: (562) 938-8618
Fax: (562) 938-8620
Web site: http://www.mooneyltd.com

Public Company
Incorporated: 1989 as Advanced Aerodynamics & Structures, Inc.
Employees: 150
Sales: $11 million (2002 est.)
Stock Exchanges: OTC BB
Ticker Symbol: MASG.OB
NAIC: 336411 Aircraft Manufacturing; 541710 Research and Development in the Physical, Engineering, and Life Sciences

Mooney Aerospace Group Ltd. (MAG) is the holding company for the Mooney Airplane Company, maker of high performance single engine aircraft. Before 2002, when MAG was called Advanced Aerodynamics & Structures Inc. (AASI), the company had spent ten years attempting to bring an advanced business aircraft to market. The innovative but ill-fated Jetcruzer project was a textbook example of the technical and regulatory challenges inherent in such an undertaking.

AASI acquired Mooney in 2002, and soon renamed itself after the venerable manufacturer. Mooney had been making planes, with distinctive swept-forward tails their trademark, since the 1950s. Their efficiency and high performance earned them a reputation as the sports cars of the general aviation industry. In 2002, Mooney had three lines of aircraft, Eagle, Ovation 2, and Bravo, which sold for up to $500,000 each. The company had produced more than 10,500 aircraft since starting production in 1953.

Origins

Albert W. Mooney and his brother Arthur both learned drafting skills from their father, who built railroad trestles in the West. Al, a self-taught aircraft designer, began working at Colorado’s Alexander Aircraft in the mid-1920s. In 1929, he formed Mooney Aircraft Co., but it foundered in the Great Depression, selling just one plane, called the M-5.

Al then worked with a number of pioneering designers in the nascent aviation industry, including Giuseppe Bellanca and Knight Culver. The Mooney brothers founded Mooney Aircraft Company in Wichita, Kansas, on July 5, 1946, with financial backing from Charles “Pappy” Yankey and W.L. McMahon.

The new Mooney Aircraft’s first product, the Mooney Mite or M18, first flew in 1947. It was a one-place aircraft with wooden wings and tail. Like the designs to follow, the Mite featured Mooney’s trademark swept-forward tail.

In 1953, Mooney moved to Kerrville, in the Texas Hill Country, drawn by good flying weather and the Mooney family’s own dairy farm. There was also a good supply of skilled workers in the German immigrant population. The four-person Mooney M20 first flew on August 10, 1953, and was certified in 1955. The M20C, rolled out in 1962, was Mooney’s first all-metal plane.

After the death of Charles Yankey, Hal Rachal and Norm Hoffman took over the company in September 1955. Both Al and Art Mooney left the company to work for Lockheed.

The Kerrville plant was producing 760 planes a year at its peak in the 1960s. However, it would soon come to a halt. Mooney underwent a bankruptcy filing in early 1969, and was soon acquired by American Electronics Labs. Later in the year, it was sold to Butler Aviation. It was renamed Aerostar Aircraft Corp. in 1970. The company ended production in 1971. A few years later, Republic Steel acquired the company’s tooling and rights to the Mooney name and designs, and production soon recommenced.

The Mooney 201, based on the previous Executive model, was introduced in 1977. Its aerodynamic refinements raised its top speed to 201 mph, hence the name. It was considered the most efficient non-turbocharged piston engine aircraft in general aviation. The Mooney 201 had a reputation for efficiency, achieving up to 20 miles per gallon. It sold for an average equipped price of about $124,000.

The number of derivatives of Al Mooney’s basic design continued to multiply. The fuselage was extended to produce the company’s mid-length, or “Renaissance” models of the 1970s. The mid-length 201 was further refined to produce the 205. The 252, later renamed M20K, was a turbocharged variant.

Mooney in the 1980s

As the general aviation market slowed, Mooney introduced a couple of creative financing options. In 1980, Mooney brought out its Retail Interest Assistance Program (RIAP), a way of knocking a few points off interest charges at a time when the prime rate was 20 percent. The Rapid Equity Accumulation Plan (REAP), introduced two years later, was a fixed payment plan whose number of payments was determined by changes in interest rates.

In June 1984 Mooney Aircraft, which had been controlled by Republic Steel Corporation since 1973, was subsumed by LTV Corporation, which had just merged with Republic. Mooney Aircraft President Roy Lopresti soon led a management buyout. LTV sold the Mooney Aircraft Corporation to newly created Mooney Holding Corporation in August 1984. Euralair, a French air charter operator, soon acquired Mooney, which was renamed Mooney International.

In the mid-1980s, Mooney introduced three new high-performance, four-place models: the 201LM, the 252 (four-seat), and the 205. While other manufacturers were scaling back or suspending production of piston engine aircraft, Mooney’s 1986 deliveries were up 55 percent to 140.

Mooneys have been called the sports cars of the general aviation industry, and the M20L, brought out in 1988, helped strengthen that association. This was the first “long body” Mooney, and it used an engine derived from the Porsche 911. In early 1991, Mooney introduced its bid for a two-seat aerobatic Air Force trainer. Only one of the planes, dubbed the M20T, was ever built.

Mooney International entered a partnership to build a new $1 million high-performance business aircraft with Socata, an affiliate of Aérospatiale, in the late 1980s. The TBM 700 was powered by a single turboprop engine. Mooney held a 30 percent share of TBM S.A., the company set up to manage the program and market the planes, and would be responsible for constructing the plane’s wings and portions of the fuselage. Final assembly lines were being set up in France and in the United States, which was expected to account for two-thirds of the plane’s sales. The TBM’s start-up costs were an estimated FFr 300 million ($54 million). Mooney bailed out of the TBM program after two years, citing a lack of financial resources. Mooney employed 300 people and was producing 12 planes a month in the late 1980s.

Mooney in the 1990s

Mooney began performing subcontracting work for other manufacturers in 1990. The work quickly grew from a sideline to account for a quarter of the company’s 1994 revenues of $26 million. By then, Mooney was making 5,500 different parts for Boeing, Lockheed Martin, Fairchild, and McDonnell Douglas. Mooney also delivered 71 of its light aircraft in 1994.

Mooney was shipping about 100 planes a year in the late 1990s, with annual revenues approaching $40 million. However, a number of factors would bring the company to bankruptcy. In December 1999, Mooney discovered that a new drilling/riveting machine had been drilling holes slightly larger than called for in aircraft specifications. This necessitated extensive inspections and reworking, costing the company up to $1 million.

Further, an economic downturn in 2001 affected sales of small aircraft manufacturers; Mooney’s high-end models, which sold for up to $450,000 each, were more expensive than other small planes, and more susceptible to such downturns than larger aircraft used by corporations.

AVAQ Group Inc., an investor group led by Paul Dopp, had acquired Mooney in 1997. Chris Dopp, son of Mooney Chairman Paul Dopp, resigned from the company in July 2001 after two years as the company’s president and CEO. A couple of weeks later, Mooney Aircraft filed for Chapter 11 bankruptcy protection. The company had furloughed half of its 230 workers. For the next few months, the Kerrville plant made only spare parts for the existing world fleet of 10,000 Mooney aircraft.

AASI: 1992-2001

While Mooney International was trying its hand at subcontracting, its future owner, a newly formed California company, was attempting to bring a new jet business aircraft to market. Darius Sharifzadeh, an aeronautical engineer and pilot, formed Advanced Aerodynamics & Structures Inc. (AASI) in Burbank, California, in 1989 to develop a plane of his own design, the Jetcruzer 450.

Taiwanese industrialist Song Gen Yeh provided $20 million to start the company. Carl Chen, former space scientist with Hughes, was picked as AASI’s president.

Company Perspectives:

Mooney Airplane Company (MAC) has a long and rich history of producing the highest performance single engine aircraft available and pioneering the Performance/Value equation. Its ubiquitous brand, the forward swept tail, is instantly recognizable at airports all over the world and helps to create its speed advantage.

Every great aviator or aviation pioneer—man, woman or company, has a story to tell. It started with the Wright Brothers, moved to Charles Lindbergh, through Glenn Curtis, Amelia Earhart, Wiley Post, Chuck Yeager and includes the legendary designer, Al Mooney.

Al Mooney created a basic aircraft design that has been market tested for over 50 years and still upholds the tradition and legacy of the highest Performance/Value equation offered in General Aviation.

The Jetcruzer 450 was canceled when company officials calculated its odds of commercial success were low. AASI then went to work developing the Jetcruzer 500, a larger, higher performance plane.

Like its four-place predecessor, the six-place Jetcruzer 500 featured a novel canard design, with a small wing in the front of the plane, and a rear-mounted engine. The fuselage was constructed of graphite composites, while the wings were made of conventional aluminum. AASI started out aiming for a sales price of $900,000 each, versus the $1.4 million that Socata was then asking for the TBM 700—another single engine turboprop.

The Stratocruzer, a twin-engine, 13-passenger version, was also in the works with a projected price of $3 million. A large cargo aircraft, the Freedom DS-888, was also on the drawing board, priced at just $1.3 million.

AASI went public in December 1996. The company used $35 million gained to build a factory in Long Beach and to develop the Jetcruzer 500. The company produced its own tooling to build the plane. According to Chen, the design tools and materials needed to build planes had come down significantly in price in the previous 20 years.

AASI claimed a backlog of 188 Jetcruzer aircraft worth $226 million in 2000. The company employed a hundred workers, most formerly employed with Northrop Grumman, Lockheed Martin, or Boeing.

Then priced at $1.6 million, the Jetcruzer was to undercut comparable aircraft by one-half. It would be capable of speeds up to 345 mph and cruise as high as 30,000 feet. However, one of the Jetcruzer 500’s main advantages was also its main problem. Mounting the engine at the rear of the fuselage produced less drag. However, it also made it more difficult to cool the engine oil.

An abortive takeover deal was announced in December 2000. Los Angeles-based Tiwenz Group, a media firm, was acquiring a 71 percent holding in AASI in a stock swap. However, AASI called off the deal within a couple of months.

Chen left the company in January 2001. Roy H. Norris, former president of Raytheon Aircraft Co., led the new management. The Jetcruzer program, which had consumed $70 million, would soon be canceled. The company’s shares were delisted from the NASDAQ in April 2001.

Purchase of Mooney by AASI: 2002

AASI CEO Roy Norris decided the time was right for consolidation in the general aviation industry, and he thought that demand would pick up due to the hassles that had come to be associated with commercial airlines. Thus, in February 2002, AASI announced the acquisition of Mooney Aircraft in a cash and stock deal worth $11 million. LH Financial, a New York investment group, controlled about 70 percent of Mooney Aerospace Group’s stock.

After acquiring Mooney Aircraft, AASI was renamed Mooney Aerospace Group, Ltd. The AASI plant in Long Beach was being turned into a service center for Mooney planes. The computerized production system was disposed of, being deemed inefficient in the production of single engine aircraft. Norris rolled back prices on Mooneys 20 percent to stimulate sales. To keep costs low, the company sidestepped its dealer network, selling direct from a handful of small offices.

Norris first stated the company was taking at least another 18 months to prepare the Jetcruzer 500 for certification. However, this program was soon cancelled altogether over significant technical problems, such as an excessive noise level and a center-of-gravity problem. Mooney announced plans to return $1.6 million worth of $10,000 deposits that had been placed on the Jetcruzer.

In May 2002, Raytheon Aircraft Co. was reported to be expressing some interest in selling Mooney its Baron and Bonanza line of piston engine planes. This would extend Mooney’s product line into six-place aircraft. However, this deal apparently fizzled.

Peter Larson, formerly chief financial officer at Cessna, became Mooney Aerospace’s CEO in August 2002 upon the resignation of Roy Norris, who had stepped down after the completion of the Mooney Aircraft acquisition.

After fabricating 100 planes a year in the late 1990s, Mooney production fell to just 28 aircraft in 2001. The company was aiming to produce around the same number in 2002 but up to 100 in 2003.

Mooney was reported to be pursuing Raytheon for sale of its Beechcraft propeller plane business, which would give the company a line of larger, six-place aircraft. It was also discussing the acquisition of rights to produce CA-100 light business jets from Century Aerospace. Norris had said he was expecting to spend $70 million through 2004 to expand Mooney.

Principal Subsidiaries

Mooney Airplane Company, Inc.

Key Dates:

1946:: Al and Art Mooney establish Mooney Aircraft Company in Kansas.
1953:: Mooney relocates to Kerrville, Texas, and begins production.
1962:: All-metal M20C debuts.
1966:: Mooney produces a record 767 planes.
1973:: Republic Steel acquires Mooney Aircraft.
1984:: LTV Corporation purchases Republic and becomes the new owner of Mooney in June; management-led buyout headed by Mooney President Roy Lopresti liberates Mooney from LTV in August.
1989:: Advanced Aerodynamics & Structures Inc. (AASI) is founded in Long Beach, California.
1996:: AASI goes public.
2001:: Mooney Aircraft files for Chapter 11 bankruptcy.
2002:: AASI acquires Mooney Aircraft, which becomes Mooney Aerospace Group.