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S-TEC On Its Own

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Corporate buyouts, mergers and acquisitions are frequent features on the global business landscape. When one is announced, the press releases babble on about how “market synergies” and “leveraged branding” will soon make the customer experience a veritable orgasmic cornucopia of products and services and competitive prices. The reality is that when big companies buy little ones, they sometimes don’t know why they’re doing it or they don’t have a thought-through business plan (or any business plan) or they just change their corporate focus and move on to something else.

Rare is the conglomerate that understands niche markets.

With that as the context, I wasn’t unhappy to hear two weeks ago that S-TEC, which can fairly be called the dominant retrofit autopilot manufacturer, had been spun off from Cobham plc, which acquired it in 2008 to add to a portfolio that included Chelton Flight Systems. From the admittedly selfish point of view of a journalist trying to cover the company from the outside looking in, I was never much impressed with the Cobham buy. Cobham is an aerospace conglomerate that draws most of its revenue from defense and commercial aerospace. It’s a $3 billion plus giant; S-TEC was a $38 million buy in 2008. Given the margins in general aviation and the slack market, I never saw how Cobham and S-TEC were a good fit. When you walked into the booths at trade shows, you were just as likely to encounter a friendly Brit who knew more about IR pods for Harriers than someone who knew where to find the best ribs in Mineral Wells. While S-TEC evidently enjoyed a degree of independence within a larger whole, survival in GA manufacturing of any kind requires a recalibrated business sense not necessarily in abundance in corporate board rooms. The closer the management is to earth, the better.

And that’s evidently the direction S-TEC will go, now that it has been separated from Cobham and combined with Chelton into a new company called Genesys Aerosystems. It’s not lost on me that the new management resisted the allure of using the word “aerospace” instead. Whenever we call a company with aerospace in the name, there are usually three layers to hack through before getting to the person who promises a callback that we know will never come. In short, smaller companies are simply more nimble, more responsive and more attuned to the markets they serve. And that, according to Roger Smith, formerly of Cobham, but now Genesys’s new CEO, is where the company hopes to go.

I spoke with Smith just after the buyout and asked him what’s on the to-do list for Genesys. First, wisely, they’re not changing the product names, which is a good thing because S-TEC has such broad product recognition. Second, says Smith, they want to grow the autopilot line to include the upper end of FAR Part 23 aircraft and the lower end of Part 25 airframes. Note that S-TEC just announced a huge sale of more than 200 helicopter autopilots to Air Medical Group Holdings, which holds a group of EMS companies. S-TEC stands alone in providing autopilots for this class of helicopter.

On the fixed wing side, S-TEC is dominant in the retrofit market because its products have been affordable for a long time and the list of approved aircraft is a long one. There’s not much competition, either, because BendixKing and Garmin don’t have meaningful presence in retrofits. Like S-TEC, Century holds hundreds of approvals and although still active in autopilot manufacture, it hasn’t marketed aggressively for years. Avidyne is making inroads with its DFC90 digital product, but only S-TEC has a true budget intro model in the System 20. S-TEC has marketing momentum that Smith figures it can build on.

On the EFIS side, Genesys has Chelton Flight Systems, which pioneered the highway-in-the-sky concept with its FlightLogic display. I flew that system in 2006 and liked both the display and the operating logic. But on the OEM side, Chelton never made much progress against Garmin. It’s tantalizing to hope the new company will push its EFIS into the retrofit market, but Smith says that’s unlikely to happen. Other companies, he says, are doing that well—chiefly Aspen—so Genesys will stick with what it calls special mission applications; small fleets and specialized aircraft that other companies aren’t tending to. But no EFIS effort for widespread light aircraft GA. That’s a disappointment. I’d always hoped the FlightLogic would find a wider audience.

As for autopilots, S-TEC has done well on what Smith calls “re-lifeing” older airplanes and given that sales are recovering from the dismal days of 2010, the timing of the new Genesys couldn’t be much better. S-TEC has a new autopilot under development for larger aircraft and I won’t be surprised to see more energetic marketing of its products for the Cherokee set.

That this is critical to GA should be obvious. Anyone stuffing twenty grand worth of new boxes into the center stack is likely to want an autopilot, too, either a new installation or an upgrade of an old Cessna or Century system. And now the FAA and NTSB have found religion with regard to addressing loss-of-control accidents, autopilots ought to have a starring role. And if the FAA puts its money where its mouth is regarding relaxed regulation in certifying and installing these systems, maybe we can get more of them in the airplanes that need them.

But whether that happens or not, I think the Genesys buy is good for GA. It’s probably unfair to say Cobham was holding S-TEC back, but in my experience, when a big company owns a little one, the mothership seems always to be occupied by frying whales instead of minnows. Or maybe trout, if that’s what general aviation has become. Sticking with my fish analogy, here’s hoping to seeing some new species from S-TEC. 

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Comments (10)

Dave, Jason, Rod, Gary, Richie, somebody say something. Clear left, clear right....OK, six years ago I installed an S-TEC 30 in my C172 trainer and it is still ticking. It is a dependable and easy to use system quite suitable for the retrofit market. I agree with Paul's deductive reasoning.

Posted by: Rafael Sierra | May 4, 2014 5:44 PM    Report this comment

I'm a bit skeptical of the "new regs will make everything better" ever since you reported on Pipistrel losing a bunch of knots on the Panthera because the regulators wouldn't let them bury antennas in the fuselage. If that wouldn't be allowed to go ahead, what hope is there for more complex systems?

But in theory, if the kindler gentler regulations do really help, do you see TruTrak or Garmin getting into the certified retrofit autopilot game? S-TEC is alright, but there's really no comparison between a System 20 or 30 and Garmin's attitude-based autopilots.

Posted by: Joshua Levinson | May 4, 2014 8:39 PM    Report this comment

Something. Paul's destructive seasoning is always agreeable.

Posted by: Jason Baker | May 5, 2014 5:09 AM    Report this comment

Like you, I remain skeptical that the CS23 initiative will have measureable economic and market impact. So far, all talk and talk is cheap. It's not clear to me that the FAA, at the field level, gives up one iota of power, influence or control. Bureaucracies have never worked like that, why are we to assume they are about to start?

I think Garmin is betting on the come and will be ready if it proves practical to market its experimental autopilot to the certified world. That's a good thing if it comes to pass. Same applies to Dynon and TruTrak.

Posted by: Paul Bertorelli | May 5, 2014 7:21 AM    Report this comment

Garmin has understood the "market" they are in even before they begin and they continue wisely. However, as they grow their smaller market segment, we shrinking light GA, become less profitable, less attractive, therefore less important thus Garmin's betting on the come. Garmin does not need CS23 reform to stay in business - the experimental OEM lot do.

Posted by: Rafael Sierra | May 5, 2014 7:55 AM    Report this comment

About 5 years ago I had an opportunity to purchase a used Stec-50 autopilot from another individual who had the same aircraft model and type as mine. The guy was upgrading to a more sophisticated Stec autopilot. Well, being excited about this great opportunity I called Stec and asked for a installation kit. Boy, what a shock. I was almost given the third degree and how dare I even think about putting a used autopilot of the same make and model of my plane into it. No was the final answer from Stec. I couldn't do it, won't be allowed to do it, and I better not do it. Money was not the object, it was their straight out refusal to sell anything much less transfer the STC.

Then an amazing thing happened about six months later. That policy was rescinded and I received a couple of calls from dealers willing to work with me on a used autopilot. Sorry guys, you lost a potential customer.

In my opinion, this lack of concern for customers by all of the certified manufactures of autopilots and also led by the FAA's unwillingness to come into the modern age by hiding behind it's own regulations has brought this segment of the market to a complete shutdown, not a standstill.

The FAA can and does change the regulations for their convenience. These certified autopilot manufactures have regulated themselves out of business and now they want to get back in. I'm sorry, I don't want there products when I can go to the homebuilt side and get a better equipped and more reliable autopilot for one tenth the cost. Until Stec can compete with the homebuilt crowd the new management team has just wasted a whole lot of time and money for a dead market.

Posted by: Jeff Aryan | May 5, 2014 10:25 AM    Report this comment

Compared to the Bendix/King autopilot I've used (a KAP 120, I believe - whatever Cessna installed in the G1000 172s before Garmin had an integrated autopilot), I found the Stec 55/55X more user-friendly. I've never flown behind an Avidyne or Garmin autopilot, but I like what I've seen with the Avidyne. Unfortunately, it's not available for the PA-28 series (at least, not the ones I fly), so there's really only one option for me anyway: an S-TEC model.

It's interesting to note that S-TEC seems to rely almost exclusively on rate-based autopilots (I believe they make one attitude-based model), while all of the other ones I know of (Garmin, Avidyne, B/K) are attitude-based. I wonder if S-TEC will now also start making attitude-based autopilots.

Posted by: Gary Baluha | May 5, 2014 12:02 PM    Report this comment

"knew where to find the best ribs in Mineral Wells."

That would be the Mesquite Pit on Hwy 180 just east of the field.

Posted by: SHANNON FORREST | May 5, 2014 2:56 PM    Report this comment

Rafael, I don't think the experimental market needs the Part 23 reform to stay in business--they're doing just fine as it is. Van's alone will keep Dynon, GRT, etc. in business. It's the low end of the certified GA market that needs it, since the current old fleet can only linger on so much longer, and $400k for a decades-old airframe like a C172 or Archer is unsustainable, and laughable.

Posted by: Bob Martin | May 6, 2014 5:33 AM    Report this comment

I have two Chelton boxes and an S-Tec 55 in my aircraft and was very concerned when Cobham came along and stated they were going to change the names of the products. Really.......... your going to trash decades of great customer service just to put another feather in your hat of a zillion feathers!? I was very vocal about the insanity of it on the Chelton boards and six years later it finally sinks in through the heavily feathered hat.

My nine year old boxes are still providing great service and that FlightLogic system in the Chelton is a thing of beauty. It is sophisticated simple technology that is well honed and works great. Chelton made bad moves that endangered the experimental market, but Cobham came in and drove a stake through the heart of the whole GA market.

It was an opportunity wasted, and the executive who decided it was a good idea to shout down from the tower to change the branding should be fired. If only they would have put their ear to the ground as Paul said and listened to those in the existing companies and asked what do you need to grow your brands. S-Tec was already doing a great job and could have developed a very competitive all digital product which the 55X was already breaking into. Listening instead of dictating and putting RD cash in the right places would of made a great difference.

I think it just shows we should all try to get into the defense industry. Apparently you do not have to have much business sense to do well there. It appears to be an industry where customers who know little about what they are buying pay way too much and are satisfied as long as it does not surface on the evening news.

Posted by: robert lee | May 6, 2014 1:25 PM    Report this comment

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