Mooney's Future With Chinese Investment
Not to be irretrievably cynical, but more than any other industry, general aviation has shown itself capable of reducing even well thought out business plans to smoking rubble. And never mind the half-baked ideas. I’ve always attributed this to the fact that flying and airplanes as a concept are so intoxicating, that only the most disciplined among us can avoid having our brains turn to mush when within, say, 50 feet of an airplane.
In that context, here comes Mooney to make another run at the market after a business history best described as checkered. Mooney is the aviation equivalent of the irradiated cockroach. It has survived more bankruptcies and sales—not to mention bad management—than any other brand I can think of. The last round of Armageddon Mooney weathered was the 2008 downturn.
Now, it has been picked up by Chinese interests who pledge to enter the world market with two of Mooney’s models, the Acclaim and the Ovation. In this interview with the company’s new CEO, Jerry Chen, at the Xi’an show in China, you can gain a glimpse of where Mooney might be going. The venue is changing, if perhaps the products aren’t.
If Chen and his colleagues have fleshed out the details of the business plan, they haven’t shared them with us. But the top line idea is that Mooneys will have a sales appeal in China and thus the venerable M20 line becomes a world airplane. But are these aircraft really suitable for a world market or are we at the point where it’s time for the next generation of designs that are more efficient and easier to manufacture to emerge? Frankly, I’m voting for the latter. If the demand is strong enough, you can sell some airplanes just about everywhere, but “some” is not always enough to add up to a sustainable airplane business and if any company has proved that, it’s Mooney.
Make no mistake, the Acclaim and Ovation are as good as any aircraft out there in terms of performance and utility. But they are complex airframes with high build hours and unless the volume soars to unimaginable numbers, there’s not much economy of scale to be eked out in manufacturing riveted airframes with retractable gear. In other words, heading into the second decade of the 21st century, they’re still old school airplanes in an industry desperate for innovation.
There seems to be an all but unquestioned assumption that the Chinese airplane market is about to explode which begets a secondary assumption that buyers there won’t be choosy about price, features, complexity and operability in the way that car buyers are. This may be true. Or not. My crystal ball, such as it is, is utterly opaque on this question. But my gut tells me we’re going to be writing stories about demand in China being weaker than many first assumed and that it's taking longer to mature than anyone believed.
Stipulating that China has interested buyers and the wealth to buy $600,000 airplanes and that the airspace opens up, as we are assured it will, what does Mooney need to be a true world airplane? And world means not just China, but India, Russia, Brazil and, eventually, Africa. To me, the obvious answer is Jet A options. Both the Acclaim and Ovation are wedded to legacy Continental engines that require 100-octane avgas. In the west, no replacement for endangered leaded 100-octane appears ready for fielding and although China has its own homegrown 100-octane fuel, for how long will these exist? China is not disinterested in the lead issue, we’re told by businesses working the China trade.
Sooner rather than later, Mooney will need a Jet A option. At the moment, there’s no piston engine suitable for this. Continental’s Centurion 4.0 is likely to be too heavy and because Continental knows this, it’s clean-sheeting other options in the 300-hp range that these two airframes need. In 2008, Rolls Royce and Mooney signed an engineering agreement to fit the RR500 turbine into the long-body airframes. A few months later, the downturn iced that idea.
And now we get to the bright side of this deal. If the Chinese buyers have lots of capital—and we always assume they do—they can get that Rolls project re-heated while also putting some developmental energy into Jet A pistons so the line will have some engine options other than reliance on 100-octane gasoline. If you pencil in a new model onto the to-do list, you can come up with a hundred million in capital requirements, if not more. It’ll take some volume to return that kind of investment, which explains why it’s often more practical to squeeze what you can out the existing technology and take profits—or survival—where you find both. Of course, we’re also told that at some level, Chinese aviation companies care more about building industry and infrastructure than short-term profits. Who would argue that light aircraft manufacturing has proven fertile ground for foundation businesses in which profit hovers over the horizon?
Bright spot two is turning the lights back on at Kerrville. This alone is positive news. It may make new models available again domestically and Mooney can always find some buyers for what it builds. That’s made easier by having a financial benefactor with deep pockets. With the factory perking, people answer the phones, the parts chain improves, used prices stabilize and the outlook is just altogether better. Oh, and we’ve gotten to the point in the global economy where we can stop ringing our hands about the Chinese snapping up another American company. That’s the way the world works now and we should just get used to it.
So personally, I’m okay with the sale of Mooney to a China-based company, but only if it pulls in some investment to get the company to the next stage. Let’s just see if that happens.