S-TEC On Its Own


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 dont know why theyre doing it or they dont 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 wasnt 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. Its 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 thats 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. Its 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 Genesyss new CEO, is where the company hopes to go.

I spoke with Smith just after the buyout and asked him whats on the to-do list for Genesys. First, wisely, theyre 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. Theres not much competition, either, because BendixKing and Garmin dont have meaningful presence in retrofits. Like S-TEC, Century holds hundreds of approvals and although still active in autopilot manufacture, it hasnt 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. Its tantalizing to hope the new company will push its EFIS into the retrofit market, but Smith says thats 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 arent tending to. But no EFIS effort for widespread light aircraft GA. Thats a disappointment. Id 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 couldnt be much better. S-TEC has a new autopilot under development for larger aircraft and I wont 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. Its 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 thats what general aviation has become. Sticking with my fish analogy, heres hoping to seeing some new species from S-TEC.

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