Aircraft

US-based wheel and brake manufacturer K&F Industries is a prime example of a company thriving on its aftermarket business, writes Helen Massy-Beresford. Many of the companies ranked highest by profitability are to be found in mechanical aftermarket-rich sectors of the business, and this year K&F has found its way to the top of the table.

The company is a major player in two key markets for the wheel and braking systems that make up the bulk of its business - business aircraft and regional jets. Present on all Bombardier regional jets, K&F's Aircraft Braking Systems (ABSC) subsidiary has also secured a place on Embraer's large regional jets. "The regional jet market is the most attractive for wheel and brake suppliers because of the frequency of landings," says chief executive Ken Schwartz.

Another key market will be very light jets and K&F has already won significant contracts, with ABSC chosen to supply wheels, brakes and control system for Embraer's Phenom 100. "Our strategy is to expand further into that area," says Schwartz. "We will be a leading player - not the only player."

The company's tight focus also contributes to its success. Schwartz says the company is focused on the wheels and brakes business of ABSC, while the Engineered Fabrics division, which makes fuel tanks and de-icing equipment, accounts for less than 10% of revenues. ABSC earns the most of its revenue from the civil market, while the reverse is true for the smaller business segment.

K&F's Ken Schwartz believes very light jets will be a key market

Across the company, still in 86th place after posting sales of $384 million in 2005, Schwartz says: "We do not have multiple positions on the aircraft. We focus on the high-cycle jets. That's the strategy we've been implementing for 10-12 years." With a presence on all of the Canadian manufacturer's regional aircraft, "if Bombardier were to launch a new programme we would be well positioned to aggressively push to be a supplier", he says.

Although it may not account for a large proportion of K&F's total revenues, high levels of US military spending are bolstering the company's profits. A shift in focus from procurement to supporting and upgrading existing systems will "play into K&F's hands", Schwartz says.

While the company has benefited from the growth in business aviation in recent years, indications that this sector could have peaked are doing nothing to dampen Schwartz's confidence. The company's "extremely oversubscribed" initial public offering a year ago demonstrated the financial community's confidence in K&F, he says. "The markets were very supportive - it reaffirmed the strength of our business model."