For many failed companies, insolvency protection is a prelude to winding up, or at least a radical restructuring as costs are shed to lure a new investor. For German diesel aviation engine manufacturer Thielert - which has been under the control of a court-appointed administrator for two-and-a-half years - it has meant business almost as usual.
Founded a decade ago by entrepreneur Frank Thielert, his self-named Thielert Aero Engines aimed to propel general aviation into a new era with the Centurion 1.7. It was the first diesel engine to be certificated and installed as original equipment on major general aviation and military platforms, namely Diamond DA42 piston twins and DA40 singles, and the General Atomics MQ-1C Sky Warrior unmanned air vehicle. Touted as a green GA engine, its great boon was that it could be powered by widely available fuels such as Jet-A instead of aviation gasoline, in increasingly short supply around the world.
LIFE TOO SHORT
Although the technology was widely praised for its innovation and efficiency, the 1,000h lifetime of the engine and the warranty Thielert was forced to offer saddled the business with costs it could not meet. The administrator was called in early 2008.
Under Germany's version of Chapter 11, insolvent businesses can be run by a court-appointed administrator almost indefinitely, if creditors agree. In this case, ensuring a continuing supply of engines was vital for customers, despite most having paid for engines with warranties no longer valid.
On the surface, the period of insolvency protection has been successful. This year Thielert will produce around 350 Centurion 2.0s (the successor to the original 1.7), a similar figure to last year, and by the end of September Centurion engines had passed the 2.5 million flight hours mark. The company's workforce stands at 250 - most of them at its factories in Altenburg and Lichtenstein, in the economically challenged former East Germany - only about 30 fewer than 2008. Crucially, the engine's lifetime has been extended to 1,500h, with a further extension to 1,800h by 2013, and 310 service centres have been appointed worldwide.
This is despite the near total loss of its Diamond business after the Austrian manufacturer developed its own Austro diesel engine, and the sharp downturn in the leisure flying and basic training sectors, which has seriously affected potential retrofit customers such as Cessna and Piper. The Centurion 2.0 was recently approved for the Cessna 172.
How has Thielert survived for so long, albeit in insolvency protection? A major help - but a huge blow for operators of Thielert-powered Diamonds - was the cancelling of all existing warranties when the business entered administration, which allowed the write-off much of the debt and resumption of production.
Thielert was also effectively restructured, with a new administrator-owned entity called Centurion Aircraft Engines set up as the customer-facing organisation under chief executive Jasper Wolffson. Centurion now offers its own warranty but only on engines sold since the insolvency.
Customers split into five segments. About two in five new unit sales this year will be replacements for Centurion engines, while a further 20% will be retrofit kits replacing avgas powerplants. Unmanned air vehicle engines comprise another 20%.
Although most Diamond aircraft coming off the production line are Austro-powered, a small proportion - making up about a tenth of Thielert's business - are for customers that ask for the Centurion. The final 10% of Thielert's activities are for developmental and experimental projects such as the new Finch Aircraft Ecoflyer, the reborn Robin DR400.
There are talks with other start-up and niche manufacturers, but, admits Wolffson, the market for new leisure and training aircraft is relatively small. Although a plan to offer the Centurion 2.0 on new-build Cessna 172s is on hold, the retrofit market for the type is encouraging, he says. And the defence sector has potential. Turkish Aerospace Industries at July's Farnborough air show unveiled the Centurion-powered Anka medium-altitude long endurance UAV, being developed for the country's armed forces.
A buyer for the business is a priority, but not a pressing need, says Wolffson. Under German company law, such a long period of insolvency protection is not unusual and the search will go on for a "strong investor", he says. "We are having a lot of interesting discussions, but the time for attracting investment is not good."