Design rules in Italy, which means its GA manufacturers fare best in niche markets. But is there enough business to keep production lines turning over?

VulcanIt is not hard to see the appeal of the Piaggio P180 Avanti twin turboprop. Its clean lines sweep from the canard foreplane, curving back along its cigar-like fuselage, to the rear-mounted pusher engines. Other manufacturers’ efforts look clumsy by comparison.

Such is true of much Italian style; tailors everywhere try in vain to match the cut of Milanese suits; expensive sports cars producers around the world fail to match the elegance and speed of those made in Italy; and the well-heeled return to Turin time and again for Italian interiors.

It is this innate design flair that provides Italy with many of its world-class luxury goods brands. But flair has a price, and so Italian companies sit best in a niche, rather than mass, market. This is equally true in aerospace, with those companies outside the protection of the Finmecannica empire having to compete on quality rather than price. Italian business aviation manufacturer Piaggio is thriving and there are signs that two other independent Italian general aviation companies, Vulcanair and Iniziative Industriali Italiane (III), may too be seeing signs of revival. All three have looked to export orders for growth. If III and Vulcanair are to succeed, they must follow the example of Piaggio and play up Italian strengths, says Massimo Isidori, senior vice-president commercial for the P180 at Piaggio.

Attractive drawbacks

But customers can be put off by the design, which draws admiring looks, but not always purchases. Isidori says the P180’s entry into the market was too early. “Operators love innovation, but they buy conservatively,” he says. The aircraft’s appeal in the USA lies in its speed, which approaches that of a jet, and its large cabin.

Usually competing against the smallest Cessna CitationJets and the Raytheon Premier I light jet, the P180’s maximum cruise speed of 398kt (737km/h) beats the CJ1’s 381kt and almost matches the CJ2’s 413kt. The Premier I is much faster at 460kt, but suffers a 30% fuel penalty, which with the current high fuel prices is a major influence. A planned engine upgrade will further enhance the Avanti’s appeal, with the Pratt & Whitney PT6-66B replacing the -66 by the end of next year. The -66B has more power, producing 1,630shp (1,215kW) during cruise as opposed to the current 1,450shp, which could close the speed gap even further, says Isidori. There is speculation that the company is considering a jet version, but Isidori says no decision has been taken on future projects.

Until Piaggio makes that decision, it is almost a one-product company – its other significant offering is the P166 surveillance aircraft for government agencies. Its reliance on one product makes some auditors at US corporate customers nervous and they believe the company needs to be more financially robust. This problem is partly solved by the Ferrari automotive family, which is linked through equity to Piaggio and helps convince some doubting corporate flight departments of the company’s financial stability, says Isidori.

Piaggio is undergoing a purple patch five years after launching subsidiary Piaggio America. North America now accounts for 60% of sales and the company has an order backlog of 70 aircraft. This is a turnaround from its dark days in the mid-1990s, when Piaggio produced one aircraft a year to fill a semi-subsidised government contract. Since it restructured in 1998 with its focus on sales in the USA, fortunes have revived. By 2003 it had a backlog of 24 aircraft when other manufacturers were seeing sales figures slide.

Tom Appleton, Piaggio America chief executive, believes the credibility “hump” has been cleared, as this month the manufacturer delivered its 100th civil aircraft. This has been backed up by strong fleet orders, such as the 29 aircraft for Teterboro, New Jersey-based fractional operator AvantAir. As a result, the Genovese workers are being asked to ramp up production from 20 Avantis this year to 26 next year and 30 from 2007.

Niche player

Yet those numbers still place Piaggio in the niche player ranks. Despite wanting to cement a reputation as a major manufacturer, the company has no plans to expand and slug it out with large Canadian, French and US manufacturers product for product. “We are in a niche on our own because we have a product that no-one can replicate,” says Appleton. Isidori adds: “We don’t think we’ll ever be a big player like Cessna, but we want to grow our segment of the market.”

To expand, the company must attack markets outside its current European and North American sales base. “There are markets such as Brazil, the Middle East, India and China that look attractive and we’ll study opportunities,” Isidori says.

Meanwhile, in Naples, Vulcanair is steadily selling around 10 P68C piston twins a year, or one-fifth of its maximum capacity. Director of sales Remo De Feo says sales could increase once its long-planned diesel-engined variant is in production. An improved spare-parts distribution network in its key export markets of Australia and the USA will also help sales, he adds.

Such small companies face hurdles, not least at a time when all manufacturers are increasing production, placing demand on suppliers. The fear is that smaller companies come further down the pecking order when it comes to the supply of components, systems and even raw materials. “We cannot compete with a company making 250 aircraft a year; it’s a different leverage in the marketplace,” says Isidori.

Piaggio’s reason for not advancing more quickly to the Genoa plant’s theoretical maximum of 40 aircraft a year is twofold: Italian labour laws make it hard to expand and contract workforces quickly; and the supply chain is weighted in favour of big companies. “Of course there is a difference in size; when Finmecannica talks to a supplier it’s not the same as when we do and we’ve suffered in the past from being smaller,” says Isidori.

De Feo says: “Small companies don’t have much say – the interests of the large state-owned companies are not the same as those of the small aircraft manufacturers.” Vulcanair makes few sales in Europe where its aircraft attract 20% value-added tax, unlike in the USA. De Feo believes there should be incentives such as tax and depreciation breaks, as in the USA, to stimulate aircraft ownership. “This should be identified as something that could be done to revive the industry. The whole general aviation community should lobby for this,” he says.

Vulcanair is pushing on with development of the P68C diesel version. There is one prototype, which has performed 45h flying and needs a further 30h before certification. The programme is using a diesel developed by French manufacturer SMA and Vulcanair is waiting for engine modifications. “We’ve taken a conservative approach on this programme; we haven’t taken any orders yet and we won’t until it is fully tested and certificated,” says De Feo.

III is also looking for new niches with the launch of a twin-engined four-seat derivative of its SkyArrow very light aircraft. Exports to the USA have picked up since the aircraft received its special light- sports aircraft category approval from the US Federal Aviation Administration. Pacific Aerosystems is licensed to sell the SkyArrow in the USA, a move that III hopes will drive sales.

Export markets

III and Vulcanair are following the path blazed by Piaggio in looking for export markets and exploiting them. All three companies know the Italian government will not bail them out if they fail commercially – which has not always been the case. In 1993-8, Piaggio was under bankruptcy protection after splitting from the scooter manufacturer of the same name and recording disappointing sales of the P180, then closely linked in people’s minds with the ill-fated Beech Starship and a victim of poor marketing outside Europe.

During this period the Italian government ordered at least one aircraft a year to keep the production line alive until new investors arrived. This kind of indirect subsidy would be frowned upon in today’s European Union anti-state aid environment, but Appleton says the country finds other ways to support the company. “We are the last integrated aircraft manufacturer able to build and deliver an entire civil fixed-wing aircraft, so we have an emotional place in the Italian public’s heart, which translates into a lot of goodwill,” he says.

The Italian state owns 20% of Piaggio through Sviluppo Italia, the government industrial investment agency, but there is no direct financial backing. Italian government agencies, including the coastguard, civil defence force and air force, have continued to buy P180s. But Appleton says it now wins through competitive tender rather than because it is Italian. He points to sales in Canada and Poland as proof.

In its difficult period, Piaggio built other business activities: engine and aerostructures manufacturing. These are profitable and provide stability against cyclical private aviation, says Isidori.

Piaggio’s aeroengine division makes parts for Honeywell, Pratt & Whitney and Rolls-Royce, notably as a risk-sharing partner in the RTM322 and as supplier of 28 Honeywell T55-712Es for the AgustaWestland upgraded Boeing CH-47C+ Chinook helicopters for the United Arab Emirates’ special operations command. Piaggio builds the engines under licence in a deal worth around $40 million. The division once accounted for over 70% of revenues, but strong Avanti sales have brought this down to 40%, says Isidori.

Appleton is a veteran de Havilland Canada and Bombardier executive, while Isidori worked with ATR’s sales force, but neither is willing to make comparisons. “It’s difficult to compare one country to another or even one company to another,” says Appleton, who says Italian labour laws are not as bad as their reputation. “If Airbus can ramp up production in France, then we can do so in Italy,” he says. The company has also built strong relationships with the unions.

Design key

But good design is the key advantage of an Italian plant. The Avanti would not be possible without access to Italian designers, says Appleton. Furthermore, the company would be lost if it were of a similar size in another country as Italy’s economy is made up of thousands of medium-sized companies. And, belying Italy’s reputation for bureaucracy, Isidori says the biggest administrative hurdle it faced was getting the P180 past the UK Civil Aviation Authority. The creation of the European Aviation Safety Agency means the Italian airworthiness body ENAC can issue a certificate valid anywhere in Europe. It did so last month in approving the Avanti II, a higher-gross-weight version equipped with Rockwell Collins Pro Line 21 glass cockpit. Piaggio has also recently become an EASA-approved design authority, smoothing the bureaucratic path even more.

But there are some things Italian style gives way to and one is money. The completion centre for P180s delivered in North America is Denver, Colorado-based Stevens Aviation. It was chosen because it is close to the customer, crucial when aircraft are being personalised.

Isidori is sanguine, however. “Americans have different tastes in materials and ultimately the customer is king. I’m sure that if Ferrari were asked to put in a pink interior, they’d do it.” -

Additional reporting by HELEN MASSY-BERESFORD/NAPLES

Source: Flight International