F 
R

7
- 
9 
9

FAIRCHILD 728JET GETS BOOST FROM LUFTHANSA

The launch of the Fairchild-Dornier-728JET-Family during the International Aviation and Space Flight Exhibition in Berlin in May 1998 caused a great stir. However, experts were rather sceptical and doubted whether this program would be successful. The first break-through has now been made. On 28 April the Lufthansa Board agreed to purchase 60 728-Jets plus options on a further 60 aircraft of this jet family.

With the aircraft, which will be handed over to the Lufthansa CityLine between 2002 and 2006, Lufthansa Chairman Jürgen Weber intends to explore new growth potentials in air traffic. Especially in view of the expansion of the Munich/Franz-Joseph-Strauß Hub, the feeder services for international traffic will be increased and regional city connections within Europe will be expanded.

The German-American jets will gradually replace the regional planes, and therewith set a sign with their new travel quality in regional commercial aviation. With their improved seating comfort, standing height and luggage bins, customers are offered a "big air plane feeling", according to Weber. After Lufthansa technicians and Fairchild-Dornier engineers had been co-operating for one and a half years, the 728JET at a list price of US$26 million, will satisfy this need. With her large cabin, which is 2.05 meters high and 3.25 meters wide, and wide seats, (33 inch pitch), the 728 is according to Fairchild-Dornier Boss Carl Albert not really a regional jet but a true Airliner. Despite this the turnaround time on the ground is be a mere 15-20 minutes.

The contract over the purchase of the 60 aircraft is worth around US$1.6bn of which Lufthansa as launch customer will not be supposed to pay the full amount. With this order Lufthansa is helping to safeguard existing jobs in Pfaffenhoffen and will create another 2,000 new jobs. The 60 aircraft are an important start for Fairchild-Dornier. The aim is to produce 500. About half of these would have to be part of so-called fleet deals, i.e. single orders of large airlines. To this purpose negotiations are currently underway with two big US-airlines. Fairchild-Dornier is currently competing against the Brazilian company Embraer for the Crossair contract.

The development costs of the program are around US$1bn. US$700 of this is put up by Dornier-Fairchild, the rest is paid for by the systems manufacturers as risk sharing partners. A further US$500 million will have to be paid within 2001 to 2205 to gear up for production.

It has to be said that the financing of the required US$700 million seems vague for Fairchild-Dornier considering that there is only $50 million of own capital. Up to date there have only been subsidies of systems manufacturers amounting to a few million US$. The State of Bavaria has contributed US$80 million. The US$270 million of the German Government are only securities, the required money has therefore not been paid out yet. Further sums will be added through loans on the capital market. Fairchild-Dornier also plans to enter the stock exchange in two to three years.

Considering this Albert sees the order placed by the traditional airline Lufthansa, who has already been launch customer for successful programs like the Boeing 737, as an important breakthrough. LH Boss Weber thinks that the connection of Dorniers's technical engineering performance with Fairchild's "business spirit" is an ideal constellation and is therefore happy to be the third member in the trio.

The LH purchase is indeed an important breakthrough for the Bavarian-American Enterprise.

In 1996 Fairchild Boss Carl Albert took over the troubled company Dornier. However, his company was much smaller than Dornier and did not have a plane program of its own, because production of the 20seater Metroliner Series had stopped. An experienced core team was formed with ten new managers, among them well-known names in the industry like Jim Robinson, formerly with Learjet and John Wolf, formerly with McDonnell Douglas.

First of all Dornier's archaic business structure was changed. In 1990 90 percent of the business derived from the military, mostly maintenance. Today the military share is only five percent. Massive cuts were made in personnel and materials. At some time staff was reduced from 2,800 to 1,600. Today there are about 2,200 jobs. Through tough new negotiations with suppliers for materials for the Turboprop-Regional 328, several millions of Dollars could be saved.

Today Fairchild-Dornier is split into four areas: the manufacturing of Airbus components, civilian and military maintenance contracts, an advisory service (formerly Dornier Logistics) and regional commercial aircraft. Main focus of the company is still in Oberpfaffenhoffen, since relocation of the final assembly plant to the USA would not have made sense. The production plant in Bavaria is one of the most modern in the world. The Fairchild infrastructure in Texas is simply not sufficient. This is why only the construction of the 328JET wing was transferred to Texas. Headquarters of the Company is in the Texan San Antonio with the administration and marketing centre.

In designing the new regional jet family one is currently profiting from the predominant trends in regional commercial aviation. Because of the liberalisation of air traffic in Europe and Northern America, there is continuous growth. Predictions for annual growth are around 6 to 8 percent. Apart from this, demands on regional commercial aircraft have increased. The rapid development of big airports, which serve as hubs, necessitates adjustments of traffic. The slower props cannot keep pace with the higher frequencies. As well as speed, comfort plays a bigger role. The "prop avoidance factor", an American phenomenon, i.e. an increasing number of passengers avoid propeller airliners, is felt in Germany as well. This is why props are now in decline. Fairchild-Dornier managing director Thomas Brandt sees this changeover to jets to be a "total, irreversible revolution".

Studies predict a demand of 3,000 to 4,000 aircraft in this area in the next ten to 15 years. In this competitive market mistakes, which were made with the 328, are meant to not be repeated. In those days Dornier was only the fifth manufacturer to enter the market and therefore only sold 100 aircraft of the 328 family. This time Dornier-Fairchild wants to be first. The company regards itself to be well equipped to enter the "up hill struggle with hostile fire" over lucrative regional commercial jet orders.

The maiden flight of the 728 as first representative of the 55-100seater family is planned for the first quarter of 2001. In spring 2002 the first 70seater will be handed over to the CityLine. The big sister with up to 105 seats could follow in autumn 2003. The smallest representative, the 55seater 528, will expectedly be ready for service in 2004.

The 728JET-Family is the only line of product in this market segment to offer almost complete communality. This is achieved through modular construction. All components are manufactured so they can be used in the 728, 928, 528 and business jet versions. This has reduced development and manufacturing costs. This also enbales the company to react rapidly to changing demand. Fairchild-Dornier promises simplified operation through the same type-rating for pilots, the same maintenance procedures, the same spares, the same training of technicians and the same ground support equipment. However, the General Electric CF34-8D1X2 engine might prove too weak for the stretched 928. In this respect Fairchild-Dornier is currently talking to GE, but has also approached other manufacturers like BMW-Rolls-Royce.

In San Antonio and Oberpfaffenhoffen the best way to cut costs is seen in the manufacturing of large numbers of units. Per month three to five aircraft are intended to leave the factory. Carl Albert dreams of an annual output of 100. Another measure to cut costs is Fairchild-Dornier's demand that the systems' suppliers should manage the integration of their systems themselves. This is why already now as many as 100 employees of supply firms work in Oberpfaffenhoffen as Integrated Product Teams (IPT).

Marketing strategists in San Antonio also find the reduction of manufacturers of regional commercial aircraft helpful. After the demise of Saab and Fokker, there are only Germany, Brazil, Canada left, which manufacture airliners with fewer than 100 seats. Apart from that there is only the 70 to 116seater Avro-RJ-Family. It is, however, not a true economical competitor because of its costly engines in terms of maintainance. Fairchild-Dornier's management also does not regard the models of the large airline manufacturers Boeing and Airbus (A318 and 717) as threats. They simply just seem to complete the fleet downwards. Direct Operating Costs, DOC, of the A318 are said to be 30 to 40 percent higher than those of the 728JET.

Next to Bombardier Embraer is seen as the main competitor with their planned RJ-170 family. However, Fairchild- Dornier is one year ahead of the Brazilians. CityLine was indeed interested, but according to Managing Director Karl-Heinz Köpfle development of the RJ-170 would have taken too much time to make full use of the growing capacities in air traffic.

The German-American company was already successful against the Canadian competition (Bombardier) in the CityLine order although the CRJ700 is a stretched version of the Canadian Regional Jet, which is already in service with Lufthansa. Fairchild-Dornier argues that the 70seater had already been lengthened twice and was therefore no longer communal with his little brother, the CRJ100/200. The cabin resembled an unpleasant tunnel, because it was relatively narrow. The CJR700 was therefore no longer designed for today's traffic.

In the meantime talks with the Regional Aircraft Consortium ATR about a possible alliance with Fairchild-Dornier had been abandoned without an outcome, since no agreement could be reached with Alenia and Aerospatiale. According to Carl Albert there had never been any consensus anyway. Despite this, ATR still holds onto the Airjet-70-Family. Studies of a 70seater and a lengthened 84-seater, with engines at the back, are being continued after they had been shelved for a while.

With Lufthansa's order Fairchild-Dornier was the first manufacturer to secure a big fleet deal and created an important advantage, which is also beneficial for Germany's industry. When the contract was signed Siegmar Mosdorf, Co-ordinator for Germany's Aviation and Space Matters,said the following: "The development of this regional jet family is a historical chance for Germany's aviation industry, to take the lead in this market segment and set new global standards". Those are big words. Let's hope that the will be followed by act as well.

From page 40 of FLUG REVUE 7/1998