A talk with Blackhawk CEO Jim Allmon
There are not that many low cost entry points to the aerospace game. But when Blackhawk founder Jim Allmon went back home after a chat with Pratt & Whitney and broke the news to his wife that he and his partners had just signed personal guarantees for £25 million worth of P&W PT6 engines – 24 to be sold in five years or else – that must have been an interesting conversation. It was, Allmon admits, a difficult business to get off the ground. Some 14 years later, with Blackhawk the world’s largest non-OEM buyer of PT6 engines, a deal for 25 engines in five years is small potatoes. Blackhawk’s most recent contract with P&W was for 1,275 engines over seven years. But at the outset, with no other company like Blackhawk in existence, the deal looked terrifying to everyone but Allmon.
“Getting finance was next to impossible. When you got into conversation with bankers they wanted you to be able to point to some company somewhere that was doing what you wanted to do, and making money. And there wasn’t any Blackhawk equivalent out there to serve as a reference point. That made potential funders really uncomfortable,” he recalls. So what made Allmon think that there was life and legs to a business based on modifying engines? The answer, really, is obvious and is inherent in the way an engine manufacturer puts together the spec for a successful engine.
“The manufacturer is going to do his research and put together an engine that meets the specifications of the solid majority of customers,” Allmon explains. What the manufacturer is not going to do is to base the engine design around the wishes of the most demanding users near the top of the design envelope. That would skew calculations of performance versus cost away from the ‘norm’ that the engine manufacturer is shooting for. Rather, the aim is to appeal to the largest customer base at the lowest price point.
There wasn’t any Blackhawk equivalent out there to serve as a reference point. That made potential funders really uncomfortable
So there are going to be a significant number of owners who will find that revenue-generating opportunities will accrue from fitting a more powerfully configured engine, one that can climb faster, work in hot lands in temperatures that would ground ‘normal’ engines, and that can provide greater luggage carrying capacity and additional speed. An obvious example, Allmon points out, is a sky diving business. “We have a number of sky diving businesses who have fitted our engines on the Cessna Caravan. They find they can get four jump loads in over the course of an hour, where they could only get two and a half jump loads before, because they can climb to jump altitudes significantly faster. That equates to a 35% to 40% revenue increase for them,” he comments.
A bush plane charter business that runs operations out of high altitude airports bought a Blackhawk mod for its Cessna Caravan and found it could go into high altitude, dirt strip landing sites carrying three to four more passengers than with the standard engine. Again that impacts revenue directly, so that company has already put a second modified Caravan into service and is looking at adding a third modified Caravan early in 2014. Examples like that abound.
“Going for a Blackhawk mod can cost as little as the same as an overhaul in some cases on an older King Air 200 to anywhere from two or three times more than a standard engine overhaul, but for companies where we can make a real difference to their income, the payback is rapid,” Allmon notes. There are also, of course, a significant number of enthusiasts who simply want the pleasure, safety and convenience of having more power and faster climbs.
So far, Blackhawk has completed 490 airplanes since its first mod in the year 2000. “This is not always an easy sell, but the value is there and you just have to help the buyer see where that value can impact their business or enhance their flying experience,” Allmon says. Getting the first sale away was tough going. Allmon and his partners had to buy a pre-owned Cessna Conquest themselves, modify it and then prove that the resale value of the modified plane would be increased sufficiently to generate a reasonable profit margin. “What boosts the resale value is that with our engine upgrade, you are creating a different airplane, one that can do missions that the original simply couldn’t,” Allmon says.
“The biggest challenge we faced was that we were creating a market that had not existed before. We were trying to put together an entirely new industry. There were a few companies that had some STCs to install upgraded engines but they weren’t particularly serious and the one company that really did try before us had a very poor reputation and went out of business in a year and a half leaving their few customers with no support and few options. So we had to convince potential customers that the resale value of their upgraded aircraft would be good to excellent, and that the new engines really did add value and that we would be around to support them should something go wrong down the road. By buying the Conquest, painting it and making it look great, we were able to attract a potential customer. He wasn’t sure that the engine would perform as we said it could, so we flew to his location at our own risk and cost, took him up to see the performance for himself and we came back with a contract,” Allmon recalls. This “hands on” approach is still one of the strongest ways Blackhawk has of convincing potential customers that an engine mod is a good idea.
Of course, the team had to move beyond the Conquest. Allmon points out that with the upgrade increasing the speed by 25-30 knots, they were guaranteed to wow the owner/pilots, but the problem was that there were only 236 Conquests built. “We are now at 22% of that market upgraded, and most after sales companies would think that getting 15% of a particular aircraft base was about the best that could be hoped for,” he notes. Two years into the programme Allmon and his partners were at airplane number 11, or 22 engines into the deal, with just two engines to go and three years to sell them, in order to fulfil that initial contract with P&W. By then the personal guarantees had long since ceased to be a scary factor.
“Once we started rolling we knew we would meet Pratt & Whitney’s requirements and we were doing so well that departments inside Pratt were competing to get our business!” Allmon remembers. P&W created a whole new department, the CEP department, or Converter Engine Programme, specifically to meet the new market that Blackhawk helped create. “P&W were so pleased with what we were doing by way of acting as a sales channel for their engines that they tried to go out and recruit other companies to do what we were doing. That didn’t thrill us particularly, but it didn’t come to much. This is a specialised business that requires a lot of hands-on labour and a very in-depth understanding of multiple aircraft performance platforms. Not many companies can master that to the level that Blackhawk does,” Allmon observes, with some satisfaction.
What boosts the resale value is that with our engine upgrade, you are creating a different airplane, one that can do missions that the original simply couldn’t
There was, however, a pressing need to find another candidate aircraft for a programme of engine upgrades. Ed Swearingen had helped P&W to design the PT6-135 by working through P&W’s inventory of parts, picking this gearbox and that compressor to get an outperforming PT6A. Once he had the perfect engine, he completed the STC for PT6A-135 on the King Air E90. Allmon went to see Swearingen with a view to buying the STC. “We spent a day going through his original drawings and calculations – real old school slide rule stuff, with the numbers all written in pencil. We brought the STC home with us and it required a lot more modification work,” he explains. The Taurus mod was approved for 700 horsepower on take-off and Beechcraft did not like that much take-off horsepower in the King Air 90 series, arguing that it stressed the airframe too much. So Allmon decided to back off the power for take-off and use the residual horsepower as a plus at cruise altitude. Beechcraft approved of the new mod and Allmon and his team reconfigured the engine to make it a simple bolt-on fitment instead of the complicated fitting that had been required by Swearingen.
“We went back to Pratt & Whitney and they said, ‘All right, it’s a new model, so there’s a new price’,” he remembers ruefully. The new price added US$50,000 per engine and the new contract was for 200 engines on the same terms, still with personal guarantees. From there Blackhawk Modifications never looked back. Six more aircraft were added to its modifications programme, including King Air 200s and Cheyennes. In 2009 came the order for 1,275 engines, and today the company has completed 490 airplanes, or 980 engines, with two or three years of the contract left to run. P&W no longer requires personal guarantees from Allmon and he is confident that if the company needed to extend the sale period P&W would be happy to oblige. After all, Blackhawk, as we began by saying, is now the world’s largest non-OEM buyer of new PT6s.
“We enjoy a very strong relationship with P&W. We involve them from the start of a new project to design a new model engine for an airplane. We do our engineering right and then P&W puts the numbers into the computer and gives us a pretty good idea of what the performance is going to be when that modification is fitted to the airplane we have designed it for. Pratt & Whitney makes sure that what we are doing is not hurting their engine, that our redesign of the air inlet system on the Caravan for example, is providing enough cooling air, and so on. They help us with a lot of the brainstorming work and in figuring out what will work in the market. When they are doing something new, they bring us in to find out what we think, so it is a very symbiotic relationship and works well for both sides,” Allmon considers.
“We also enjoy a very close relationship with Beechcraft Corp with them selling our engine upgrades through their factory-owned service centres. We also work together on numerous engineering projects so it’s nice to have ‘mother Beech’ behind you when you need her.”
So what is next for Blackhawk?
“The King Air 350 could use a little more speed don’t you think?” l