EVA talks to Nextant CEO Kenneth Ricci
As 2012 came to a close it was clear that Nextant Aerospace CEO Kenneth Ricci’s idea of remanufacturing Beechcraft 400A jets to produce a lower cost, competitive alternative to today’s light jets, is going to do rather well for the company. Nextant closed 2012 with 29 sales of its 400XT, just four sales away from the magic break-even number of 33, according to Ricci, and with more orders coming in all the time. Moreover, as yet Nextant has not even skimmed the surface of the 600 or so Beechcraft jets still out there, and a fair number of these are on the market at any one time.
Things seem to just keep getting better for Ricci and Nextant, despite the uncertain economic environment. Not only are US sales going well, the 400XT is attracting attention globally, with three already ordered in Europe and the company’s latest order went to South Africa, courtesy of a dealer that Nextant had only just signed up. “I guess we underestimated the extent to which the 400XT would generate global interest as opposed to simply US interest,” Ricci admits. In fact one of his New Year resolutions is to ensure that Nextant does everything it can to improve its brand visibility in Europe in 2013. “We’re now pretty well known coast to coast in the United States, but we need to capitalise on the attention we are starting to get from Europe,” he says.
So what led Ricci to conceive of re-manufacturing Beechcraft 400A jets? How did it all come about? “We owned a maintenance company that we retained after we sold our FBO business. It was a good business but it is very hard to differentiate yourself significantly as a maintenance shop. You are doing what everyone else does and I always look for something that will give me a unique edge in a business,” he explains. Casting around for that “edge” Ricci moved into upgrading analogue gauges to digital gauges. It was a good line of business but it quickly dawned on him that you could remodel more than just the gauges. Why not find an aircraft that already had a significant production run and that had an inherent deficiency which you could address at a cost that would still allow you to bring the remodelled jet to market cheaper than a new, equivalent jet, but with at least as many desirable features?
That, in a nutshell, is Nextant’s business model and it has proved to be gem-like. However, executing on this game plan has taken patience, tenacity, great management skills and excellent engineering know-how. In particular, Ricci has had to be prepared to dig deeper on the funding front than he had ever anticipated.
The groundwork for the initial idea was done in 2007 but it took the company till October 2011 for the FAA certification on the 400XT to come through – and the whole exercise took far more cash to resource than Ricci and his partners had anticipated. “The FAA had not had to look at the idea of carrying out a sustained and extensive remanufacturing of an existing jet type before, so this was all very new for them, as it was for us. Originally I had thought that it would cost around $3 million to take the 400XT through the certification stage. However, I always like to err on the side of caution so I doubled that to $6 million as an estimate. My partner was more pessimistic. He said, “Double it again”, so we pencilled in $12 million as the cost of certification,” Ricci remembers.
If I’d known at the time that it would cost $30 million would I still have done it? Probably not, but now I’m glad we did
In reality they could have doubled again and still been short. The actual cost was just a smidge away from $30 million. “If I’d known at the time that it would cost $30 million would I still have done it? Probably not, but now I’m glad we did,” he jokes. With each 400XT selling at $3.975 million for the base price, and with most clients adding enough options to take the average sale price to $4.4 million, Nextant’s expenditure is being repaid in fairly hefty chunks. Even at $4.4 million though, the 400XT is still coming in well under the cost of a new light jet in its class. This lower price tag, together with a host of improvements, plus significantly lower running costs than other jets in its class and an extended reach that brings more airports within the plane’s non-stop range, has enabled Nextant to create a very appealing product.
Ricci was also in the fortunate position of being able to fund the remanufacturing certification process and the new Nextant business entirely through its parent company, Directional Aviation Capital, where Ricci is the Principal. “One of the delights of this business is that we have never had to sit down in front of a bunch of bankers to try and interest them in funding our business. We do it all on our own balance sheet at Directional and that gives us considerable freedom of scope. Now that we are nearing break even, things are looking very good indeed for 2013,” he says.
So what is involved in the remanufacturing of the Beechcraft 400? After a thorough examination of the airframe, which is not life limited by the FAA, all the life limited components and systems are replaced and all items listed in the Airworthiness Limitations Manual are returned to zero-time status. The engines are swapped for the Williams FJ44-3AP, which is both more fuel-efficient and lighter than the plane’s original JT15D-5 engines. The Williams fuel burn per nautical mile is 32% better, Nextant claims, and the Full Authority Digital Engine Controls (FADEC) eliminate the need for a thrust reverser, adding to the weight savings and improving operational reliability. Maintenance costs are also 27% lower than the original engine and the overhaul interval moves out by 400 hours. Another bonus is the fact that the Williams engine is significantly quieter, allowing Nextant to have the 400XT certified to Category IV noise compliance regulations. Ricci is also able to claim that the FJ44-3AP is “greener” than the JT15D-5, since it produces less greenhouse gasses.
At present US buyers are still somewhat blind to green issues, or at the very least, these issues do not rank at the top of their wish list when contemplating a business jet purchase. But greener engines are already a key selling point in Europe and will be increasingly important in the US. Then there is the all-important matter of the 400XT’s additional range. Where the Beechcraft had a range of 1,333 nm, with the mythical full complement of four passengers, the 400XT claims a fraction over 2,000 miles, bringing many more airports within range in the US, and opening up more city pairs as far as European travellers are concerned.
Part of the reason for this additional range comes from the fact that when Nextant carried out computational fluid dynamics (CFD) studies on the Beechcraft, these showed a wave pressure build up generating excessive drag between the original engine nacelles and the fuselage at normal cruise speeds. This was eliminated through a complete redesign of the engine cowlings and pylons. A small additional range bonus comes from one of the options, the Shark Winglets, which Nextant is getting certification for and which will be retrofitted to all the already built 400XTs as an after-sales service. The winglets add a further 3% improvement to performance. On the standard 400XT the Beechcraft avionics are upgraded to the Rockwell Collins ProLine 21 system, which ensures that the aircraft will be ready for future NextGen airspace requirements.
The 400XT has a completely remodelled interior along with a wish list of 20 standardised options that include the Rockwell Collins Venue cabin management system. Ricci has deliberately standardised everything, including the options list. As an owner, you get to pick as you please from that list of 20, but that’s all you get. There is no bespoke work available outside the list. Would that change if you threw enough money at it? Possibly, but the whole point of the way Nextant has gone about things is to capitalise on the benefits of standardisation.
Ricci and his team have put at least as much thought into the build process as into the improvements made to the Beechcraft. When they were upgrading their supply chain to enable a rapid build out response to orders, it became clear that there was simply not enough space in the hanger that they had started their operations in. So they acquired much larger premises on the other side of Cuyahoga County Airport. This has enabled Ricci to design a cell-based assembly manufacturing shop that will allow up to six 400XTs to be built simultaneously. The airframe assembly will take place outside the build shop and the airframe will then be wheeled into its appropriate cell in the new premises, where it will have a complete new wiring harness fitted, plus the avionics and interior design. Once this phase is complete the plane goes to the completions hanger to have its interior finished to the client’s specifications.
The new premises are also large enough for Nextant to consider adding its own paint shop instead of having the 400XTs painted by third-party specialists. “Clients like to choose their own design for painting and it makes sense for us to enable them to come to our site to view the various options. Having our own paint shop will also give us far more control of the processes and the timing. It’s a real bottleneck for us at present. And if the customer is behind in picking what he wants, then you can lose your allocated slot in the paint shop,” he says.
The complete remanufacture and build process takes up to eight weeks from the time the airframe is rolled into a cell. However, the 400XT is generating a healthy level of demand so a new customer signing up at the end of December 2012 would expect to wait until July 2013 for completion. As Ricci points out, this is still a good turnaround for the business aviation sector. Build-on-sale is a well established practice across the business aviation sector, since most manufacturers cannot afford to have completed aircraft sitting around waiting for someone to buy them.
Pilot training for the 400XT is carried out on a special-purpose Nextant 400XT flight simulator run by CAE SimuFlite in Dallas. Nextant provides training on the 400XT for two pilots as part of the purchase price. The simulator is designed to take pilots to full certification on the aircraft, and CAE provides a dedicated, 400XT level D full-flight simulator. Trainees have the option of additional type-training on the new engines and the Proline cockpit. “You can literally complete all the XT qualifications with SimuFlite,” Ricci says.
So what’s next for Nextant, apart from the obvious plan of going as deeply into the stock of Beechcraft 400As as possible? Clearly, the logical next step in the game plan is to look for other candidates for the Nextant remanufacturing treatment. “We have basically three criteria for judging whether an aircraft is suitable for our remanufacturing process. First, it needs some inherent weakness. Second, you need a decent production run. Unless there has been at least 300 to 400 instances of the plane built, why bother? The third point of course is that you have to be able to build it for considerably less than the client would have to spend on an equivalent jet,” he comments. In fact the 400XT comes in at half the price of a Citation CJ3, which also has Williams FJ44 engines, and it is also half the price of a Phenom 300.
At Nextant’s press briefing at the annual NBAA Convention in October 2012 Ricci was asked if he had identified any other likely candidates for his remanufacturing process. His answer was that Nextant has identified at least four other candidates. Although he declined to name them, the assembled journalists immediately began calling out their guesses. The Falcon 50 quickly emerged as a likely candidate, as did the Hawker 800. The aim here would be to ensure that a remodelled, remanufactured Hawker would be competitive with Cessna’s Citation Latitude, which has a purchase price of $14 million or so, new. Ricci says that Nextant would aim to bring such a plane to market at around $8 million.
With all the technical skills Nextant is building up through its remanufacturing business, it is a relatively short step from where it is now to moving on to design its own business jet. However, Ricci points out that spending $30 million for a certification process is one thing, spending $600 million to get a brand new jet design through the certification process is something completely different. For now, his chosen business model is working well. There is a clear road ahead and sales are growing. It may be a niche business, but it’s a very healthy niche business. Nextant’s story has clearly only just begun…