32963 Homepage

Want to purchase reprints of your favorite 32963 or photos?

Copies of Vero Beach 32963 can be obtained at the following locations:


Our office HQ: (located at 4855 North A1A)
1. Corey's Pharmacy
2. 7-Eleven

(South A1A)
3. Major Real Estate Offices


1. Vero Beach Book

2. Classic Car Wash
3. Divine Animal
4. Sunshine Furniture

5. Many Medical

In tough times, Piper vital signs seem strong
BY IAN M. LOVE MANAGING EDITOR (Week of February 19, 2009)

There is no getting around how bad the news surrounding Piper has been of late. More than 300 layoffs last week, the general aviation market in a shambles, the stock of the company’s owner tanking, all of which would appear to paint a bleak picture for Indian River County’s largest private employer.

And there seems to be no relief in sight.

“We expect annual (general aviation) production to decline between 18 and 20 percent over next four years,” said Ray Peterson of Forecast International, a company which provides market information and analysis on the aviation industry. When Piper announced the latest round of layoffs, spokesman Mark Miller could not say definitively this was the last staff reduction the organization would face.

Yet, while the situation is dire, there may be some reason for hope. No one knows how long, how deep or how permanent will be the change in Indian River County wrought by this recession, but Piper does have some things going for it that may make it a player when times do change, according to a number of aviation and financial analysts contacted by Vero Beach 32963.

Key for Piper is making the right moves to stay afloat during the economic downturn, leveraging the brand name the company has earned in 52 years of building planes in Vero Beach, maintaining market share in its current fleet, and gaining market share if it is ultimately able to complete development of and enter the very light jet market with its PiperJet.

What is frustrating to Piper management is the story it had to tell for 2008 was a company on the upswing before the economy and the credit markets went south very far and very fast. In figures just released this week by the General Aviation Manufacturers Association, Piper was one of the few success stories in general aviation, increasing delivery of its fleet of planes by nearly 20 percent.

Led by its newly launched Matrix aircraft which received orders for all 100 planes slated to be produced last year, Piper increased upped its sales from 221 aircraft for $174 million in 2007 to 268 planes for $214 million last year. Also this week, the Matrix was awarded the Editor’s Choice award by Flying Magazine.

Even if Piper makes all the right moves, the sheer weight of the recession of 2009 could forever change the general aviation landscape, taking with it companies unable to survive the double whammy of the banking debacle and credit crunch. Piper is clearly not immune from the effects of this crisis.

Sales of Piper airplanes are down so far this year — some 60 orders have been cancelled, many in the last two weeks of January – prompting the company to reduce headcount until the economy begins to show signs of improvement. And even more cutbacks could lie ahead, though it should be noted that the current headcount of 650 is 150 more than the last time Piper was forced to cut its workforce after the 2004 hurricanes.

“If market conditions continue to deteriorate, it may be necessary for the company to take additional actions,” Miller said when announcing the layoffs. “We regret the pain this is causing. However, people aren’t buying planes, which is true for all of general aviation.

“We are building far less than we normally would and cannot afford to keep a full workforce when we don’t have the sales to support that. This is a very difficult and agonizing situation. We did not seek to do this but were instead driven to do so by the worldwide recession,” Miller added.

Is there a real possibility that Vero Beach could lose Piper and the 650 jobs that still make it the county’s largest private employer in the months ahead? While this is not an impossibility, it seems unlikely.

“In the general aviation market, the makers of recreation type planes for individual owners (a big part of Piper’s portfolio) get hit first in a down market before the business plane market and take longer to come back,” Peterson said.

But despite the layoffs, Piper still needs to build planes to fill about 110 orders. “On the positive side, (general aviation) manufacturers are sitting on order backlogs that have accumulated over the past few years,” Peterson said.

“Even if orders slow, they are sitting on a considerable amount of work that can help carry them through the downturn. And Piper is positioned to come out of downturn when the market does turn. It has an extensive lineup of aircraft and has positioned itself well over the years,” Peterson said. “They are in a position to be a player in the market when it turns.”

But whether Piper will turn out to be the growing company that was anticipated when the state and county agreed to put up $32 million to keep Piper in Vero ultimately depends on whether it is able to proceed with development and sale of the PiperJet.

Miller says the delivery date of late 2011 for the PiperJet remains on target.

“Right now the aircraft is on schedule in every aspect in terms of testing, development and funding,” Miller said. “We are in a highly intense testing phase where we take the jet out and push through every one of its performance parameters. The next step will be to build a second prototype.”

Miller added there will be a third prototype built and tested before the company begins to crank up the factory and actually begin producing the jet aimed for the owner-operator segment of the jet market.

“The $2.2 million price tag puts it at the low end of the very light jet market,” Peterson said. “(That market) is still in the developing stage and no one has emerged as an industry leader. Piper has the ability to gain a niche and gain market share in that space.”

To be sure, the decision by Piper to go into the very light jet market was a gamble. Richard Aboulafia, vice president of analysis at Teal Group, an aviation consultancy and research group based in Fairfax, Va., says Piper’s timing has made the gamble even riskier.

“That (very light jet) market is very close to luxury consumer goods, and is far worse than any other aircraft business, and it is very tough to tell when it will recover. Whether Piper will be able to weather this is up in the air,” he said. “They still have a name with brand equity. I’d be cautious, it’s very difficult to tell when the general aviation market will recover and this industry is very tough on small players.”

Piper points to the nearly 200 orders still on the books for the PiperJet. Miller said the company has lost some orders due to the economy, but has also picked up some buyers since making the jet available on the market.

“One thing that makes our jet unique in the market place is its total package,” Miller said. “Our jet outperforms all our competitors in terms of price, distance, cruise speed and payload. We can carry an 800-pound full fuel load. You can fly coast to coast with one fuel stop and it can be configured with a fully enclosed lavatory, which is important on a long flight.”

Aboulafia points to the aircraft companies that have failed or are struggling to break into the very light jet market, and is blunt in his assessment of Piper’s chances.

“Making very light jets is a long shot, there are an awful lot of dead bodies and they would be a small niche player in that market,” he said. “There is an enormous amount of money required to get to market in the space and they are trying to move up to a different level.”

While companies trying to gain a foothold in that market like Adams and Eclipse have already gone bankrupt, and others have announced massive layoffs, their business model was to go after companies wanting to buy fleets of planes for air taxis.

“We never built our case on the air taxi business,” Miller said. ”We built our business case on owner-operators. The vast majority of our customers are business people who use it as part of their business operations.”

What Piper is facing with all their planes, however, is the complete drying up of credit. Right now it is almost impossible for buyers – even those with stellar credit – to get banks to lend them money, and until that changes Piper will remain in a holding pattern.

Added to Piper’s woes is the state of its parent company American Capital Ltd., which has fallen off a 52-week high of $37.85 and on Tuesday dipped below $2.00, a more than 90 percent drop in price. American Capital, which has a stake in over 300 companies, has been hard hit by the economic downturn and is in violation of some debt covenants.

Just the same, none of the banks with which it does business has called in its loans, and American Capital has been selling assets and is talking with lenders to restructure its debt. American Capital declined a request for an interview.

“In the beginning of 2008, they began selling and they moved out of a lot of assets that would be worth less now than they were back then,” said Troy Ward, senior analyst of Stifel Nicolaus, who covers American Capital. “In that sense it was a good thing. I would not consider them to be a distressed seller, they don’t have a margin call.”

And while Piper is Indian River County’s biggest employer, it is just a sliver of American Capital’s collection of companies.

“As far as American Capital’s relationship with Piper, it is a very small piece of its overall portfolio,” Ward said. “(Piper) against total assets of $9.8 billion is pretty small.”

Neither Ward nor Henry Coffey of Sterne Agagee would speculate if Piper is up for sale, noting it depends entirely on American Capital receiving an attractive enough offer in a down market, and both were in agreement that Piper does not to appear to be a part of its portfolio that it needs to shed.

“They need to find somebody who wants to buy it, and put money into it, and wants long-term brand value,” Coffey said.

While the world waits to see what the future holds, Miller said Piper remains focused on the bottom line – surviving this economic tsunami and then being ready when the market shows signs of life.

“We wake up every day trying to figure out how to preserve the employees we have and bringing back the others as soon as possible,” he said. “For every business the goal is to expand, the last thing you want to do is layoff people.”