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Airline Management, General Aviation, Regional Aircraft, UPDATES

UPDATE: Evektor EV-55 Outback, the 10-14 seat twin PT6A powered un-pressurized utility aircraft is in trouble, Malaysian investor Aspirasi Pertiwi stopped planned its funding, 2 out of 3 Czech shareholders face possible criminal charges in “shareholder’s war”, available cash is very low and certification is way behind schedule. The Czech Republic has 2 new turboprop programs, the Aircraft Industries L-410NG and the Evektor -EV-55 Outback, both were ordered by China last week with 20 x L-410’s for Xinjian General Aviation and a possible Chinese assembly line and MOU for 300 x EV-55 Outbacks from Evektor Asia Pacific, a dubious sales representative for Evektor connected to the Malaysians. The Tecnam P2012 a 11 seat piston twin is ready for first flight as Air Cape readies to confirm its 100 unit MOU, while Evektor’s future is not so bright. The BIG lesson is don’t just jump at any investor, find a strategic investor that can assist beyond just money.

READ: past article on EV-55 Outback program, January 16, 2016

READ: past article on 2015 General Aviation turboprop market, February 16, 2016

On March 30, 2015 China’s President Xi Jinping concluded his visit to the Czech Republic, and left with 30 deals signed worth $4.0 billion, which includes 20 x L-410NG regional 19 seat turboprops worth $126 million ($6.3 million each ??) from Aircraft Industries (ex-LET Kunovice) now owned by Ural Mining & Metallurgical Company (Russia) which itself is owned by Russian oligarch Iskander Makhudov. The L-410NG is a new version of the L-410UVP-E20 with a GE H85 (850 shp) engine, MTOW to 7,000 Kg from 6,600 Kg and a cruise of 420 km/hr and a glass cockpit, and it is positioned to do very well in the coming years (20-25 units per year).

The Chinese talk about a L-410NG assembly line, yet they have a the AVIC Y-12E and Y-12F ? and yet they buy Viking Series 400 Twin Otters and now L-410NG’s ? Time for AVIC to get its own house in order, and get local operators to buy Chinese ? The Russians also need a 19 seater and a move to Russia is a real possibility, and then the Czech Republic could be left with NO commercial aircraft manufacturer without Evektor and Aircraft Industries.

L410ng_big_20150715_04441736

L410NG

The new Aircraft Industries L-410NG, should be available for deliveries by late 2017, a great improvement on the current L-410-UVP-E20 model, it is the BEST selling 19 seat un-pressurzed airliner in the world with 1,138+ deliveries since 1970.

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As well, there was an MOU (?) for 300 EV-55 Outbacks and 50 LSA (light sport aircraft) worth $966 million from China’s Gungdong Longhao Group through obscure company called Evektor Asia Pacific Limited (“EAP”) registered in Hong Kong (14th Floor, Chum Wo Commercial Centre, 23-29 Wing Wo Street).

Evektor 2nd aircraftev-55-2

The latest EV-55, s/n 003, OK-DRM (ABOVE photo left)) took to the skies this week on March 8, 2016 and it is the first production conforming aircraft so badly needed to move certification forward. NOT sure why the aircraft has a small Malaysian flag on it IF it’s done with them ? 

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EAP is a company responsible for Evektor sales, marketing and maintenance in Asia and Africa,which I suspect has something to do with David Chew who was put in charge of Evektor when Malaysian investment company Aspirasi Pertiwi with a promised $200 million for the company, took charge in order to help Evektor certify and put into production the EV-55. This was sadly never really going to work, it was the “blind leading the blind”, the Malaysians has nothing to offer beside money, what Evektor needed was a strategic investor with money and industry know how and contacts, but only received cheap promises and an incompetent David Chew (aka Chew Keat Soon) to “run” the show at Evektor.

That financial promise has not happened and the relationship has gone sour, with no more than $10 million from the Malaysians having gone into Evektor, and the Malaysians have at this time only 9% of the shares in Evektor (with no special rights), and from inside reports, the relationship with Aspirasi Pertiwi is over, no money for almost 6 months and as I touched on before, it is pretty clear this was all a Malaysian scam to buy the program, get it certified and then ship off to China or Malaysia, all orchestrated by David Chew, a self claimed genius that “can learn all about the aviation industry in one month”, yet he could not deliver on anything.

The problem is that Evektor just flew its 1st production conforming EV-55 on March 8, 2016 (s/n 003, registered OK-DRM) and the company has a long way to go to certification under EASA CS-23, and it still has no avionics supplier as Esterline CMC Electronics Smart Deck line was terminated, and most importantly without the Malaysian money the program WILL run out of money sometime soon, and the whole program will come to a halt very quickly.

As Aspirasi Pertiwi has proved to be a unreliable partner, and with no money since late last summer going to Evektor, while Tun Dr. Mahatir (ex-Malaysian Prime Minister 1981-2003) owner of Aspirasi Pertiwi is showing he is unreliable and not trust worthy, which given the massive corruption in Malaysia today is no surprise.

Current Malaysian Prime Minister Najib Razak is accused by anti graft investigators of having $+1.0 billion in his account, and to cover things up the Royal Saudi family claims it has given him a “gift” to equal to that amount as a cover for any criminal investigation, but that all sounds like a Saudi cover up, is this what responsible global leaders do ? cover up criminal activities for each other ?

On top of all of the problems with the dubious Malaysians, Evektor has more problems closer to home, as according to a local paper the is shaken by a “shareholder’s war”, as it is understood that one of the 3 partners that hold 91% of Evektor a.s., Jaroslav Ruzicka has filed criminal charges with the Czech Police against his two partners, Libor Duchtik and Josef Vavra, in what is being described in the Czech Republic as “tunneling” a common criminal business act from the 1990’s where owners would “tunnel” out of the company all cash and fixed assets and then declare bankruptcy.

All of this, is now with the Czech Republic Police (PCR) to investigate. As well, given that the Czech Republic has invested CZK 1.5 billion ($+/- 42 million) in the EV-55 program and that that program might take flight to Malaysia or China and not benefit the Czech citizens or state, the country’s Service Information Services (BIS) is involved as if fraud against the Czech state is being contemplated by the Malaysians and some partners, then the intelligence agency is doing what it needs to and stop it and prosecute those behind it.

Suffice to say, its a mess at Evektor, there is nothing to convince the market the EV-55 is going to be a reality. The original SWOT (strengths, weakness, opportunities and threats) analysis had to show that Evektor has no experience in CS-23 certification, no experience in commercial aircraft sales, no experience in mass production of CS-23 aircraft, no ‘real’ marketing and sales organization, no real product support, etc.

I have also bring up this latest 300 x EV55 MOU from Gungdong Longhao Group and 4 x EV-55 orders from Malaysia’s APFT and Senai Airport terminal Services made in March, 2015. These deal were arranged by EAP, and I very bothered by the timing of the 300 unit MOU, as the relationship between Evektor and Malaysia is over, and all of a sudden they come up with “dubious” 300 aircraft MOU. It smells like a scam, to blackmail Evektor into doing some deal with the Malaysians/EAP, as the relationship is over but now with 4 orders and 300 MOU’s is Evektor obligated to EAP for this ? a liability and a possible lawsuit brewing bu EAP versus Evektor a.s.

Evektor went through this 8 years ago when it cancelled its relationship with then US dealer Jeff Conrad (Sport Aircraft International) and then a subsequent lawsuit was filled against Evektor for loses. A bad decision, followed by setting up Evektor Aircraft in Florida, but instead of a regional office and sales organization, it was relegated to being just a southeast sales dealer for Evektor, but the worst was pricing it’s aircraft in Euros !

You can’t imagine the American response, they knew nothing of the Euro, and they had to pay up front various deposits with final payment varying depending on the Euro/$US exchange rate ! it was a Eastern European gong show to say the least. The management team in the Czech Republic did everything it could to destroy USA sales, and then we all know how 2008 worked out for all GA manufacturers, a huge drop in sales due to no financing, killed demand.

The Malaysians, I do not trust and the timing for such a huge order is worrying, as EAP is Evektor’s dealer and they expect delivery of 4 x EV55’s in 2017 for Malaysian operators and then these 300 deliveries for China, which I am sure is a scam/made-up ‘order’ but it is a legal obligation on Evektor from its ‘Dealer’ EAP.

This could be a huge liability on Evektor and the Czech state has the state has a hand in the project, and in the 1990’s it was in fashion for many crooked businessmen to sue the Czech government when the business went badly.

This is a clear case where a company was in need of capital and now we see it needed more than capital, the Malaysians they know nothing of aircraft production, certification, support what Evektor needed was a strategic partner, not only with capital but industry know-how, this a RED FLAG for any company seeking capital, make sure you get a strategic partner that can add all those things you lack.

The time lost by Evektor in certifying the EV-55 Outback, has allowed Tecnam to develop their P2012, a 11 seat twin piston aircraft made of composite, which is NOT a rugged aircraft for the hardcore work needed by small remote operators, where they fly cargo and passengers to remote airstrips, and the aircraft need to be rugged, not plastic. Tecnam got a MOU in 2012 from Cape Air (USA) for 100 x P2012 which runs 80 x Cessna C402C’s and 4 x BN2 Islanders and that is in certification now, and once its starts flying Air Cape will need to firm that up.

Tecnam-2012

The $2.0 million composite Tecnam P2012, 11 seat piston powered (Lycoming TEO-540-C1A engine) to run on avgas and mogas, 7,610 lbs MTOW, 2,610 lbs. useful load, Max. cruise 210 kts is slatted to replace Cape Air’s (USA) 80 x Cessna 402C’s and 4 x Britten Normand Islanders, as the airline has a 100 unit MOU with the manufacturer.

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Cape Air also looked at the EV-55, but with no one at Evektor with knowledge of airline operations, economics, fleet planning, I can only imagine what Air Cape thought after leaving Evektor, wondering how these guys want to see commercial aircraft and no next to nothing about the business ?

The EV55 is whole lot better than the P2012, but is behind in certification and orders, and the P2012 is better than operating 40+ year old PA31-350’s, C402’s, BN2’s, Aero Commander 500’s, etc. Timing is always crucial to an aircraft program, too late or too early you miss the ‘jackpot’, and the P2012 will hit the jackpot IF Evektor does not change its fortunes soon.

Well as it stand now, the situation looks grim, will 2/3 of the shareholders go to prison ? will the EV-55 ever be certified ? as it needs $+40 million for that and probably another $+40 million for ramping up production, and where will it ever find the $200 million for the shareholders, certification and production ??

I know that there was a great interest from Global Aviation Partners (GAP, http://www.globalaviationpartners.com) to make a deal with a strategic investor, but that was not acceptable to Evektor on the grounds that some administrative expenses would need to be paid up front to cover expenses (<$75,000), but that was rejected even though $200 million was on the table for the project.

You can take a horse to the pond for a drink, but you can’t make him drink the water ! and the next few months will tell where the EV-55 and Evektor will end up.

Only time will tell, but sadly this program is off its tracks and it may never get back on the tracks without a MAJOR infusion of capital and know how.

Till next time, cheers, keep the comments welcome, always good to hear from my readers, good or bad.

 

 

 

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About Aviation Doctor - Helping aviation companies to transform the present into a more profitable tomorrow

I am a Canadian and EU national with an MBA and 33+ years experience in aviation business development with 20 years overseas and work in 25+ countries. A former investment/merchant banker (mergers and acquisitions to corporate turnarounds). airline and OEM senior executive and past owner of 6 successful aviation companies in 3 countries (executive jet charter/management companies, aircraft sales, aircraft broker, airline/aerospace consulting to aircraft insurance). I have a very diverse aviation background with 75+ aviation companies (45+ airlines of all sizes, OEM's, airports, lessors, MRO to service providers) as consultant, executive management, business analyst and business development adviser. Excellent success track record in International Business Development. Most work with airlines is with new start-ups and restructuring of troubled carriers. I sold new business jets, turboprops and helicopters for Cessna, Raytheon, Gulfstream to Eurocopter as an ASR as well as undertaking sales and marketing of commercial aircraft for Boeing, de Havilland, Dornier, Saab and Beechcraft. Brokered everything from LET-410's to B747's and from piston PA31 to G550 business jets. I look beyond the headlines of the aviation news and analyze what the meaning and consequences of the new information really means. There is a story behind each headline that few go beyond. Picked the name Aviation Doctor, as much of my work has been with troubled companies or those that want and need to grow profitably. I fix problems be in the business, and help with restructuring for a better tomorrow. You can reach me with comments or suggestions at: Tomas.Aviation@gmail.com and I comment a lot on Google+, my Facebook and LinkedIN.

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