Case Study - Raytheon

THE CHALLENGE

The Raytheon Aircraft B1900 is one of the most popular 19-seat twin turboprop commuter aircraft in the world. There are nearly 700 B1900 aircraft produced and operated in over 50 countries around the world. Raytheon terminated its production in 2003 due to reduced demand for such turboprop commuter aircraft, particularly in the US market and Europe. There is an unmet demand for commuter air transportation in emerging markets, such as China, India, Australia and Africa, for light-cargo air freighters, for corporate air shuttles and for special purpose aircraft for airborne ambulance and the forest services, such as the B1900. The challenge was to find a potential buyer for the B1900 assets and technology no longer utilized by Raytheon.

THE METHOD

The Business Jet Alliance Group, Inc. and Devonshire Holdings, Inc. formed a 50/50 joint venture, Business Aviation International, Inc. (BAI), to pool experience and resources to develop and implement a concise plan for the B1900 solution indicated above. BAI signed a MOA with Raytheon Company in mid 2004 to pursue the acquisition of the B1900 assets. BAI planned to re-start production of this cost effective airliner transport into the emerging markets. BAI established a partnership with a major leasing company in China to finance sales in the Asian markets. In 2006, BAI offered to acquire 121 airworthy B1900 airplanes, spare engines and parts, and maintenance contracts. Raytheon Airline Aviation Services, Inc., the legal entity that managed the sales, leasing, maintenance and product support of B1900 fleet, would be part of the acquisition. The proposal was to acquire the entire B1900 activity, including their US$350 mm Loan Portfolio.

THE RESULT

BAI had received preliminary commitments for the purchase of about 30 B1900 airplanes in China. BAI contracted with Shanghai Industrial Aircraft Corporation to build the B1900 in China. However, Raytheon could not complete the sale of the B1900 to BAI, because (1) Raytheon’s King Air aircraft shares the same TC with B1900 and the FAA Aircraft Certification Office would not “split” the existing B1900 Type Certificate into a new TC; and consequently, (2) BAI would need to acquire Parts Manufacturer Approval from suppliers for obsolete components or source to new vendors for replacement parts. As a result, BAI was not able to acquire the B1900, despite the willingness of Raytheon to sell.