On the Record with
LOUIS F. HARRINGTON, PRESIDENT & CEO, FAIRCHILD DORNIER GmbH

Fairchild Dormer Has Become a Player Again

"There's been quite a change in this company in the last year. We've moved from an environment of survival to one of growth." So says Lou Harrington, president and CEO of Fairchild Dornier.

"Now we have sufficient funding and stability to do what we need to do."

And that, he told Show News, is nothing less than bring the 70-passenger 728JET regional airliner to reality. Orders stand at 114 plus 162 options, as well as another 29 orders for the executive Envoy 7 version. There are also another four firm plus two options for the growth 928JET version, which will be built with the same tooling.

The first two of five development 728JETs are under construction and will be assembled in Oberpfaffenhofen, aiming for first flight next May. Meanwhile production tooling is taking shape, and two new assembly halls will be built to handle production that could eventually reach 130 aircraft a year by 2008.

As of mid-April Fairchild Dornier also had 144 orders and 87 options for the 30-passenger 328JET. "That's a total order book of $12 billion, for 542 aircraft," Harrington says.

After nearly collapsing under the doubly difficult challenge of building a new company and a new airplane at the same time, Fairchild Dornier is now anticipating 25% to 30% annual compound growth through 2008, thanks to sound financial backing and the installation of new management, including Harrington.

The company was purchased by investment bankers Clayton, Dubilier & Rice and Allianz Capital partners just over a year ago, and placed in the charge of current chairman Chuck Pieper. An infusion of $400 million in cash, and an $800 million credit line partly guaranteed by the German government, have given it a future to look forward to.

"We made significant adjustments about a year ago," says Harrington, referring to a reality check that led to cancellation of the 428JET program and a stretching out of the 728JET development timetable. "Since then we have not missed a single significant milestone." The business plan calls for a third aircraft to be added to the 728JET family, but a decision on this "X28" doesn't have to be made for a couple of years, he explains.

The "X28" will be either a smaller or larger 728JET derivative, perhaps as small as 50 passengers, where the market is already well served, or beyond 110 passengers, which would bring it into competition with Airbus and Boeing.

While Harrington hovers hawk-like over the 728JET program to keep it on track, he is also there to earn a return for his investors. Clayton, Dubilier & Rice said when they bought Fairchild Dornier they were not in it for a quick turnover, making it clear they would sell the company only when it is stabilized with the new airliners in service and they can realize a good return on their investment. Employees will soon be offered the chance to buy in-"having ownership changes the mindset," says Harrington-bringing management and the workforce's share to about 9%.

Until deliveries of the 728JET begin in 2003 (to launch customer Lufthansa) the company will be living off its funding. "But after that we see very positive returns as we start receiving payments," he says. Revenues are projected to rise to $4 billion to $5 billion a year by 2008 from just $660 million in 2000.

Harrington believes it is too early to be thinking of suitors. "We have our hands full right now and don't intend to let up. We will not be distracted from bringing this airplane to market," he says.

By John Morris