Sunday, April 15, 2018

Papua New Guinea Defence Force buys 4 P-750s from troubled New Zealand planemaker

For staff at Hamilton planemaker Pacific Aerospace, the work day has become a waiting game.

Waiting for a judge to hand down a sentence for illegal indirect exports to North Korea, waiting to hear who is leaving next, waiting for news of some firm orders, waiting for the redundancy rumours to turn to fact.
Sources say the privately-owned Waikato business icon, which traces its origins back to the 1950s, is a workplace riddled with uncertainty, the worst atmosphere they can recall on a site which, by the very nature of its industry, has survived plenty of ups and downs.
The chief financial officer and the commercial general manager left within a month of each other this year. Since late last year, say sources, other staff have been heading for the door, either squeezed out or seeking better job security elsewhere. Only one complete aircraft has been rolled out of the Hamilton hangar since February last year, said one source.
Chief executive and shareholder Damian Camp concedes cashflow has been "tight" and that last year was challenging. But he says the future is "positive", with solid orders in the pipeline and a new aircraft type soon to be rolled out.
The company is known for its multi-purpose P-750 XSTOL (extreme takeoff and landing) aircraft. The planes are believed to sell for about $2 million apiece, though the exact price depends on the specifications of each plane.
"Tight cashflows are not unusual for us, at times it gets pretty bumpy," says Camp. "It's about timing deliveries and payments against those deliveries. It's normal stuff."
Underpinning staff jitters is a joint venture with Chinese state-owned aviation juggernaut Beijing Automotive, promoted in 2016 as solving Pacific Aerospace's historic cashflow troughs and peaks once and for all.
Back then, Camp said "a $30 million company that's been pottering along" would, thanks to the joint venture, double annual production and delivery of its P-750 aircraft from 2017, with at least 20 planes to be made that year. Half would go to China and the rest to markets Pacific Aerospace had established itself before the partnership with the Chinese, he said. Forty aircraft a year would soon be rolling out of Hamilton.
But all manufacturing staff could see was their jobs disappearing, says one source.
"We felt like Fisher & Paykel [Appliances], we'll ride it to the end and then we all lose our jobs."
Today, some staff see no reason to change that opinion, with a factory in China now assembling P-750s, a regular one-way flow of information from Hamilton to China and a Chinese workforce having been trained at Hamilton, says another source.
Camp has confirmed the exits of CFO Paul Hornell and commercial general manager Steve Peters this year, but says there have been no redundancies. He says Hornell had moved with his family to Christchurch after five-and-a-half years with the company. "Big deal". Sources say Hornell's departure was a shock because he was the de facto chief executive.
Asked whether other staff have left, Camp says: "As with any company that employs 180 people there are people that leave and there's people who come."
But sources say there are fewer than 180 staff now and because Auckland-based Camp is rarely seen at the Hamilton site, he would be unlikely to know staff numbers.
In 2016 Camp said Pacific Aerospace had 135 staff. Wages are being paid with no problems, say sources.
The Herald sent follow-up questions to Camp, asking him to clarify staff numbers and to respond to allegations about credit lines and aircraft completion challenges.
Camp's emailed reply said that, because Pacific Aerospace is a private company, and the breadth and commercial sensitivity of the questions, he would have to consult the board of directors before saying any more than:
• Pacific Aerospace had 11 confirmed P-750 orders for 2018, with a "good number" of additional contracts under negotiation and/or subject to finance applications.
• It had contracted the sale of its first E350 aircraft and expected to ship in it about four months. (The E350 is a smaller aircraft than the P-750. The intellectual property and assets for it were bought from a Canadian company which went broke.)
The Papua New Guinea defence force was collecting the first of four P-750s at the end of this month.
• A second P-750 sale to Poland had just been dispatched.
• The Chinese joint venture had received its production certificate from Civil Aviation China and had completed its first P-750 from a kit supplied from Hamilton. A second kit would be shipped in coming weeks.
• A skydive aircraft with a larger, more efficient engine had begun trials and deliveries were expected to start next year.
Camp earlier said the 11 ordered P-750s were for China and some would be completed in that country.
"It's exactly why we've partnered with the Chinese to achieve that, so it's all going very well. The idea is that most of the assembly work for the Chinese aircraft will be done in China."
Asked if the North Korean issue had put the business under pressure, Camp says "no, none whatsoever".
"We're working closely with all our major US suppliers and have no issue with them at all."
In October last year, Pacific Aerospace pleaded guilty to indirect export of aircraft parts to North Korea. Customs NZ laid charges against the company in August for three breaches of the United Nations sanctions against North Korea and one charge under the Customs and Excise Act. The company also pleaded guilty to that charge.
The charges came after a New Zealand-made P-750 aircraft was identified at a North Korean military airshow in September 2016. The 10-seater plane, which had a North Korean flag on its tail, is popular with skydiving companies. It had been sold to a Chinese company earlier in 2016, Camp said at the time.
Customs NZ said a chain of emails suggested Pacific Aerospace knew the aircraft was in North Korea when it was asked by the Chinese owner for parts and training.
The company's latest annual report for the year ended December 2016 shows it received a government growth grant of $479,000. It is eligible for two grants under the Callaghan Growth and NZ Trade and Enterprise international growth funds.
Pacific Aerospace is owned 50:50 by Pacific Aerospace Group and BAIC International (Hong Kong), according to Companies Office records. BAIC is a Chinese government-owned company which in 2016 had annual revenue of US$56 billion ($77b).
Pacific Aerospace Group, in turn, is 33 per cent owned by PAHL Ltd, whose shareholders are Damian Camp and his brother Joshua Camp, and interests, and 67 per cent by Auckland property and agribusiness investor Nicsha Farac.

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