RichardAboulafia.com 

:: June 2012 Letter ::

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Dear Fellow Three Martini Playdate Enthusiasts,

Like many analysts, I do my best research over gin. Itís my policy to not endorse products in this letter, but recently I was enjoying Plymouth gin with a friend, and he told me that this successful brand was actually brought back from the dead a few years ago. Some investors had bought it, revived it, marketed it, and created a success. Apparently, this is common in the consumer product biz. Brands that still have brand equity (and therefore potential value), but are dormant or near death, are called ghost brands. Examples include Brim coffee, Eagle Snacks, and something called Nuprin. You may have thought these products had died, and they may indeed have. But they and others have been put back on the market, sometimes successfully.

This got me thinking about ghost brands in the aviation world, a timely discussion because in April, Eclipse Aerospace announced that it had received an FAA production certificate that would let it resume production of its Eclipse 500 very light jet. I was rather hoping to spend the rest of my life never discussing Eclipse again, but there is now the intriguing prospect that they become aviationís first successfully revived ghost brand. More on that later. My key finding is that aviation has no ghost brands. In fact, itís death on brand revivals.

First, airlines. Coincidentally, I recently got a letter from ď200 Kelsey Associates LLCĒ claiming ownership of the Air Afrique, BOAC, Pan Am, and People Express trademarks and offering a commission to anyone finding a buyer. If thereís a brand that might have had some residual brand equity, it was Pan Am. It has been revived as a name five times, in a series of increasingly pathetic airline ventures, and its name has also been used for some naugahyde bags and a short-lived retro-nostalgic TV series. Braniff, another airline that might have had some luck under the brand electro-fibrillator, has seen three failed re-boot efforts.

Airlines donít get revived because, to put it gently, most airlines suck. They donít have much brand equity, or consumer goodwill of any kind, to revive. Good airlines, such as Southwest (I guess I do endorse products), donít die in the first place, so they donít need to be revived. But what about aircraft manufacturers?

The story there is equally grim, with exactly zero successes. McDonnell, Douglas, Convair, and Republic, for example, are brands that youíd think would have had value for someone, yet remain stubbornly dead, at least in the aircraft industry. My favorite ongoing failure is the revival of the old Fokker jetliner product line and brand (www.rekkof.nl) which has been flailing around for a decade or so. But a survey of the aircraft business graveyard yields some quirky corollaries:

1. Reviving aircraft is easy; just donít revive a dead brand for them. Whether itís the C-5B or the G.222 (now C-27J) or the many reinventions of the Rockwell Jet Commander (now Gulfstream 150) many aircraft programs have been brought back, with names changed to protect innocent and guilty alike. Most recently, Viking has re-birthed the old De Havilland Twin Otter, and RUAG has re-launched the Dornier 228. Of course, re-branding doesnít necessarily help; the Sino-Swearingen SJ30 has been given more all-new brand names than I can recall, but after 25 years of trying itís clear that the crypt will stay shut.

2. Donít revive a dead brand for an existing product. Raytheon/Hawker Beechcraftís Premier One did well enough. Then they re-named it the Hawker 200. That grand old brand, along with a horrendous market downturn, killed it. Back in the 80s and 90s, BAe made a go of the 146 100-seat quadjet, but then it revived the old Avro name. The product keeled over and died. Again, it would have anyway, but planes can die for more than one reason. And remember, too when BAe applied the old Jetstream name to the ATP regional prop? Instant death.

3. Double the ghost name, double the pain. Fairchild Dornier and Hawker Beechcraft were both new companies (the latter with existing products) that decided to revive not one but two dormant/dead brands. FD suffered arguably the worst implosion of any startup yet (will someone please remind me where that 728JET prototype wound up?). HB lost billions of dollars in the downturn, finally declaring bankruptcy in May, with the loss of some, or all, of their jet product line. Lockheed Martin and Northrop Grumman werenít reviving old brands; they were merely merging businesses to help everyone survive. But when Boeing merged with a failure (McDonnell Douglas) they had the good sense to not append those names to their own (although they did keep some of the top management, which was just as bad).

4. The ďNo Aviation Ghost BrandsĒ effect shows up through the supply chain. At the component level, no one is reviving the Coltec or Garrett brand names, despite their possible appeal to some old timers. Also, there are two big aerostructures companies in the US, both carved out of larger entities. One adopted an all-new moniker, Spirit, and did very well. Another revived a dead airframer name, Vought. They did poorly, and were ultimately absorbed into Triumph (after Boeing was forced to buy out their disastrous 787 work). Once again, thereís no proof that adopting a legacy name hurt them. But looking at all the evidence above, Iíd be careful about standing too close to any revived brand legacy chalets at air shows. They tend to self-destruct.

Back to Eclipse. First of all, Iím kind of sympathetic. This aircraft has its fans, and the new companyís goals (50-100 per year at $2.7 million per) sound extremely reasonable, particularly compared with the Ponzi-like numbers offered with the original program. Besides, let bygones be bygones, especially since the company is no longer managed by Vern Raburn (unfortunately for the new company, ďNo longer managed by Vern Raburn!Ē is not a useful marketing slogan, no matter how accurate and appealing it may sound).

Iím also prepared to look past the market problem. The lower end jet market is still scraping along the bottom, but it will be back one day. However, thereís a bigger problem on the production side. United Technologies, which builds the vast majority of the Eclipse (engine and airframe) has signaled that it wonít invest more than the $25 million or so theyíve already kicked in. So, who will fund this revival? Who will convince all the other suppliers, burned when the company flamed out in the 2000s, to invest in resuming production?

But most of all, to recap, if Eclipse resumes production, it will be the first revival of a dead brand in the aviation biz (let me know if you can think of another). The aircraft industry has high barriers to entry, low barriers to exit, and seemingly impossible barriers to re-entry. Therefore, we arenít updating our Eclipse report with a forecast, but I canít exclude the prospect of having to add one, either.

Most of Tealís Aircraft report updates this month, coincidentally, are of dead programs: Tornado, AMX, MD-80, and Rooivalk. Weíve also updated the Trainer overview, and the Learjet, ALH, and LCA reports. Have a great month.

Yours, ĎTil Iím Forced To Drink Brim For My Plymouth Hangovers,
Richard Aboulafia
 

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