Looks Like It's Time For Plan 'B'...
It appears Diamond Aircraft's initial hopes an amicable arrangement could
be worked out, regarding the current financial mess at Thielert
Aircraft Engines, may have been a bit optimistic. In a written
update to customers sent Monday -- and obtained by ANN -- Diamond
says the situation has gone from lousy, to worse... and the
administrator tasked with handling Thielert's insolvency isn't
going out of his way to help matters.
"Over the past 10 days, Diamond senior management has been
working diligently in an attempt to achieve a workable solution for
DA42 and DA40 tdi owners on parts support and warranty," the
company writes. "...Unfortunately, the results have not been
positive, and we need to share with you what clearly is a very
"Overall, we have the
impression that the insolvency administrator is not able to nor
interested in providing a path forward which makes current TAE
engine operators and owners a priority. Instead, we are left with
no choice but to conclude that their agenda is at odds with ours
and yours, and that we will likely not get a workable solution from
working with TAE and the administrator until after the end of
preliminary insolvency, presumably in July."
Diamond states it explored a number of options to deal with the
Thielert insolvency -- including the purchase of a number of
Centurion 1.7 and Centurion 2.0 engines to get AOG aircraft flying
again, and obtaining a sizable inventory of spare parts. The
planemaker also proposed paying for costs to overhaul returned
parts, with Thielert paying for labor to install those parts... as
spelled out in the insolvency agreement.
"Our clearly expressed goal has been to devise a plan which
helps DA42 and DA40 tdi customers, paves a way for continued
production of Diamond aircraft with TAE engines, and simultaneously
enables TAE to continue operations and protect their market
position as much as possible by doing their best to serve our joint
customers," the company states. "Unfortunately, the insolvency
administration has not accepted any part of our proposal.
"Instead, we have gained the impression, based on several
actions taken, that the goal of the administration is to maximize
near-term cash flow from what they seem to view a 'captive'
audience – i.e., operators of Diamond aircraft with TAE
engines, whose only choice is to park an AOG aircraft or pay
whatever price TAE may ask for parts."
Noting that Thielert has also cancelled all previous agreements
to guarantee parts deliveries -- and has significantly hiked its
prices for inspections AND parts -- Diamond also took the drastic
step of "strongly" advising customers ordering parts or services
from Thielert to "get a written confirmation from the office of Dr.
Kuebler, the insolvency administrator, confirming completeness of
the order, suitable airworthiness certification, firm delivery
date, confirmation of availability of all required materials and
resources to produce the ordered parts, return of any customer
owned parts sent for repair/inspection, and cash credit (vs credit
on account) of any cores returned to TAE."
Diamond states its hands are tied in regards to helping
customers facing current warranty, service, or support issues get
what had been promised to them. The planemaker notes German law
prohibits the insolvency administrator from granting preferred
status or treatment to any creditor -- meaning other Thielert
clients are also in the same boat.
"We are painfully aware that this is a very difficult situation
– effectively, Diamond and its customers are victims to
actions beyond our control," the planemaker says. "The TAE
insolvency was not foreseeable from our perspective: TAE was a
respected, publicly traded company with significant customers
including Cirrus, Cessna, General Atomics and others."
Alas, Diamond says production of its DA40 tdi and the popular
DA42 TwinStar have been suspended indefinitely, until a reliable
supply of engines and parts can be reestablished. "Unfortunately,
given the handling of the situation to date, we are less confident
that production can be resumed in the near term," Diamond adds.
But there is a ray of hope on the horizon, the planemaker
adds... one that probably places Diamond in a better position than
some other Thielert customers.
"As some of you may have read in the aviation press, Austro
Engines (AEG) is developing its own heavy fuel/diesel engine,"
Diamond says. "Diamond has contractual long-term agreements with
AEG. We have flown the engine on the DA40, the DA42, and a DA50
prototype [which flew last week, as ANN reported.]
"Certification of the engine in Europe, under EASA rules, is
expected later this summer. Certification of new DA40s and DA42s
with the Austro engine (shown below) is expected under EASA rules
(i.e., for the European market) late in 2008, with FAA validation
to follow ASAP," Diamond continues. "It is our intent to offer
retrofit kits for all DA42’s, which would replace the current
TAE power plant with a 170hp AEG engine, when such a retrofit kit
"In consideration of the current situation we will make every
effort to offer special price and schedule consideration to current
DA42 customers that opt for an AEG retrofit kit," Diamond adds.
Diamond also repeated its request to current Diamond owners to
provide the company with status information for their aircraft. "We
are still missing this information for a number of customers, and
will be following up with you to obtain it. It is critical for us
to know as well as possible when aircraft are coming due for
inspections, so we can make the case for parts, and be able to
project the financial implications of any financial support we
might offer our DA42 owners in the future.
"In closing, please let us assure you that the TAE situation has
the highest attention from everybody in Diamond’s senior
management. We are doing our best to work in this difficult
situation, and can only ask that you understand that while we would
like to do more, to get you engines and parts faster, we can only
impress the importance and priority of providing AOG parts in a
timely manner to TAE and the insolvency administrator."