The TAE insolvency continues to present significant challenges to our customers, our business partners and Diamond Aircraft. 

TAE

It Per information received from TAE, it is expected that the preliminary insolvency will end late June and that insolvency will be declared July 1st, 2008.  It is expected that Dr. Kuebler will continue as the insolvency administrator and as such we do not expect any change in the current business approach of TAE.  In the short term, we expect that TAE will continue to operate in insolvency while they continue dialogues with and continue to search for investors. 

Although Diamond, TAE’s largest customer, has formally registered as a potential investor, Diamond has not yet been invited for potential investment discussions with Dr. Kuebler. 

With the end of the preliminary insolvency, the government wage subsidy will end.  Continued operation in insolvency will of course require significant revenue or bridge financing, pending securing of additional investment.  Not knowing the current financial position of TAE, we do not have any reliable information as to how long TAE can continue to operate in insolvency.

The recent AD relating to the clutch inspections / replacement has exacerbated an already bad support situation.

It is rumored that an additional airworthiness action relating to the propeller regulating valve is coming, but we do not have any further detailed information.

Currently, Frank Thielert continues as General Manager of TAE under the financial stewardship of Dr. Kuebler, the insolvency administrator. 

On a positive note, we have learned that Dr. Kuebler recognizes the need to apply resources to solve outstanding technical issues and to extend current maintenance intervals in order to have a viable product and company.  Any such extension of inspection and maintenance intervals is of course in the interest of all concerned and most welcome.

Should customers be sending money to TAE for parts?

Many customers are asking Diamond for advice regarding sending advance payment to TAE for service parts.  Diamond has no reason to believe that the insolvency administer will not meet his legal obligations in filling prepaid or credit card orders.   We would however caution that customers receive confirmation that all necessary parts of an order are actually available for immediate shipment, or if they are not available, that TAE commit to firm delivery dates acceptable to the customer, prior to funding the purchase.  There is not much point in receiving a partial inspection kit which will not allow return to flightworthy status.

We have suggested to TAE that in cases where parts are not available for immediate shipment, that TAE should adopt a policy of requiring a nominal deposit (10%) with order, with the balance due when the parts are actually confirmed to be ready for shipment.  If TAE is unable to offer such reasonable terms due to cashflow limitations, then we would have most serious concerns regarding adequate financial liquidity to ensure filling of backorders.   

What Diamond is doing

Diamond is primarily concerned with the support of the existing TAE powered fleet, followed by the need to resume production of the DA42.  The actions of TAE to date, i.e. the extraordinary pricing for routine and mandatory support items for the TAE engine, do not give us an adequate level of comfort that a return to “normal” is likely under the current administration / management.  Consequently, we have decided that the best course of action is to develop independent support capability for the TAE engine, until such a time that long term support of the TAE engine is viable, or an alternate engine solution is available.  

1. Independent Support for TAE Engines

On May 30. 2008, Diamond senior executives met with EASA’s (European Aviation Safety Agency) specialists and top officials to discuss the TAE situation.

We expressed our concern that, based on the questionable financial viability of the TAE powerplant with current maintenance costs, TAE may not survive long term, and that ongoing technical support, regardless of cost, is not ensured.  We impressed on EASA the need to develop independent technical support capability now, vs waiting for the situation to potentially deteriorate even further. 

As disrupted and as expensive the current TAE support situation is, it would be even worse if there were no technical support at all.

EASA welcomed our proactive approach, and pledged their support.  This is of course a familiar approach – OEM independent technical and parts support is available for many other general aviation powerplants, including Lycoming, TCM, Pratt & Whitney, and others.

Consequently, our approach is to establish independent technical and parts support, such that TAE engines could continue to be supported, regardless of the future of TAE. 

2. Austro Engines  (AEG)

The Austro Engine program is progressing well and on schedule with engines flying in DA40, DA42 and DA50 airframes, as well as in the testcells.  The factory, with full development, production and test facilities is completed.  Initial airworthiness authority approvals of the facility are in place.  Austro Engine has 4 state of the art dyno test cells as well as a modern propeller teststand, such that development and testing of the Austro Engine powerplants, as well as TAE support items, can proceed at a rapid pace.

Diamond intends to offer Austro Engine upgrades to existing DA40-tdi and DA42 customers under very favorable conditions.  With increased aircraft performance, coming from the higher horsepower and improved altitude performance of the Austro Engine powerplant, the upgraded aircraft will surely increase in value, considering that factory new DA42 NG’s (Next Generation) will be sold at a premium vs the current DA42.  

We are currently working on the details of a customer program that will address TAE support as well as upgrades to Austro Engine when these are available.  We expect to release the details of this program in the next few weeks.

3. DA42 Lycoming

Considering the time expected to achieve the international Austro Engine, as well as DA42 NG certifications and in response to specific fleet customer inquiries, Diamond has also made the decision to pursue Transport Canada and FAA STC certification of the DA42 with Lycoming IO-360 engines, primarily for the North American Flight Training market.  We will be advising customers of the project plan as it develops.  The installation will be designed to permit retrofit of existing TAE powered aircraft with the Lycoming engines, future retrofit to Austro Engine powerplants , as well as being offered in new production aircraft. 

In Summary:

1. TAE is currently providing technical and parts support, albeit at a slow pace and at very high cost.
2. Diamond is taking aggressive action to ensure continued independent technical support of TAE engines, regardless of the future of TAE.  Until this capacity is developed and approved, TAE remains the only source for technical support and parts.
3. Diamond is aggressively pursuing certification of the Austro Engine powerplant for the DA40-tdi and the DA42 airframes, both for new production and for retrofit.
4. Diamond is aggressively pursuing certification of the Lycoming engine for the DA42 airframe, both for new production and for retrofit.
5. Diamond will be releasing details of a TAE support and Austro Engine retrofit program within the next few weeks.

Again we sincerely appreciate the support and understanding we have received from our customers and assure all customers with TAE powered Diamond’s that we are doing our utmost, on all levels, to achieve the best possible and sensible long term solution to protect your investment in your Diamond airplane.