DM Flying Service to form HondaJet Midwest
Saturday, December 13, 2008 7:00 AM
The HondaJet Midwest headquarters will be based at Chicago’s Aurora International Airport. Construction will begin this spring. Rendering submitted
Investing $8.5 million to construct a building at Chicago's Aurora Municipal Airport is more than enough to get John Lowe out of bed every morning. But the president of Des Moines Flying Service Inc. also is excited about what lies ahead for the 70-year-old company.
"We'll be starting a brand-new company," Lowe said.
Des Moines Flying Service (DMFS) will break ground on the HondaJet Midwest headquarters this spring and hopes to move in by summer 2010, a few months before Honda Aircraft Co. Inc. plans to begin delivering its new HondaJet. DMFS will continue its presence at Des Moines International Airport and Chicago as a Piper Aircraft Inc. dealer with its current staff of 35 people, and form a second company of about 25 people in sales and service focused on the Honda aircraft.
Lowe - a pilot who flies to Chicago on a regular basis - will oversee both operations, but has not yet determined whether he will move permanently to Chicago or who from the Piper side might join him.
Already DMFS has seen a strong interest in the HondaJet. Since signing an agreement with Honda last December, it has placed 35 orders for the seven-seat, $4 million airplane, including four from Iowa companies. Most buyers are businesses that want to upgrade from an older aircraft or are looking to buy a small second or third plane.
These orders are on top of the 30 to 40 Piper airplanes DMFS typically sells per year. But DMFS won't see a dime of its commission from Honda until the planes are ready for delivery in late 2010.
As nerve-racking as that might seem in today's current economic conditions, Lowe said, "we have not lost a single order because of the economy - I should say, yet." In fact, its aircraft orders are up this year thanks to the Economic Stimulus Act of 2008, which reinstated bonus depreciation, allowing companies that buy new equipment this year to depreciate 50 percent of the cost of the asset in the first year.
In August 2007, Lowe was pulled off a lake in Canada when Honda called, wanting to talk to him about becoming a HondaJet dealer. A week later, DMFS gave a presentation to Honda and in December 2007, signed an agreement to become one of five PiperJet dealers out of 10 nationwide to also sell the HondaJet.
Lowe believes his company was selected because of its long history in the business and reputation for customer service. Plus, it recently ranked No. 2 for Piper sales worldwide.
Since it inked a deal with HondaJet, DMFS has been focused on selling the planes while Honda builds a 400,000-square-foot headquarters for aircraft production in Greensboro, N.C. Lowe said Honda decided to enter the light business jet market business when it created an airframe to test its engines built for general aviation and decided the entire plane was a good model. But it has taken since the mid-1990s to bring the aircraft to the market. The first HondaJet began flying in 2003 and now has about 400 hours logged.
Entering the airplane business takes "at least 10 to 12 years from start to finish if they make it at all," Lowe said. "With (Federal Aviation Administration) bureaucracy and rules and requirements, new airplanes today, there's a huge investment to get them to the marketplace. It's nothing to talk about $300 million to $400 million for development costs to do this, and it takes heavy hitters."
But, Lowe said, people are excited about the HondaJet. "The thing we have to sell here is that it's an exceptionally fast airplane that burns less fuel," he said. "It's the latest state-of-the art technology and design."
Paying the price
In signing the deal with HondaJet, DMFS agreed to take on major costs to build the HondaJet Midwest headquarters - plus the time DMFS staff and Lowe have dedicated to selling the plane. Lowe took at least a half-dozen trips to work with Honda and the other U.S. dealers on a 50-page design-intent document for what Honda wanted to see its new dealership buildings look like.
Though the initial investment is steep, Lowe said he felt comfortable making it given Honda's reputation. "If this were some other company, we probably never would have gone this far," he said, "but Honda is so encompassing. They're very successful; they never ever want to bring a product to the marketplace prematurely."
This could be the biggest change ever for the company Howard Gregory acquired in 1939 from his flight instructor. Gregory, who still comes in to the office, started selling the Piper Cub, which were flown during World War II, for around $2,000 apiece, compared with the minimum quarter-million-dollar planes DMFS sells now.
At that time, "everybody that flew was a dealer," Gregory said.
So far, the biggest change Gregory has seen in his business was when Piper began building twin-engine planes, which boosted DMFS's business dramatically in the 1950s and 1960s.
Similar to his father-in-law Gregory, Lowe started out learning how to fly and eventually joined the business when Gregory needed sales help in 1975. "Gradually I got chained to a desk," he said.
Whether the HondaJet deal completely transforms the company "remains really to be seen," Gregory said. It is the biggest investment DMFS has ever made. Now he would "like to see them start delivering the jets."
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