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Aviall, Inc.

Aviall, Inc.

2750 Regent Boulevard
DFW Airport, Texas 75261-9048
U.S.A.
Telephone: (972) 586-1000
Toll Free: (800) AVIALL-1
Fax: (972) 586-1361
Web site: http://www.aviall.com

Public Company
Incorporated:
1981
Employees: 939
Sales: $1.16 billion (2004)
Stock Exchanges: New York
Ticker Symbol: AVL
NAIC: 421840 Industrial Supplies Wholesalers; 421860 Transportation Equipment and Supplies (Except Motor Vehicle); 514191 On-Line Information Services; 541614 Process, Physical Distribution, and Logistics Consulting Services

Aviall, Inc. is the world's leading supplier of new aftermarket aerospace parts. It provides supply-chain services for the aerospace, defense, and marine industries through two operating units. Both are U.S. companies with long histories and global reach. Aviall Services, Inc., based in Dallas, is a leading distributor of aftermarket aerospace parts. It buys them from about 220 original equipment manufacturers (OEMs) for resale to more than 18,500 customers in government, commercial, and general aviation. This unit also performs repair work and handles supply chain management and other services. Inventory Locator Service LLC (ILS), based in Memphis, specializes in e-commerce services for the aviation, defense and marine industries. Its more than 15,000 users buy and sell 55 million line items through ILS's electronic marketplaces.

Origins

Aviall, Inc. was formed by the 1981 merger of Burbank, California-based Aviation Power Supply Inc. (APS) and Cooper Airmotive, formerly a division of Cooper Industries Inc. These two companies each had numerous precursors.

Cooper Airmotive's history dates back to the formation of Edward F. Booth Inc. in 1932. This was launched as an aircraft dealership at Dallas's Love Field by former Army flyer "Doc" Booth. The company became Booth-Henning Inc. in 1934 when Texaco avgas salesman Hall Henning joined the business. It was renamed Southwest Airmotive Co. in 1940 after an investment bank acquired control.

Two important industry developments occurred after the war. Southwest began supplying parts to the airlines, which had previously dealt only with manufacturers. In 1950, the company also won a novel contract to overhaul piston engines for the U.S. Air Force.

There were several other early predecessors. One was Standard Aircraft Equipment, which mechanic Louis Bollo formed in 1933 from Bendix's old operations at Roosevelt Field in Long Island. Another future component, Van Dusen Aircraft Supplies, was formed during World War II by G.B. Van Dusen, who delivered parts himself by plane. It acquired several competitors in the 1960s. Aviation Power Supply was established in 1952 by three aircraft mechanics. Focusing on the commercial market at first, it eventually expanded to include engines for business jets and helicopters.

Cooper Industries acquired Southwest Airmotive in 1973, and the next year merged it with Dallas Airmotive, which had been acquired in 1970. Standard Aircraft Equipment was added in 1975.

At the time of its creation in 1981, Aviall, Inc. was probably best known as a fixed base operator (FBO) at three Dallas airports, fueling and servicing general aviation planes. However, it was also the world's largest independent jet engine maintenance company. Overhauling engines for several southern airlines and industrial users accounted for about two-thirds of revenues.

Heavy Acquisition Activity in the 1980s

The relatively small Aviation Power Supply (APS) had to borrow heavily to finance the $150 million acquisition of Cooper Airmotive that formed Aviall in 1981. Company President Robert G. Lambert later lamented to the Dallas Morning News that the highly leveraged company had been created right before a recession that was particularly harsh to the general aviation business. "It was a rough start," he said. Compounding the challenge was the bankruptcy of Braniff, a $25 million a year customer.

Revenues rose 33 percent to $400.5 million in the fiscal year ended August 1984, with profits of $8.1 million after a loss the previous year. The company had 2,600 employees, about twothirds of them in Dallas. There were a half-dozen turbine maintenance shops in the United States, and 50 distribution offices around the world.

Aviall had a successful initial public offering on the New York Stock Exchange in the fall of 1984. Within a year, though, Ryder System Inc. announced it was buying the company for $125 million.

Aviall then acquired the assets of Minneapolis aviation parts distributor Van Dusen Air Inc. in late 1986. Van Dusen had about 60 branch offices through the world and had a handful of shops to overhaul engines and other components. Its sales were about $190 million a year. Aviall also acquired Ellis-Horn Company in 1986.

Aviall's Love Field general aviation facility underwent a $1.5 million upgrade in 1988. In the same year, ILS headquarters moved to a new location in Memphis. ILS began serving the marine industry the same year, while introducing new DOS software for PC users. Its first Windows software followed in 1994.

Aviall greatly expanded its European operations with the £50 million purchase of Caledonian Airmotive in 1987. The Scottish firm, an offshoot of British Caledonian Airways, specialized in overhauling jet engines for airliners. It had revenues of more than $100 million a year. Aviall bought USAir's Pacific Southwest Airmotive subsidiary in 1991.

Focusing on Distribution in the 1990s

Aviall and Aviall Services became Delaware corporations in 1993 and Ryder System, Inc. spun off the companies to its shareholders in December of that year. Company President Marshall B. Taylor explained to Air Transport World that Ryder was unwilling to continue to invest the levels of capital needed in a demanding industry that had suffered greatly in the early 1990s recession. Many airlines declared bankruptcy, forcing Ryder into unwelcome decisions about their creditworthiness. Aviall itself, however, remained profitable until it lost $146 million in 1993 as revenues slipped 25 percent to $895 million.

In 1993, Aviall acquired Memphis-based Inventory Locator Service (ILS), which had started operations in May 1979.

Formed by John Williams, founder of The Memphis Group, ILS provided a business-to-business marketplace for its subscribers to search among millions of parts and negotiate orders. Users could connect via cheap, "dumb" terminals rather than expensive mainframes. Much business was done by phone and fax before the development of the Internet.

Aviation Sales, Aviall's used parts distribution subsidiary, was sold off in December 1994. Aviall also divested its engine repair and overhaul businesses between 1994 and 1996. Together, these had about 1,900, or two-thirds of Aviall's total.

As the airlines staggered to recovery following a global recession, a predicted trend toward more outsourcing in the industry failed to materialize to the degree expected. Both airlines and jet engine manufacturers were performing more maintenance work.

The company's Aviall Dallas Engine Services unit was hammered by penalties and losses under a fixed-rate contract. This put Aviall at risk of defaulting on its debt covenants. Aviall's small engine subsidiaries were sold off in the spring of 1995. Privately owned Dallas Airmotive bought several of these.

Greenwich Air Services Inc. (GASI) of Miami bought Aviall's Commercial Engine Services Division for around $270 million in early 1996, making GASI one of the largest independent MRO (maintenance, repair, and overhaul) companies in the world.

Robert G. Lambert, president and CEO of Aviall and its predecessors from 1973 to 1992, returned to these roles in December 1995 as Marshall B. Taylor left the company. Lambert was already chairman. Eric E. Anderson was named president and CEO in 1996, and succeeded Robert Lambert as chairman as well in December 1997. Anderson had joined Aviall in 1988 and became head of its ILS unit in 1993.

Aviall was quick to embrace the web, becoming, according to Anderson, "the first independent aviation services company to offer electronic services over the Internet." By 1998, the ILS e-commerce unit had revenues of $28 million, with income of $16 million. It had about 85 employees, most in Memphis.

The Asian financial crisis was preventing Aviall from seeing much of a return on its efforts in the Far East. The company also had to deal with significant IT problems in 1999. It was a difficult year; the company's lagging share price put the company into play.

Nolan Acquisition Partners, then Aviall's largest shareholder with 9 percent of shares, offered to buy the company for $280 million in April 1999. This led to a fruitless, several-month search for a strategic buyer, as opposed to a financial one. The company's market capitalization was reported between $200 million and $300 million at the time. Aviall's board ultimately opted to keep the company independent.

Company Perspectives:

Aviall deliverson our commitments to customers, suppliers, employees and shareholders. Aviall deliversacross worldwide markets, with unmatched product breadth and value, and through leading-edge technologies. Aviall deliverscorporate ability, strength and growth, sustained business momentum and evolutionary industry transformation and vision.

Tech Investments for 2000 and Beyond

Paul E. Fulchino replaced Eric E. Anderson as Aviall's chairman and CEO in January 2000. Fulchino had formerly been president and COO of BE Aerospace, Inc. Aviall soon began overhauling its e-business processes in 2000 in order to streamline parts buying and supply chain management for its customers. New state-of-the-art technology was installed to support this. According to Computerworld, this investment helped push Aviall to the top of its field.

ILS introduced web access to its database in 1999/2000. In 2001, ILS was changed from a Tennessee corporation to a Delaware limited liability company. It was seeing record usage while other dot-coms folded in the collapse of the Internet bubble. It had about 6,000 subscribers at the time and was succeeding in the face of new competition from start-ups, airlines, and OEMs.

Aviall's overall revenues were growing by leaps and bounds. In fiscal 2002, sales rose 59 percent to $803 million. The company was representing 180 manufacturers and had more than 10,000 customers in general aviation, plus 300 airlines.

Sales exceeded $1 billion in 2003. The growth prompted the expansion of Aviall's Dallas central distribution facility and headquarters over the next couple of years. The Houston customer service center was also relocated to larger accommodations. The company continued to take advantage of acquisition opportunities. It bought the hose assembly business of McAVIAN Aircraft Supply in 2004.

In December 2004, the U.S. Supreme Court ruled against Aviall Services in an environmental case. Aviall had discovered contamination at some former Cooper Industries sites, and took a proactive approach to cleaning them up before they were sold off to another party. However, the Supreme Court decided Aviall could not recoup costs from Cooper since it had not been ordered to clean up the sites by the government.

Principal Subsidiaries

Aviall Services, Inc.; Inventory Locator ServiceUK, Inc. (USA).

Principal Operating Units

Aviall Services, Inc.; Inventory Locator Service LLC.

Principal Competitors

AAR Corp.; The Fairchild Corporation; First Aviation Services Inc.; The Memphis Group, Inc.

Key Dates:

1932:
Edward F. Booth Inc., predecessor to Cooper Airmotive, is formed at Dallas's Love Field.
1933:
Standard Aircraft Equipment is formed in Long Island.
1940:
Former Edwin F. Booth Inc. is renamed Southwest Airmotive Co.
1955:
Southwest Airmotive is formed.
1973:
Cooper Industries merges Southwest Airmotive with Dallas Airmotive.
1979:
ILS is formed in Memphis.
1981:
Aviation Power Supply Inc. and Cooper Airmotive merge to form Aviall, Inc.
1984:
Aviall goes public on the New York Stock Exchange.
1985:
Ryder System, Inc. acquires Aviall for $125 million.
1986:
Aviall buys Van Dusen Air Inc.
1987:
Caledonian Airmotive signals major European expansion.
1991:
Aviall buys USAir's Pacific Southwest Airmotive subsidiary.
1993:
Aviall is spun off to Ryder shareholders; Aviall acquires ILS.
1994:
Aviall begins major divestment of engine maintenance operations.
1999:
Board keeps Aviall independent after evaluating takeover offers.
2000:
ILS's IT systems undergo major overhaul.
2003:
Growth prompts facilities upgrade and expansion.

Further Reading

"Aviall Closes on Deal to Sell Engine Unit to Dallas Airmotive," Weekly of Business Aviation, March 20, 1995, p. 121.

"Aviall Sells Re-Distribution Business, Concentrates on Big Engine Work," Airline Financial News, December 12, 1994.

"Aviall Spares Venture Could Save Airlines Billions," Airline Financial News, December 25, 1995.

"Aviall to Buy Van Dusen Assets," Dallas Morning News, October 29, 1986, p. 2D.

"Aviall to Sell Remaining Engine Units, Focus on Distribution," Weekly of Business Aviation, February 5, 1996, p. 54.

Cantu, Tony, "Ryder Ponders Sale of Texas Aviation Unit: American Airlines Parent Named As Potential Buyer," South Florida Business Journal, June 18, 1993, pp. 1+.

"CEO Interview: Paul Fulchino - Aviall Inc. (AVL)," Wall Street Transcript, July 17, 2000.

"CEO Interview: Paul Fulchino - Aviall Inc. (AVL)," Wall Street Transcript, June 18, 2001.

"CEO Interview: Paul Fulchino - Aviall Inc. (AVL)," Wall Street Transcript, June 24, 2002.

"CEO Interview: Paul Fulchino - Aviall Inc. (AVL)," Wall Street Transcript, May 5, 2003.

Civins, Jeff, and John Eldridge, "Cleanup Help Not Available," Texas Lawyer, January 10, 2005.

Donoghue, J.A., "Aviall, Alone and Assured," Air Transport World, February 1, 1994, p. 97.

"Facing Default, Aviall Strikes Potential Deal with Greenwich Air; If It Goes Through, Once-Tiny GASI Could Become Biggest Independent," Aerospace Propulsion, February 15, 1996, p. 5.

Feuerstein, Nora, and Lynn Cornwell, "ILSmart Review: Accelerating Buying and Selling Time," Contract Management, April 2005, pp. 58+.

Field, Alan M., "No Respect," Forbes, July 1, 1985, p. 46.

Fulton, Dennis, "Low Profile Belies High-Flying Aviall; Jet Support Firm on Fast Growth Track," Dallas Morning News, February 3, 1985, p. 1H.

"Greenwich to Buy Aviall's Engine Service Business," Aviation Daily, February 6, 1996, p. 193.

Harrington, Lisa H., "Bulking Up; Independent Sites Fight for Mass As Major Vendors and Buyers Throw Their Weight Around," Air Transport World, November 2000, p. 16.

"Lambert Takes Over Top Jobs at Aviall Following Taylor's Departure," Weekly of Business Aviation, January 1, 1996, p. 2.

Leland, Richard G., "Court Decision Shows No Good Deed Goes Unpunished," Real Estate Weekly, February 2, 2005.

Mathews, Jim, "Girding for Aviall Proxy War, Nolan Brings Ex-GE Chief Aboard," Aero Safety & Maintenance, April 2, 1999, p. 1.

Maxon, Terry, "Aviall Chairman Lambert Returns As President, CEO," Dallas Morning News, December 21, 1995, p. 11D.

, "Aviall Plans to Sell Jet Repair Unit; Company Cites Decline in Profits for Action," Dallas Morning News, February 1, 1996, p. 1D.

Melymuka, Kathleen, "Going for Broke: When the Chips Were Down, Aviall Invested $40 Million in IT: The Payoff Is a $431 Million Boost in Sales," Computerworld, May 26, 2003, pp. 41+.

Paulk, Michael, "Commercial Aviation Companies Take Their Battle Online," Memphis Business Journal, August 4, 2000, p. 6.

, "ILS Bucks Dot Com Slowdown, Reports Record Business Levels," Memphis Business Journal, April 20, 2001, p. 7.

Pratt, Ben, "Aviall, at Last, Hovers Closer to a Sale: After More Than Six-Month Exploration, Aviation Co. Should Land a Buyer," M&A Reporter, October 18, 1999.

Reed, Arthur, "Caledonian Airmotive Expanding with Ryder," Air Transport World, April 1, 1989, pp. 62+.

Ridgway, Nicole, "Aviall Buyout Talk Gains Momentum As Deadlines Near," Dow Jones News Service, August 12, 1999.

Robertshaw, Nicky, "ILS Creates a Global Market for Aviation, Ma rine Parts," Memphis Business Journal, March 26, 1999, p. 32.

Robinson, Teri, "Get Buy-In from Sales Force to Ensure E-Biz Success," InternetWeek, September 27, 1999, p. 22.

Stuart, Scott, "Aviall Faces Potential Proxy Pounding: Frustrated Shareholders Bemoan Aerospace Supplier's Grounded Stock," M&A Reporter, February 15, 1999.

, "Deal Engines Hum for Aviall: Would-Be Buyer May Lack Financial Lift to Raise Its Bid," M&A Reporter, April 19, 1999.

"Stung by Fixed-Rate Engine Contracts, Aviall to Exit Engine Arena," Aerospace Daily, February 2, 1996, p. 168.

"Superior Terminates Deal for Acquisition by Aviall," Weekly of Business Aviation, November 27, 2000, p. 245.

Tan, Kopin, "Analysts Expect Aviall to See Much Interest from Aerospace Buyers," Dow Jones Business News, February 24, 1999.

Tan, Kopin, and Steven M. Sears, "Aviall Said to Be Mulling at Least Two Purchase Offers," Dow Jones News Service, June 16, 1999.

"USAir to Sell Pacific Southwest Airmotive to Aviall," Aviation Daily, April 19, 1991, p. 140.

Velocci, Anthony L., Jr., "Market Focus," Aviation Week & Space Technology, March 8, 1999, p. 15.

Weinberger, Joshua, "Secret of My Success: Aviall Services Uses CRM to Improve Collaborationand Revenue," CRM Magazine, January 1, 2005, p. 50.

Weiss, Michael, "Ryder System to Buy Dallas-Based Aviall for $125 Million," Dallas Morning News, August 23, 1985, p. 3D.

Zimmerman, Martin, "New Aviall Facility to Open Thursday," Dallas Morning News, July 28, 1988, p. 2D.

Frederick C. Ingram

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