Waypoints

Wnt to get the attention of someone who puts words on paper for a living? Just suggest that those words might be inaccurate. You will get attention.

When Alan Hanks, executive vice president of corporate operations at Narco Avionics, telephoned to politely suggest that I was all wet in my perceptions of his company, I felt my blood pressure going up. It seems that Hanks took umbrage at my statement in this column in the June issue (" Waypoints: Electronic Warfare") that "Narco, once a major player, has all but disappeared."

Hanks, in his forever gentlemanly manner, suggested that I had an outdated perception of the company. The firm, he explained, was shipping new radios and developing new products. In an effort to call his bluff, I proposed that we meet at Narco's Fort Washington, Pennsylvania, factory so that he could show me around.

Fort Washington, a Philadelphia suburb, is near Wings Field, the airport where AOPA was formed 57 years ago. The picturesque country-club airport is only a 45-minute flight from AOPA's headquarters in Maryland.

En route to Wings Field in a new MSE on short-term loan from Mooney, I mentally reviewed the tortured history of Narco Avionics, the 51-year-old company that coined the word "avionics" and pioneered an entire industry. Here I was, flying in a brand-new airplane chock-a-block with Bendix/King avionics — just like every new airplane I'd seen in years — yet from the late 1960s until about 1971, Narco owned 90 percent of the lightplane avionics business. Today you won't find any airframer installing the product line.

The company suffered through a series of corporate changes throughout the 1970s. Entrepreneur Ed Zimmer bought the avionics business "for a song" in 1981, reports Hanks. Like the rest of the general aviation industry, Narco struggled through the 1980s and early 1990s. In early 1993, with cash flow near zero, the company announced a plan that was designed to bring in at least some cash. Under the scheme, Narco dealers would no longer be permitted to do field repairs. All the units would be returned to the factory for service. This immediately offended dealers, who could no longer generate income from the repairs, and it infuriated customers. A simple display replacement that any dealer could do in minutes would take days to weeks to be returned from the factory. The new policy came at a time when Narco's relationships with its dealers were already at an all-time low, thanks to the manufacturer's ongoing relationship with mail-order companies.

Throughout the 1980s, some 95 percent of Narco's business was conducted through a select group of mail-order dealers advertising in Trade-A-Plane. Customers could dial the telephone and buy a Narco radio from one of the mail-order houses for less than the local dealer might have paid for it himself; yet Narco needed its dealers to install and support its products.

Hanks, who rejoined the company last year after a 20-year hiatus, is tasked with regaining Narco's market share in a crowded industry a fraction of the size it was 20 years ago.

According to Hanks, the company is "back from the precipice, but there's still lots to do." He reports that Narco is "comfortably financed for where it is and where it's going."

He acknowledges that his biggest and most lucrative market currently is in sales of replacements for those 75,000 to 85,000 Narco radios already in the fleet. Of those, some 30,000 are Mark 12s, 12As, and 12Bs, all of which must be replaced by January 1, 1997, when new Federal Communications Commission regulations are scheduled to go into effect. Under the new FCC regs, radios that don't meet frequency tolerance criteria cannot be used for transmitting after 1996. Narco now produces slide-in replacements for all of its older models and, of course, the new ones meet the latest FCC specs and bring all the modern conveniences of digital flip-flop displays, memory channels, and at least eight watts of power.

Contributing to Narco's woes in the last couple of years was the decision by AlliedSignal to allow its Bendix/King Crown series of radios to be sold through mail order. This drastically changed the product mix for mail-order dealers. Five years ago, Narco products represented some 60 percent of sales for Gulf Coast Avionics, a mail-order company in Tampa and one of Narco's largest dealers, according to the company's president, Rick Garcia. Gulf Coast also operates a traditional walk-in avionics shop.

Today, Bendix/King garners about 70 percent of the Gulf Coast business; Terra gets 20 percent; and Narco has only 10 percent, Garcia estimates.

Hanks admits that the AlliedSignal decision devastated the already struggling Narco.

Hanks recognized that the only way to compete was to rebuild a strong and loyal dealer base without offending the mail-order dealers who still represented a major portion of Narco sales. To do that he developed a plan to pare down the number of Narco dealers to try to make the dealerships more valuable to their owners. Over the years, the number of Narco dealers had grown to nearly 1,000, about the same number that other avionics manufacturers have. Hanks' objective was to trim the number of Narco dealers to about 200, but to have them be the top 200 shops in the country.

He currently has about 150 shops assigned "Master Dealerships," which gives them better discounts and the right to service Narco radios. Dealers without the "Master" designation still may not service Narco products. Hanks expects to have another 50 or so shops recruited into the Master Dealership program within a year.

To allow the dealers to compete with the mail-order business, Narco introduced minimum advertised pricing. The MAP program limits the price that any dealer, including the mail-order operators, can advertise. The company's MAP for each of its products is set at a level that allows the traditional dealer to still make a profit, even if he sells the unit at the same price as that charged by the mail- order dealer. "Now when a customer waves Trade-A-Plane in front of the dealer, he can afford to sell it at that price too and then also sell the installation of the radio," Hanks says.

At least on Hanks' scale, the program has been a success. He has succeeded in bringing down the percentage of Narco business done through mail order, while increasing the amount of business conducted by traditional shops. Now the mail-order dealers represent about 42 percent of Narco's business and the shops get the remaining 58 percent. In addition, sales are up some 25 percent from last year and 40 percent from 1994. Hanks admits that 1994 was such a bad year that it's not a fair benchmark.

He now spends much of his time working to bring the quality of the factory products and services up to the highest levels. On the day of my visit he delayed the shipment of a number of radios because employees had not adequately wiped their fingerprints off the trays before packaging the units. "We can't afford to deliver anything but the best. We've used up all our credibility. We must now deliver 100 percent, 100 percent of the time."

While Hanks appears to be doing good work, he has failed to communicate such moves to the industry and the customers.

Gulf Coast's Garcia appreciates Hanks' efforts but says, "The company hasn't done anything to communicate the changes. They definitely need to change their image." Garcia says that his company has always received quality products and support from Narco, but he knows that many smaller shops have not.

Fred Kattermann, owner of Islip Avionics in Islip, New York, agrees that the company has not done enough to communicate its changes. "They need to rejoin the AEA [Aircraft Electronics Association] and develop a reasonable dealer concept. They need 200 percent quality for at least the next three years to convince dealers and customers that they're serious." Islip Avionics is not a Narco Master Dealer, though Narco has asked it to become one. Kattermann says the slight discount offered to the Master Dealers is not worth the additional paperwork and hassle of joining up. He does maintain his traditional Narco dealership, however, and still sells the occasional radio.

Kattermann, Garcia, and other dealers with whom I spoke are all in agreement that they want Narco to survive. AlliedSignal needs a strong competitor, they concur. The Trimble acquisition of Terra Avionics is good news to the dealers — and ultimately for the customers, as well. A third strong challenger in Narco would be even better news.

I don't envy Hanks' task, however.