Are you back to full production yet?

At the time of our acquisition, we needed to restart the production line and reignite the supply chain. Six months later, we are on course to meet our production target for 2006 and will significantly increase it in 2007. Conservatively, I would anticipate full production with a renewed supply chain to be in full effect in 2008.

Have you completed visiting your customers? Are they still on-side?

We are in the process of rebuilding relationships seriously damaged by the previous owners and the absence of service to our operator base. Although we are a new shareholder with a fresh, experienced and inspired management team, the pain of the past is not easily forgotten.

The reactions of our customers range from great appreciation of our arrival to, at the darker end of the spectrum, cautious optimism. ‘I’ll believe it when I see it,’ they say. We are dedicated first and foremost to our installed base and the facilitation of service and parts. We have reduced AOG instances by 70 percent since August, but the onus is upon us to prove to our customers that we will make the necessary changes that will ultimately foster their confidence.

Are parts getting to customers now?

Our spare-part order fill rate has increased to 80 percent while reducing aircraft on the ground by almost 70 percent. To enhance our service and part delivery performance, we have signed long-term supply agreements with many of our key suppliers. We continue to work toward finalizing the few remaining key supplier agreements to ensure that our commitment to offer unequalled customer service transcends from merely a concept to an operator reality.

How many deliveries are still outstanding?

We anticipate the delivery of at least 20 new aircraft in 2006, with the opportunity to double the number depending upon our ability to procure all the necessary parts. The absence of full production over the last few years has forced the restart of production by many of our key suppliers, with certain delays due to long lead times.

What is the size of your workforce now, compared with two years ago and before you took over the company? What are your manpower plans for 2006?

Two years ago, MDHI employed approximately 170 employees. The current workforce count is approximately 185. Depending upon confirmation of new contracts and the potential award of the LUH (light utility helicopter) contract by the U.S. Army, new hires could increase the workforce to between 250 to 300 employees over the next six months.

We have maintained much of the previous workforce at the mid- management and touch-labor levels but have replaced most of the senior management staff, including rehiring Andy Logan, a patent holder on the Notar technology, as our chief technology officer and David Langenhuizen as general manager of operations. We continue to create a team that demonstrates the passion, creativity and skills to set in motion the extraordinary comeback for MDHI.

The MD 902 has proved especially popular as a police/EMS helicopter in the UK. Now that a new 10-year procurement cycle is under way, do you feel that the operators are reassured you are back to stay and, vitally, can support the product?

We continue to meet with our customers to candidly explain where we have been, where we are and where we believe we are going–including the public service operators in the UK. We believe it is important to share our current reality as well as our game plan to be the provider of superior technology and unparalleled customer support. We understand the customer confidence will be built on our ability to meet their needs for timely delivery of parts and technical assistance, and we further understand that the burden of proof is upon us.

In January, Jeff Snyder, general manager of spare parts and service, and Hans Hilkhuysen, director of international programs, made time to meet with the European MD 902 user’s group. This group convenes to discuss ideas and issues relevant to Explorer operators throughout Europe. The feedback from the meeting was quite positive and cautiously optimistic on the progress that we have made toward spares availability. Moreover, we were encouraged by the supportive comments by our operators when apprised of MDHI’s plans to achieve operational efficiencies and to innovate technology as we move into the future.

Setting prices must be a tricky business. While MDHI is finding its feet again, is your policy to price parts aggressively?

Our pricing strategy is proprietary. However, our philosophy is simple. We are indelibly committed to delivering aircraft that offer superior performance and safety, innovative technology and economic efficiency. That commitment makes our aircraft of great value. I believe that it never makes sense to sell aircraft at margins that do not serve to foster the long-term growth of the company. We want to offer a great product at superior value, but we will not undercut pricing to sell aircraft. We would prefer to spend money on innovation and safety.

Have you been evaluating potential upgrades to the Explorer?

The existing Explorer has consistently proven itself to be a superior aircraft that can fulfill a wide spectrum of mission objectives. The aircraft performance is solid. However, we are considering system-wide upgrades that will enhance the aircraft’s performance in all flight regimes, including increasing payloads. Specifically, upgrades will include modifications to the tailboom and improvements to the cockpit displays. We anticipate FAA approval for them later this year.

We are also committed to the upgrade of safety features suggested by the FAA, including HUMS, wire cutters and TAWS.