By Paul Gable
Accompanied by glowing pronouncements from state and some local officials, AvCraft Technical Services, Inc. received a second round of incentives from Horry County and the state with the promise to create 150 new jobs over the next three years.
“AvCraft’s decision to expand their workforce by 150 employees is a tremendous testimony of our attractiveness as an aviation destination. I am thankful for the company’s commitment to Horry County and proud of our economic development team for this terrific announcement,” said Tom Rice, chairman of the Horry County Council.
“It’s another great day in South Carolina, and we are going to celebrate AvCraft’s decision to expand and create 150 new jobs in Horry County. Bringing jobs and investment to our state continues to be a top priority of this administration, and we will build on this year’s success in 2012,” said Gov. Nikki Haley.
“AvCraft is a tremendous asset to our community, and this project is just the beginning for aviation-related businesses locating and expanding in the Myrtle Beach region,” said Doug Wendel, chairman of the Myrtle Beach Regional Economic Development Corporation (MBREDC).
AvCraft is the first company to be approved for incentives by the latest version of the county’s economic development arm. Horry County Council approved a $100,000 incentive package for the company earlier this month with a matching $100,000 coming from the state.
While the announcement was hailed by some officials, other Horry County officials were surprised and concerned when the announcement was made yesterday. When county council voted to approve the incentive package, it was not told the name of the company involved. AvCraft was only referred to by a code name to county council by Brad Lofton, CEO of MBREDC.
“I can promise you, from now on, council will know the name of the company involved before incentives are voted on,” said council member Carl Schwartzkopf.
Schwartzkopf added he had spoken with a majority of council members, after the announcement, who voiced the same sentiments.
The concern and surprise resulted from the first experience with incentives between the county and AvCraft dating from 2004. AvCraft has consistently boasted about its ability to create hundreds of high paying jobs for Horry County, although, to date, its performance has not matched its pronouncements.
Despite spin by county chairman Rice and Lofton, after criticism by some council members became public, county officials and residents have a right to be concerned.
Rice is running for the new 7th Congressional District seat, with Wendel serving as his major fund raiser and jobs being at the forefront of his campaign. However, with only his first ever year of elective office, as county council chairman, about to be completed, Rice may not yet understand what it takes to create solid permanent jobs and the use of government incentive packages.
Rice and Lofton claimed this AvCraft is a new company with a bright future, but it really is not. It has new ownership and possibly a revised business plan, but at its heart, it is still providing maintenance and completion services for regional turboprop and jet aircraft, a service called “pimp my ride for airplanes” by council member Marion Foxworth in 2004.
AvCraft first arrived at Myrtle Beach International Airport in January 2004 under the name AvCraft Support Services, Inc. At the time, the company was principally owned by Ben Bartel.
The history of AvCraft under Bartel was one of continued over optimistic miscalculations. Headquartered in Leesburg, Virginia, AvCraft Aviation Holdings bought an airplane maintenance facility at the Canton-Akron Airport in Ohio and Tyler Jet Completions of Tyler, Texas in late 1999. Both businesses were renamed AvCraft.
Bartel purchased the Fairchild Dornier 328 production facility in Oberpfaffenhofen, Germany out of bankruptcy in late 2003, changing the name to AvCraft Aerospace GmbH. At that time, he estimated there was enough interest in the aircraft to support production of 300-500 more units. Shortly after the purchase of the German factory, Bartel announced he was merging the Ohio and Texas operations into AvCraft Support Services to be located at Myrtle Beach.
According to early 2004 statements by Bartel, the Myrtle Beach facility planned to provide maintenance and refurbishment for existing Dornier 328’s in the United States, as well as providing paint and completion facilities for new production aircraft from the Oberpfaffenhofen plant. He estimated the Myrtle Beach plant would ultimately provide 300-400 high paying jobs in Horry County.
Bartel negotiated a combined incentive package of $1,075,000 with Horry County’s Partners Economic Development Corporation, the precursor of the current Myrtle Beach Regional Economic Development Corporation, and the state of South Carolina Department of Commerce.
The Myrtle Beach Air Force Base Redevelopment Authority agreed to provide a maximum of $750,000 to Horry County to fund the local portion of the incentive package with $325,000 coming from the state. The local incentive money was to be paid in four equal annual installments of $187,500 each, according to terms of a lease between AvCraft and the Horry County Department of Airports, if certain employment goals were met. AvCraft received the first installment in May 2005, based on employment of 40 full-time employees by January 15, 2005.
AvCraft missed a June 15, 2005 employment goal of 80 full-time employees needed to qualify for the second full installment but still received a payment of $148,125, according to the terms of the lease. According to company records submitted to Horry County, AvCraft employed 62 full-time employees in January 2005 and 63 full-time employees in June 2005.
According to county records, AvCraft received partial payments on the third and fourth installments, even though the company averaged approximately 50 employees in the ensuing years. Total payments by Horry County to AvCraft over the four installments of the incentive agreement was nearly $500,000 although the company only achieved its first employment goal.
According to S.C. Commerce Department spokesperson Claire Morris, AvCraft never received any incentive payments from the state because it failed to meet its employment goals.
In March 2005, AvCraft Aerospace GmbH filed for bankruptcy protection in Germany. Bartel closed the corporate headquarters in Virginia in April 2005. In July 2005, Bartel was detained in Frankfurt, Germany by the German Federal Police as he was investigated for tax evasion in that country.
Maple Financial Group, Bartel’s principal creditor for his AvCraft ventures, foreclosed on the company in late 2005. It operated the Myrtle Beach facility until October 2010 with Mike Hill serving as General Manager for most of that time.
In November 2009, then Gov. Mark Sanford attended a ceremony in Myrtle Beach at which AvCraft Support Services, Inc. and Indaer International announced a joint venture “to provide seamless regional aircraft heavy maintenance to customers throughout the Americas,” initially targeting the ATR 42 and 72 markets. At the time, AvCraft estimated this joint venture would create 50 new jobs in Horry County over the next three years.
According to the Indaer International website, www.indaer.com, the company is called “a leading aerospace group that provides technical services to airlines, lessors and government agencies.” It was founded in 2002 “as the successor company to ACES (Aerolineas Centrales de Columbia), a well-established Latin American regional airline, Indaer continues to build on its unique heritage to offer an unmatched combination of engineering, process management and maintenance excellence.”
Indaer International is headquartered in Medellin, Columbia as was ACES before it. According to industry publications, ACES was founded by Medellin entrepreneurs, most notably Orlando Botero Escobar and German Penaloza Arias, on August 30, 1971. By 1976 it expanded its network to small regional destinations and in 1981 began adding jets to its fleet to allow for longer range destinations. The airline was merged with Avianca and SAM to form Alianza Summa in May 2002 with Indaer International being spun off at the time to provide technical services.
On October 1, 2010, it was announced a group of investors led by Indaer International purchased the assets of AvCraft Support Services, Inc. A new company, KNH Aviation Services, Inc. was formed to hold the assets of the purchased company, which now operates under the name AvCraft Technical Services, Inc. Mike Hill, General Manager of AvCraft Support Services was named President and Chief Operating Officer of AvCraft Technical Services providing continuity in the operation of the Myrtle Beach facility.
KNH completed a new lease on hangar facilities with Horry County in September 2011. It now has its new incentive package. But, while the announcement was being made yesterday, it still had only about 50 employees at its Myrtle Beach facility after laying off approximately 30 employees in November 2011. We can only wait to see what the future brings this time.
Paul Gable is a veteran investigative reporter residing in Horry County, South Carolina and is the current editor of the Grand Strand Daily an online magazine featuring all things local and political.