When Mahindra Aerospace bought into GippsAero in 2010, the pairing looked like a perfect match destined to do great things. The Indian congolomerate wanted a fast entry into aviation and GippsAero needed money to see off the impact of the Global Financial Crisis and fund development of its GA10 single-engine turbo-prop.
At the time, GippsAero founder George Morgan said “I am sure our association with Mahindra will take the company to even greater heights and we look forward to the beginning of a new chapter in our history.”
Other than being a company short of cash, the GippsAero that Mahindra bought into was a successful company with a proven product in the GA8 Airvan. GippsAero had the know-how; Mahindra had the money. Surely the formula for success wasn't too complex.
But it has now been 10 years since the deal was done and the story is very different from what it was at the start of the chapter. Mahindra Aerospace has failed to climb those heights and is desperately looking for an exit that won't leave them too much in the red or with excessive egg on their faces.
It is believed that Mahindra sunk more than $100 million into the company, but has struggled to get a return on their investment.
If the stories coming out of the factory at Latrobe Regional Airport in Victoria are solid, Mahindra may have dug their own bottomless pit to throw that money into. No sooner had the partnership been launched than changes started; changes that hindsight reveals were intrinsic to the situation the company now finds itself in.
Those changes included new members of the management team and new engineers that had no aviation experience. Immediately they tried to put a corporate stamp on GippsAero. It was big-business thinking applied to a operation where the prime product was hand-built and economies of scale never came into the equation.
Costly new systems were brought in, driving up the cost of the Airvan 8. To preserve desired margins, Mahindra boosted the sell price of the aircraft, unfortunately to a level customers baulked at paying.
"Things worked at GippsAero because we had aviation oriented people doing it," former GippsAero engineer Max* told Australian Flying. "Once textbook engineers without real-life aviation experience were brought in, things started going backwards."
One of the very first tasks Mahindra set GippsAero was to drop work on the GA10 (rebranded as the Airvan 10) and instead build the prototype of an Indian design: the five-seat C-NM5 single-engined low-wing. The aircraft was built from the drawings sent over from Mahindra. The prototyping team worked up to 18 hours a day to get the aeroplane built, which they did successfully, even though many of those in the team had little faith in the design. It was a distraction they didn't need.
"We built it because we were told to build it," Max recalls ruefully.
It was testament to the skills of the team that the C-NM5 flew in September 2011, only 10 months after the edict to build it was passed down. Mahindra Aerospace immediately began boasting of the achievement.
“GippsAero is proud to have produced the prototype of the C-NM5 in partnership with our parent company Mahindra Aerospace,” CEO Terry Miles said at the time. “The construction of a working prototype in 10 months is an outstanding achievement for our team, and a testament to the manufacturing skills that we have nurtured within our organisation here in regional Victoria.”
The C-NM5 was then parked in the development hangar (dubbed "Dreamland" by some inside the company), where it has become the ultimate hangar queen and an obstacle for people to walk around. No further work was ever done.
By the time the team could refocus on the Airvan 10, Mahindra's team of new engineers had made fundamental changes that started the aircraft on a trajectory that GippsAero couldn't arrest. The original engineers found themselves sidelined as the corporate machine went to work on the product.
Intended to be an aircraft that was a simple step-up for pilots already flying Airvan 8s, the design concept was drifting away from its raison d'etre. Mahindra's team didn't seem to understand what the aeroplane was all about.
"Mahindra was very hard-nosed," another former GippsAero engineer, Gary* laments. "The influx of engineers were from larger projects. GippsAero's engineers had a lot of knowledge, but they were pushed aside.
"A complete disconnect occurred between what the aircraft was supposed to be and what the engineers were making of it. You could say there was some difference of opinion."
Max was more blunt in his assessment of the outcome: "Mahindra engineers stuffed it up!
"Arrogance within the Mahindra culture didn't work with the Australian way of doing things. Some upper management dictates just weren't accepted. They were too over-controlling."
Buckets of Mahindra money–much of it invested in dead ends–was needed to get the new-style SETP to a point where it could be presented for type certification. It was a lot more than it should have been, and a lot more than it could have been had Mahindra left GippsAero to develop it on their own. It seemed the same skills and abilities that CEO Terry Miles spruiked after the C-NM5 flew were not enough to turn the Airvan 10 into a marketable proposition.
Despite endemic corporate interference, the Airvan 10 passed through both CASA and FAA scrutiny to the certification stage.
On 15 August 2017, CASA Stakeholder Engagement Manager Rob Walker traveled to Traralgon to present GippsAero with the Airvan 10 type certificate. It was the second time only that a turbine aircraft had been certified in Australia.
"It opens us up into a much bigger market, the turbo-prop market," CEO Keith Douglas said when the TC was presented. "The piston-engine market is maybe 50-60 aircraft a year; the turbo-prop market is 150 per year. Cessna sells about 90 Caravans, the 750 XL maybe 30 of them.
"We're going to enter into this space, but we're not going to compete with them; we're actually going to provide the operators with another option that's not been there in the past.
"We're very, very excited about this."
But the excitement soured. Not only had Mahindra sunk more money into the project than they wanted, their own engineers had been unfaithful to the demands of the market niche the aircraft was aimed at. It's not that the certified version was a bad aircraft, it was actually quite good, but it was too distant from what the project set out to deliver.
After the first production model Airvan 10 was lost over the Mojave Desert during spin trials in 2018, Mahindra's ardour for the aircraft cooled substantially, even though Botswana company Major Blue Air later placed an order for one. It is telling that the order was never filled.
Then in 2019 came what may have been the trigger for Mahindra making escape plans: an Airvan 8 parachute plane crashed in Sweden, prompting CASA to issue a grounding order. It was taken up all around the world. Despite CASA removing the order after it became obvious the aircraft had not failed in any way, sources inside GippsAero believe it rattled Mahindra severely.
Problems such as these are part of any GA manufacturer's world; you resolve them and plow on. Imagine if Beechcraft had given up after the second prototype Bonanza crashed before the type was certified. But Mahindra isn't a GA company; it's a conglomerate that brings with it an attitude incompatible with GA.
And now, with nothing to show for the millions invested, Mahindra is looking to cut their losses. How they plan to do that is very unclear and no-one within Mahindra is talking right now.
However, there are strong indications that other companies are keen to buy GippsAero and keep it running. At least two US-based companies and one Australian organisation are known by Australian Flying to have made representations to Mahindra. Rumours talk about up to eight potential suitors.
If information is right, Mahindra is trying to recoup the losses by putting a price tag of over $100 million on the company, but simultaneously is keeping the financials close to their chest, making due diligence and a serious offer nearly impossible.
Other sources say that the company will be wound up by the end of August and the Airvan 8 tooling probably destroyed. But even those who have either moved on or been shoved out of the operation still hold out hopes that a deal can be found to enable the Airvan to continue on.
"To see it whittled down is heart-breaking," Max laments. "Much damage has been done to GippsAero.
"The upside is that the customer base still embraces the original GippsAero team and is holding its breath to see what will happen to the Airvan 8. The Airvan 8 has very strong brand loyalty; the customers know it works and know it makes money for them.
"The Airvan 8 is still a sure thing, provided someone can get control and do it sensibly."
*not their real names. Engineers spoke to Australian Flying on condition of anonymity. Mahindra Aerospace has been contacted but has declined to comment.