Symphony Aircraft Industries, which produces the Symphony 160 two-seat trainer, has entered into the Canadian version of bankruptcy.
Filing under C-36 of the Creditors Arrangement Act protects the company from its creditors while it continues to operate, officials with the Quebec-based company said.
“We were put in this position by our suppliers, who are primarily non-GA suppliers who have less patience,” explained Paul Costanzo, CEO.
The underlying cause of the company’s financial problems, according to Costanzo, is the “dismal” venture capital environment in Quebec. “There is a lack of appetite for this type of business venture,” he said. “We’ve turned over every stone we thought was worth turning over and we have not been able to bring the capital into the business that we need.”
Symphony chose to locate in Quebec in 2001 for several reasons, including the fact that a facility built for the former owner of the model, OMF, was already in place. More important, the tax structure for a Canadian controlled private company provides significant tax advantages, Costanzo said.
But the lack of capital from companies in the Quebec area has proved detrimental. “It doesn’t make sense that a company with our potential can’t attract capital,” a frustrated Costanzo said. “We are in an awkward situation — we’re too big a project for the small venture capital firms, yet too young for the big funds.”
Filing with the courts for protection was essentially a “last call” for capital from the Quebec market, he said.
“If we can’t bring in enough capital to become a stable and well-funded company, we’ll have no choice but to move to the United States. We’ve had three different calls just today from venture capital firms in the U.S. who want us to move to the U.S.”
Of course, moving to the U.S. would cost a lot of money, as well as slow down production of the airplanes. The company could have U.S. venture capital firms invest and still remain in Canada, but it would lose some of its tax advantages, Costanzo said. He noted that all of the venture capital firms from the U.S. interested in Symphony want the company to move here.
The company is looking for a minimum of $5.5 million (U.S). “But I’d be more comfortable with $8 million to $9 million,” he said. “That would get us out of the mode of spending too much of our energy chasing capital.”
During this “transition” — as Costanzo calls it — the company’s staff has been “skinnied down” to 15, from 30 a few weeks ago. While top executives are focused on chasing capital, other employees are working on certification of the glass cockpit version of the 160, which will be called the SA 160e. “We’re continuing to build the second glass cockpit aircraft, but at a very slow pace,” he said. “Our emphasis now is on the customer support side.”
One of the company’s biggest customers, Spartan School of Aeronautics, which recently decided to replace its existing fleet with Symphony 160s, is standing behind the manufacturer.
“We recognize that with any new aircraft company there are always bumps that must be worked out,” said Brent Mills, president of the Tulsa school. “Regardless of any extraneous business issues which may be temporarily impacting company operations, we strongly believe in the aircraft and its quality.”
Costanzo declares that there is “no doubt” that the Symphony 160 has an “enviable future” in general aviation. “The question is simply whether this success will be based in Quebec or in the USA, which I expect will be answered in the next 90 days,” he said.
The company plans to be at AirVenture in Oshkosh in “full force,” he added.