A Turboprop Built for Trouble

Workers can produce three Kodiaks a month at Quest's Idaho plant.

JOHN KEATLEY / REDUX FOR TIME

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Paul Schaller, a former Silicon Valley pilot and high-tech executive, has spent the past five years getting Quest Aircraft Co., a turboprop manufacturer in Sandpoint, Idaho, off the ground. But just when business was taking shape, he ran into a wicked recession that has made owning a private plane about as politically correct as wearing mink to a PETA convention.

Schaller's salvation has been to exploit an overlooked and defensible niche: utility turboprops for missionary and humanitarian organizations that need to access remote and dangerous regions. It's a growing $300 million market that hasn't seen much innovation since the Turbo-Beaver bush plane was introduced by de Havilland Canada in the early 1960s.

Since becoming CEO in November 2004, Schaller has been able to get the prototype of the company's Kodiak aircraft--a rugged 10-seat hauler equipped to operate in harsh environments--commercialized and certified by the Federal Aviation Administration. He's boosted deliveries from zero to 27, garnering customers ranging from the Mission Aviation Fellowship operating in Indonesia to a Saudi prince. Given that each Kodiak sells for a base price of $1.45 million, the steady revenue stream has helped fund production and the expansion of the company's workforce.

Quest now employs 300 people in Sandpoint, a small resort town nestled 50 miles (80 km) from the Canadian border. Its lean manufacturing facility is rolling three Kodiaks off the assembly line a month. The company's goal is to double revenue to $60 million next year, which would put the start-up into the black. It's reachable, as the company has 120 planes on back order.

"It's taken more than a wing and a lot of prayer to get to this point," says Schaller, who notes that the fundraising, cash-management and marketing skills he gained from working at various start-ups have helped him navigate the challenges of getting a new aircraft launched in a recession. Quest has spent $80 million to build, certify and start production of the Kodiak--all without venture capital or high-interest loans. Compare that with Cirrus Design, which plowed $70 million into its SR20 single-engine piston aircraft over five years before commercializing it. It later raised another $55 million to ramp up production.

The tale is uplifting, especially during a time when the $150 billion business-aviation market is in free fall. After reaching lofty heights in deliveries and sales in September 2008, the industry has taken one of its sharpest nosedives in its history. In the first three quarters of 2009, there were 1,587 new aircraft deliveries worldwide--a 47% drop from the same period a year earlier, the General Aviation Manufacturers Association reports. "Backlogs for orders are also shrinking. In the third quarter, we estimate backlogs on business jets were valued at $48 billion, vs. $82 billion during the same time last year," says Brian Foley, an industry analyst who runs his own firm. "For the first time in history, I predict, cancellations will exceed new orders for the year."