Ever Evolving: Successful moving freight, Castle Aviation adds a passenger division

Ever Evolving

Successful moving freight, Castle Aviation adds a passenger division

By John F. Infanger

July 2002

NORTH CANTON, OH - Michael H. Grossmann has tried just about every general aviation business, from flight training to a full-service fixed base operation. He's tried a few airports as well. Along the way, he came to realize that his company was best at charter, particularly freight. Since moving to the Akron-Canton Airport here, he has discovered an airport that's providing reasons for a long-term commitment. Now, he's branching out with a passenger business.

Grossmann, 49, started out as a firefighter, but followed an interest in flying. An automobile accident in 1983 served as the personal catalyst to take the plunge into his own business, as a broker under the Air Medical Transport name.
"I was an EMT (emergency medical technician) when I was with the fire department, so I became an air ambulance broker. At the same time, I wound up with a pilot service and management deal on a Navajo, which really got us developed," he recalls.
For two years, he continued firefighting as well. In 1986, he formed Castle Aviation in pursuit of an FBO contract at the New Castle, PA, airport. He kept the name but didn't get the contract.
"We went to a meeting and it was kind of like, you're going to become the FBO tonight. And I went in there and they just blindsided me and the other guy got it. I just walked away absolutely stunned," he explains.
"It was the first railroad job I ever got in my business career."
With the charter business continuing to grow, Grossmann decided to abandon the rapidly changing air medical business. In time, he also discovered that moving freight could be more reliable and considerably easier than moving passengers.

He also got his full-service FBO. From 1989 until 1992, Castle Aviation was based at the downtown Akron Fulton Airport, before being forced out when the city decided it wanted the property for other use. With the country in a recession, Castle Aviation downsized from 22 employees to three, according to Grossmann. He would then redeploy the company at nearby Portage County Airport.
"I reevaluated everything," he says. "I looked at what was it that made the most money over the years? It was charter, so I decided to get rid of everything else in 1992 and became a charter company."
In April of that year, he was awarded a contract with The New York Times to run newspapers to Hamilton, Ontario, a contract Castle Aviation still has.
"That was the beginning of our recovery. That's when we got pretty hot and heavy moving freight. Kitty Hawk came into existence and we started flying automotive freight daily for them. Three-quarters of my business then was with Kitty Hawk."

Building up castle
By 2000, says Grossmann, Castle Aviation had grown to have annual revenues of $3.3 million. By that time he had added airline AOG service and moving airline parts and maintenance crews had grown to account for some 40 percent of the business.
His airline business helped him stay
the course as other freight companies were seeing business disappear beginning in 2000. Of course, after 9/11 the airline business itself went away. However, his company's reliance on the airlines qualified it for a disaster relief loan, which he says helped him through the difficult times in late 2001.
Meanwhile, The New York Times and Purolator USA came calling. Castle added an Akron to Louisville run and one between Chicago and Kansas City for the Times, and a Cleveland to Hamilton run for Purolator. "Our business this year has really turned around," says Grossmann, explaining that Castle just experienced its best first quarter ever.
Revenues dropped in 2001 to $2.7 million, but Grossmann expects to be back at the $3.3 million mark this year, with strong growth ahead.
Critical to maintaining a viable business during the tough year of 2001, says Grossmann, was keeping an eye on profitability.
"I refused during this entire slow period following 9/11 to fly an airplane that doesn't make money. Competitiveness has been tight; we certainly have not increased our prices to reflect our increased costs, but I can tell you of Caravans out there that are charging a dollar or less a mile and they're not making money.
"It's going to be interesting in the freight industry when the business really starts picking up, which I would anticipate in 2003. All of a sudden all of these people who have been flying their airplanes for a buck a mile won't have the money to modernize their airplanes, or to do the maintenance."

Northstar business aviation
Central to that growth, says Grossmann, will be the company's push into passenger charter, which has begun operating under the Castle umbrella but doing business as Northstar Business Aviation. To be successful moving passengers, he says, you can't be seen as a freight firm that also dabbles in people.
"People associate us as a freight hauler," he explains. "I asked a CEO group; seven of eight people said get a new name."
The company currently operates a fleet of eight aircraft:
o 4 Caravans
o 2 Aerostars
o Cheyenne II
o Merlin 3
Three of the airplanes - an Aerostar, the Cheyenne and Merlin - are dedicated passenger planes for Northstar Business Aviation.
"We're not saying 'executive' because when the public looks at charter, if they see executive they think high-ups," he says. "We are trying to educate people and let them know that the chartered airplane is a viable tool for their company. It's business aviation, not just for executives.
"Will it end up as two separate companies with separate [FAA] certificates? I'm not sure yet."
Grossmann recognizes that the Northeast Ohio market, with Cleve-land at its core, is a jet market and has entered "alliances" with companies that will provide that service through Northstar. In late June, the company was to host an open house that featured a Citation 3, Lear 60, and Citation XL on the ramp.

Akron-canton airport
The right business environment on the airfield is also impacting Castle Aviation's operation, says Grossmann. The Akron-Canton Airport, located some 30 miles south of Cleveland Hopkins International, has been aggressively gaining air service, started when Air Tran began service to Atlanta in 1996.
Explains Grossmann, "Moving to the Akron-Canton Airport was the second best business decision I ever made. The best was buying a Caravan.
"I was used to fighting the little airport authority in which everybody had their personal agendas. Here the atmosphere is one of a common goal. the airport wants everybody to prosper, everybody to grow. With the Northstar project their attitude has been, 'What can we do to help?'"
In late 1999, Grossmann purchased the corporate flight department facilities of BF Goodrich - complete with 30,000 square feet of hangar and offices on two acres, and a 60,000-gallon fuel farm [no retail sales]. The leasehold was renegotiated to a 40-year term, with fees of 26 cents per square foot and a flowage fee of six cents [sliding scale].
Akron-Canton Airport offers three ILS approaches and an FAA-operated tower. "The life of the pilot when we came here got so much easier," says Grossmann.
He adds that the perception of customers has changed as well with the move to the new facilities. "When you move to an airport of this size, people look at you differently," he explains. "Other businesses look at you differently, as a business to be reckoned with."