City firm has stake in surveillance aircraft

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This article was published 05/12/2017 (3090 days ago), so information in it may no longer be current.

A new intelligence surveillance and reconnaissance airplane developed by Newfoundland-based Provincial Aerospace Ltd. (PAL) was unveiled last month at the Dubai Air Show.

The next showing of the plane — a completely modified Dash 8 Q300 — was at a private event in Winnipeg on Tuesday at Exchange Income Corp.’s (EIC) investor day.

PAL Aerospace is one of more than a dozen operating companies owned by Winnipeg-based EIC, including Toronto-based Quest Window Systems Inc., which was acquired last month for $95 million.

PAL’s Force Multiplier surveillance aircraft — which will be operated by PAL’s own crew and be made available on demand to customers around the world — might be one of the most obvious examples of how EIC is supposed to work.

At the end of investor day presentations, Mike Pyle, EIC’s chief executive officer, said his company’s business model is unchanged since it was formed in 2004 — buy companies with strong management teams and expertise in niche markets, and continue to grow revenues and profits. Many invest in EIC for the dividend stream, which has been increased 12 times since 2004.

“When the companies we own have opportunities, it is our job to help them with capital and provide them with the support they need,” Pyle said.

The development of the Force Multiplier fits the EIC model for a few reasons. For starters, PAL acquired the plane from another EIC company, Florida-based Regional One, an aerospace aftermarket company that buys, sells and leases used planes and parts.

The concept of the Force Multiplier — which is already being referred to in some circles as a top intelligence, surveillance and reconnaissance (ISR) platform — has been around for some time.

Regardless of the jurisdiction, when a special ISR mission comes up around the world, the idea is that countries will pay for rapid intelligence without the hassle of owning, operating and maintaining the aircraft. The plane and its intelligence-gathering technologies are suitable for a variety of missions — like search-and-rescue operations, immigration and border control or disaster relief.

The idea is the aircraft — including crew and all the maintenance requirements — will be leased on demand by the hour, the day, the week, the month or whatever is negotiated.

Retired Gen. Rick Hillier has been on staff as a corporate adviser to PAL since retiring from his position as chief of the defence staff for the Canadian Armed Forces late last decade. He said he can’t imagine a scenario in which military or government agencies of countries around the world would be shy about deploying such third-party assets.

“When I was chief of the defence staff, I would have used it,” he said.

The development costs, the fees PAL plans to charge, and the number of subsequent versions it intends to produce, are all being kept under wraps.

There are photographs of the slate-grey plane available. But as it was parked in Winnipeg at the Calm Air hangar — another EIC company — no photos were allowed.

PAL, which was acquired by EIC in 2014 for $246 million, is a thoroughly diversified aerospace and aviation company. It runs its own scheduled air service in the Maritimes, and just started a joint venture with the Innu and Inuit of Labrador to form Air Borealis. A year ago, it was part of the Airbus group that won the $2.4-billion airplane-maintenance contract to provide service and support to Canada’s new fleet of 16 Airbus C-295 search-and-rescue aircraft.

The company plans to build the heavy-maintenance, repair and overhaul facility for those planes in Winnipeg.

But even with about $200 million in annual revenue, PAL would have not been able to develop the Force Multiplier without the support of a parent company like EIC.

Among other things, that’s because of EIC’s access to capital markets.

Late last week, it sent out a press release on a $70-million debt offering — that can be converted to equity — only to issue another press release less than 24 hours later, raising the offering value to $100 million as a result of investor demand.

It was an impressive display of market support, made even more noteworthy because offerings of that type of debt instrument are usually not that popular and are rarely, if ever, of that size.

martin.cash@freepress.mb.ca