The encyclopedia · Finance & Accounting · Financial decision · 1996–2002
Dornier built flying boats for a century — then Fairchild bought it and went bust too
Dornier, founded in 1914, made the Do X flying boat and the Do 328 commuter. Fairchild acquired it in 1996; both companies were bankrupt by 2002.
Dornier · Fairchild · 2002-01
What happened
Dornier, founded by Claude Dornier in 1914, was one of Germany's great aviation companies. It built the Do X, the largest flying boat of its era (1929), and the Do 228 and Do 328 commuter aircraft. After WWII, Dornier was absorbed into Daimler-Benz's aerospace division, then spun off.
In 1996, Daimler-Benz sold Dornier to Fairchild, an American aerospace company. The combined Fairchild Dornier planned to build a family of regional jets — the 328JET, 428JET, 528JET, and 728JET — to compete with Bombardier and Embraer. The development program was ambitious and expensive.
The 728JET, the centerpiece of the strategy, never flew. Development costs soared, orders were slow, and the post-9/11 aviation downturn crushed demand for regional jets. Fairchild Dornier filed for bankruptcy in January 2002. The 328 program was sold to a Swiss company. A company that had built aircraft for 88 years was liquidated, and its American parent followed it into bankruptcy within months.
Why it happened
- The 328/428/528/728JET family was too ambitious for a company with Fairchild Dornier's balance sheet — the development costs exceeded the company's capacity to fund them.
- The post-9/11 aviation downturn eliminated demand for new regional jets at the exact moment Fairchild Dornier needed orders to survive.
- Daimler-Benz's sale of Dornier to Fairchild transferred the problem to a smaller company with fewer resources, not a solution.
- The 728JET, the program that was supposed to save the company, never flew — the development was too slow and too expensive.
The lesson
A product family that needs $2B in funding is not a strategy for a company with $500M. Fairchild Dornier planned four jets and could not finish one.
Aftermath
The Do 328 program was acquired by 328 Support Services, which continues to support existing aircraft. The Dornier name was acquired by a Swiss company for a new Do 228NG. The original Dornier company, which built aircraft from 1914 to 2002, is gone. The case is cited alongside Fokker as an example of how regional aircraft manufacturers struggle to fund new development programs.
Sources
- Dornier Flugzeugwerke — Wikipedia (founded 1914; Do X flying boat 1929; Do 228/328 commuter aircraft; sold to Fairchild 1996; Fairchild Dornier bankruptcy January 2002; 728JET never flew)
- Los Angeles Times — Fairchild Dornier Discloses Insolvency (3 April 2002; world's No. 3 short-haul jet maker; $670M debt; 4,300 employees; 728JET development ~$1B; 125 firm orders; post-9/11 downturn; sought creditor protection under German law)
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