- The Washington Times - Monday, November 19, 2001

Shares of Fairchild Corp., a Sterling, Va., aerospace company, slipped to a record low last week as the outlook for the airline industry continued to darken after last Monday's plane crash in New York.

The stock worth $20 a couple of years ago and $7 just four months ago closed at $2.34 Friday on the New York Stock Exchange.

The crash of an American Airlines jet in New York was yet another blow to airline and aerospace companies, which have suffered badly since the September 11 terrorist attacks. The company will shed some of its noncore businesses such as a company that makes industrial fasteners, and various real estate properties to prepare for a weakening in the industry, which is expected in nine to 18 months, says Jeffrey Steiner, chairman and chief executive officer.

He says that no airlines have stopped existing orders yet and the money raised by the sale of businesses would be used to pay down debt.

The company will also avoid layoffs, if possible, as fewer workers now are racking up extra hours. So with a slowdown their workload would be reduced but their jobs would not be cut, Mr. Steiner says.

Adding to Fairchild's woes, one of its lead investors, Gabelli Asset Management Inc., complained last week that Mr. Steiner was getting paid too much. This prompted the chief executive to agree to defer a portion of his compensation until the company's fortune improves.

Gabelli owns 11 percent of Fairchild, a maker of airplane fasteners. Mr. Steiner is the company's largest stockholder, owning 27 percent of its shares.

About 75 percent of Fairchild's business is in the manufacturing and sale of fasteners. This makes Fairchild the world's largest player in the industry, controlling about 40 percent of the market, says John Pincavage, analyst with Pincavage & Associates.

Another 14 to 15 percent of Fairchild's business is in the maintenance of airplane parts. Fairchild also runs a shopping center in Farmingdale, N.Y.

Fairchild's reported net sales for its first fiscal 2002 quarter ended Sept. 30 rose 11 percent to $165.07 million from $148.37 million a year ago.

Meanwhile, income loss decreased to $3.6 million (14 cents per share) from $5.45 million (22 cents).

If the company follows through with its plan of shedding noncore businesses and uses the money to pay down debt, Fairchild's stock would rise, Mr. Pincavage says.

"But if you said would I want to sit and depend on revenue stream and earnings of the aerospace industry, that's a bigger risk," he says.

Last week the chief executive of Boeing Co., Philip Murray Condit, said the events of September 11 will result in the cut of 1,000 airplanes from production. He also said he did not expect a recovery of the airline industry for 28 to 42 months. This news sent aerospace stocks tumbling.

"It's a pretty serious situation and of course it's reverberating everywhere," says Paul Nisbet, an analyst with JSA Research, a firm that tracks the industry.

Mr. Nisbet says Fairchild's military business is strong, but the commercial side is suffering. Only the maintenance sector of the commercial sector is likely to remain strong, he says.

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