When the remote Marshall Islands opens its new airport in February everything from air stairs to toilet trucks will be provided by Mactec Aerospace International in Christchurch.

Mike McDonald and his father Ken originally founded the company in 2000 to finance their sprint boat racing hobby, starting out with a $5,000 bank loan and some welding gear they taught themselves to use. But the days of running the business as a sideline venture are long gone. In just six years Mactec has become the largest supplier of aircraft ground servicing equipment in the Southern Hemisphere, exporting to 11 countries, employing 68 staff, and with manufacturing bases in Christchurch and Jakarta.

Mactec has been quick to make its mark: in 2004 it was named Ullrich Export New Zealand Emerging Exporter of the Year at the New Zealand Trade and Enterprise Export Awards and won the Innovation of the Year prize at the Trans-Tasman Business Awards. In 2005 it was New Zealand’s sixth fastest-growing company on the Deloitte/Unlimited Fast50 index and last year ranked 15th with average revenue growth over the past two years of 322.6%. To top it off, 29-year-old CEO Mike McDonald won the Young Entrepreneur category of the 2006 Ernst and Young Entrepreneur of the Year awards.

On a scorching nor’ west day during Cup Week, when it seems half of Christchurch is at Addington Raceway, McDonald is head down at the office, oblivious to the shenanigans on the Lindauer lawn just a few kilometres away. He’s just back from the US and the irony is that this aviation whiz is a rather reluctant passenger. “I’ve had a few scares on commercial flights and that put me off.”

His trip included a stopover in Hawaii where he met the Marshall Islands’ transportation minister. The latter was a bit taken aback by the youthfulness of the man about to outfit his new airport, but McDonald is used to raised eyebrows over his age.

He left school without finishing the sixth form and was the youngest person ever accepted for an aviation engineering apprenticeship (with Ansett), which he finished in a record four years, instead of the usual five. He’d always been nuts about planes, but figured he didn’t have the brains to become a pilot, and his father, who worked for Newmans Air and later Ansett as a loader and ramp manager, had encouraged him to try engineering.

McDonald junior was made redundant from Ansett in the first wave of job cuts and walked straight into a job with Air New Zealand. He worked for the airline’s joint venture partner Pratt Whitney here and in the US, helping intro-duce lean manufacturing processes that halved engine -assembly time.

Meantime McDonald and his father had set up the small engineering business in the family garage intending to focus on general engineering and irrigation work. When Ansett closed down, Ken McDonald ran the business full time and the first piece of ground service equipment (GSE) they produced was a disabled passenger ramp for Eagle Air.

Mike quit his US job with Pratt Whitney to concentrate on winning Mactec a Royal New Zealand Air Force contract that was pivotal in establishing the company’s creditability. It led to work for the Bahrain Defence Force and significant orders from Australia. “Once we got the air force contract in 2003 that really opened our eyes to the fact there was quite a big market out there.”

Mactec is very much a family business and McDonald says that’s one of its strengths. His wife, Suzie, was the accountant for several years before having their two young sons, brother Brodie purchases materials, Ken runs the workshop, and mother Helen does HR and administration. “She’s the gel that holds us all together.”

Ken McDonald says his son has a maturity beyond his years and an eye for detail. “Ever since leaving school he has worked with senior staff and that has rubbed off. Even as a young fella he was ‘Mr Right’; nothing was ever out of place.” And there’s no doubting his salesmanship: Ken proudly points out that while in Hawaii Mike managed to sell the Marshall Islanders another $300,000 worth of gear because they’d overlooked the need for carts to transport baggage.

For his part, Mike acknowledges the business would never have survived without family support. “We have been through some extremely difficult times and the family has been able to pull together and make it happen.”

Until about 18 months ago they operated with a $125,000 overdraft with his parents’ home mortgaged against it. In two-and-a-half years shipping costs soared 600%. “Our gear doesn’t fit into containers so we really get hammered.” Almost 90% of Mactec products are exported and in 2005 the exchange rate knocked $1 million off the company’s income. “It has been a real hell of a ride.”

Mactec has invested heavily in research and development and now holds four patents, including a worldwide one for the Skyhook. This nifty piece of gear carries disabled passengers down the aisle and lifts them into their seats, avoiding the risk of back injury to airline staff. Getting medical certification in the US has been a long process but McDonald says United Airlines has indicated that it will need up to 700 Skyhooks.

“Six years ago we owned [no intellectual property], not one drawing. We didn’t have any drawings, we had ideas. We explained what the vehicles could do, but we didn’t actually have any pictures. Every time we built a new product we quickly took a photo and put it in our brochure.”

Now Mactec’s sophisticated software produces virtual three dimensional models of machinery which are tested by rolling them up to a computer-generated aircraft. ‘Because a flawless performance in the air begins on the ground’ is the company motto. McDonald says that with so many inexperienced, low-paid contractees working in the aviation industry it is not uncommon for service vehicles to hit and damage aircraft, which is hugely expensive in terms of flight delays and repairs.

Mactec uses technology to help prevent such incidents and it is the only company routinely fitting door-sensing equipment — like that found on terminal air bridges — to all its mobile equipment. When a plane moves up or down, for example as passengers embark or fuel is loaded, the machinery moves, too, to avoid damaging aircraft doors.

This commitment to high-tech solutions and a willingness to build exactly what customers want has given Mactec the edge over some well-established competitors. “Custom building and flexibility keeps us in the market and has destroyed a lot of other people’s businesses. They’ve stuck to one product and said ‘this is what we’ll build for your aircraft, take it or leave it’ and the customer is saying ‘we’ll leave it and go to Mactec. Sure they’ll charge us for it, but we’ll get what we want.’

“We started out with five competitors and we now only have one-and-a-half: the half being a company that was the same size as us with 55 staff, and now they have only six full-time employees. They committed their entire business to Qantas because they believed that it was never going to go anywhere else.”

Mactec has also moved into refurbishing second-hand machinery and is the only GSE company in the Southern Hemisphere doing so. Overhauled gear is popular because it is 30% to 50% cheaper than buying new. “But just getting the machinery here is a problem. Our biggest piece was a 50-tonne tractor that came from Osaka. I bought it from a Japan Airlines equipment park in the middle of farm land, shipped it back here, we rebuilt it and it’s now operating for Emirates.”

However, the fast turnaround times required by the aviation industry are a real challenge. “Aviation has a crazy timeline about it. When an airline gives a ground handling contract to a company they will give them 60 to 90 days [notice] at best, so that company has to make a decision about equipment pretty much within 48 hours of getting the contract. That gives the manufacturer less than 60 days to build and ship it.”

McDonald clearly knows how to work the system and acknowledges personal relationships are vital in the aviation industry. Friends from his Ansett days have dispersed throughout the industry and are a valuable source of inside information. “They have their ears to the ground on everything and so I know what’s going on even at the highest level.”

Believing that the Australian GSE market has peaked, McDonald is looking to Southeast Asia for future growth, and that motivated him to start manufacturing in Indonesia.

In future, New Zealand will become the R&D base and “specialist jobbing shop” with up to 70% of products made in Indonesia.

Mactec is also keen to sell into the American market now early technical problems have been sorted and the exchange rate has -stabilised. “We didn’t want to be selling our equipment to the US when we were uncertain about its reliability. You need to be local so you can support it if it does break down. A lot of the gear has been going for three years and has given us a lot of data, and it’s very rare that we get faults.”

If McDonald has any regrets it’s that he didn’t get expert advice from consultants earlier. But he is grateful for mentoring from experienced staff like Steve Scott, ex-operations manager at PDL and Avensis, who joined Mactec 18 months ago as chief operating officer and has been instrumental in setting up the Indonesian operation.

Last year a group of private investors took a stake in Mactec and McDonald believes that will help the company lift annual turnover from about $11 million to $20 million.

According to Companies Office records Pernik Engineering holds 1,133,334 of the 3,966,668 Mactec shares while David and Lynn Conn jointly hold 850,000. The rest are held by the McDonalds. The records also show Geoffrey Laurence, David Conn and Adrian -Januszkiewicz (former CEO of Shotover Jet and managing director and owner of Fox Glacier Guiding) joined Mike, Ken and Helen McDonald on the Mactec board in August.

McDonald told Unlimited the independent directors didn’t want to be interviewed for this story because “it is how they operate” and requested they not be named. When we approached Januszkiewicz he reiterated that stance saying it was “not our practice to comment on our investments publicly”.

McDonald is less reticent about the challenges ahead. Manufacturing costs top the list and he says as more airlines move towards becoming low-cost carriers, they try to buy aircraft that require less ground service equipment.

But he remains confident about the future of the aviation industry. “Seventeen thousand aircraft take off every day worldwide and that’s going to double in the next ten years.”