Evergreen International Aviation, Inc. Business Information, Profile, and History

Company Perspectives:

Evergreen is recognized as a world leader in air freight and aviation services with a broad base of customers including other air carriers, aviation companies, and governmental agencies. Many successful operations integrating these sister companies have resulted in a reputation for superb service, reliability, and agility. We thank each person who has assisted us along our flight path and we look forward with vision and inspiration to the decades ahead.

History of Evergreen International Aviation, Inc.

The "airline's airline," Evergreen International Airlines, Inc. is an air freight carrier that hauls cargo for a number of other passenger airlines and shipping companies. Its fleet includes 11 Boeing 747's and a few other types of planes. Evergreen also has several other ventures that handle freight on the ground, trade aircraft, and maintain planes. Helicopters were the company's original business, and it still has a large rotorcraft interest. In addition, the company runs a substantial farming operation on the land surrounding its base in Oregon's Willamette Valley. The company is not to be confused with the Evergreen Marine shipping empire of Taiwan or its airline, EVA Airways.

Origins

The Evergreen International Aviation group of companies was founded by Delford M. Smith. Smith, an orphan, was born in 1930. He went to work at an early age, first by delivering newspapers. Smith later worked at logging camps while attending the University of Washington. After graduating in 1953, he joined the Air Force. In 1957, Smith began flying helicopters and subsequently went on to work for agricultural, forestry, and oil concerns as well as on firefighting missions. Eventually, Smith set out on his own, buying his first choppers on credit. His company--Evergreen Helicopters, Inc.--was registered in Oregon on July 1, 1960. Early the next year, Evergreen Helicopters of Alaska was established. The company grew substantially during the Vietnam War. In fact, under contract from Royal Dutch/Shell to evacuate employees, it remained in Vietnam a few days longer than the U.S. military.

In 1974, Evergreen had bought the lease to a large air base in Marana, Arizona, from the Central Intelligence Agency, which was coming under congressional pressure to divest its holdings in airlines such as Air America. The Marana facility, which had the capability to work on any type of aircraft, became known as Evergreen Air Base and housed repair and overhaul operations.

By 1975, Smith had a fleet of 98 helicopters. He developed pioneering new uses for the rotorcraft, capitalizing on new opportunities as they arose. For example, Smith logged his own timber and flew it out of remote locations before lumber prices collapsed in the early 1980s. Also in 1975, Smith's company bought Johnson Flying Service, a small airline in Missoula, Montana, that had a license to fly anywhere in the United States as a "supplemental carrier." The growing company was relocated to McMinnville, Oregon, and renamed Evergreen International Airlines.

Evergreen Air, Inc., a holding company for the diversifying businesses, was registered in Oregon on August 3, 1978; the name of this entity changed to Evergreen International Aviation, Inc. (EAI) on December 15, 1980. Work soon began on a new 22,000-square-foot, two-level headquarters building. In 1978, the company bought 1,000 acres of land surrounding its base in tiny McMinnville and created Evergreen Farms.

Post-Deregulation Diversification

Soon, Evergreen was flying charters to Hawaii and the Caribbean. After deregulation of the airline industry, it ventured into scheduled operations to the Caribbean. Twice-weekly flights between Philadelphia and the Bahamas began in February 1979. The company also began offering tours from the Northwest to Hawaii and Las Vegas. However, deregulation allowed the major airlines to price Evergreen out of these markets. The company was more successful in setting up cargo routes on both sides of the country; however, it dropped its East Coast network in November 1979.

A new subsidiary, Evergreen Tours, was created in February 1980 to market tours and charters. The unit soon launched a joint venture with New York's Atlas Travel for travel to Israel.

Difficult and sensitive missions continued at the same time Evergreen was trying its hand in the pleasure flight market. The company transported the deposed Shah of Iran part of the way from Panama to Egypt via a DC-8 airliner. It had been referred by Executive Jet Aviation, Inc., whose planes did not have the required range or capacity.

The company began flying cargo to New York's John F. Kennedy International Airport in 1980. Evergreen had 228 aircraft on order at the time, from helicopters to DC-8s. The airline had 19 planes--some owned, some leased, and some being leased to others. The company was now building a 55,000-square-foot, three-level building to house its Evergreen International Airlines subsidiary. There were more than 1,200 employees in all. Total revenues for 1980 were estimated at $150 million. The airline and helicopter units were profitable in spite of the recession at that time. Nevertheless, a downturn in the construction industry led to less demand for Evergreen Helicopters' giant Sikorsky S-64E Skycrane. The company had two of this model, plus another 110 helicopters in its fleet. Evergreen was promoting the use of helicopters as high-speed ambulances in urban areas and was already operating them for hospitals in Houston, Phoenix, and San Diego.

In 1981, Evergreen set up overnight freight service for United Parcel Service (UPS). It continued to operate it for several years, until UPS took it over with its own aircraft. In 1982, the company entered into a more enduring contract, using helicopters to carry mail to remote outposts in northwestern Alaska.

In 1984, Evergreen acquired Airspur Helicopters, the Los Angeles area commuter helicopter service that Evergreen had previously been operating on behalf of Westland Inc., a subsidiary of the British helicopter manufacturer. This venture endured for only a short time. In May 1987, Evergreen established a regional hub in Terre Haute, Indiana, to sort and ship for the firm of Express Mail. When online, this unit, which employed 750 people, was processing 1.3 million pieces of overnight mail each week.

In December 1989, Evergreen supported the U.S. invasion of Panama, during which a dozen of its employees were captured by, then later escaped from, Manuel Noriega's troops. The Drug Enforcement Agency (DEA) hired Evergreen helicopters to defoliate drug fields in Latin America. The company was also spraying to eradicate blackfly-borne river blindness in West Africa on behalf of the World Health Organization.

In the late 1980s, Evergreen joined Aeroflot in opening an air cargo route between Alaska and Siberia. The company also participated in a heavy helicopter transport joint venture within the Soviet Union. In August 1989, Evergreen launched a scheduled freighter service between Hong Kong and New York via Columbus, Ohio. Flights for Qantas Airways Ltd. began at the same time. The company also flew cargo for Iberia and Air-India.

In the summer of 1989, Evergreen lost its Express Mail contract to Consolidated Freightways Corp.'s Air Train Inc. unit. The two-year contract, worth $173 million, went to Air Train (later Emery Worldwide Airlines Inc.) largely on the basis of lower cost.

Emery was suspended from its Postal Service contract during an over-billing probe in 1992. Evergreen did not win the subsequent ten-year, $1 billion "A-Net" contract to transport Express Mail traffic, but did win the $100 million "T-Deal" contract to operate an Express Mail hub in Indianapolis for ten years.

Thriving in the Early 1990s

Evergreen entered the 1990s with revenues of about $477 million a year and a staff of 2,300, including 450 pilots, and a fleet of 165 aircraft, including 16 Boeing 747's, worth approximately $1 billion. Its debt load was $600 million. Evergreen was co-owned by founder Del Smith and his two sons, Mark and Michael.

The company was again expanding its headquarters. In 1992, it increased its facilities fivefold at New York's John F. Kennedy International Airport. Scheduled JFK-Beijing freighter service was launched in May 1993. However, Evergreen suspended the service after two flights in the face of a reported anti-competitive "ambush" by Air China and China Eastern, as well as the threat of a boycott by Chinese freight forwarders and ground handlers. It was restarted in October after the U.S. Department of Transportation threatened sanctions. Federal Express Corp. bought Evergreen's China routes in 1995.

In addition to its cargo operations, which accounted for about three-quarters of the company's revenues, Evergreen had a number of sidelines, including a successful aircraft trading and leasing business, which helped the airline consistently maintain the correct size fleet. Its Evergreen Aviation Ground Logistics Enterprises, Inc. (EAGLE) subsidiary provided ground handling and other support services at nearly two dozen locations in the United States.

Uniquely, the company managed 7,300 acres of farmland in northwest Oregon. Originally bought in 1978 as a noise buffer for its helicopter testing, by the early 1990s diversified farming was one of Evergreen's fastest growing businesses.

The Gulf War was the cause for the worst year overall in the history of the aviation industry. However, Evergreen International Aviation was a dramatic exception. Airlifting supplies for the military build up added $150 million to its revenues. The company's helicopter crews remained after the war to support firefighting operations at Kuwaiti oil wells.

In May 1991, Evergreen began leasing Japan Air Lines four massive Boeing 747 freighters for the U.S. cargo service of Japan Airlines (JAL), which had recently grown to include Chicago. (These planes were furnished with Evergreen crews due to a pilot shortage in Japan.) Two years later, Evergreen won a Chinese government contract to establish scheduled flights between New York and Beijing.

In 1991, Evergreen began refueling Hong Kong-bound aircraft in Khabarovsk, Russia, to avoid high landing fees in Japan. However, a joint venture with Aeroflot's Far East division ran into a series of mishaps, including parts and fuel shortages and a managing director who absconded with the venture's corporate charter and checkbook. Evergreen was also involved in a helicopter services venture in the former Soviet republic of Georgia.

Mid-1990s Crisis

Revenues were more than $500 million in 1992. Evergreen sold $125 million in junk bonds to refurbish several badly worn Boeing 747's that had been leased by Pan Am Corp. before its demise. In late 1993, JAL, then in the midst of a recession at home, declined to renew its contract, which represented one-third of Evergreen International Aviation's revenues. The air cargo industry as a whole was suffering from excess capacity.

The company took a $34.3 million loss on $401.2 million in revenues, down about $100 million, for the 1993-94 fiscal year. A $12.6 million deficit followed the next year, when sales were $366.1 million. Evergreen suspended payment on $454 million in debt in February 1994. In March 1994, creditors grounded one of the company's 13 Boeing 747's. On the positive side, Evergreen was able to lease five planes to UPS, including two 747's formerly used on the JAL contract.

Plans for a $15 million expansion of the Evergreen Air Center were deferred by debt and a $78 million lawsuit in 1996. The suit concerned junk bond notes held by Cargill Inc. With a number of creditors and rumors of hard-dealing "vultures," Chapter 11 may have seemed a natural solution. However, against the advice of his lawyers, Del Smith refused this course of action, aware that very few airlines had ever flown out of bankruptcy. Evergreen lost $10.3 million in 1996 but achieved a $21.2 million profit in 1997 following a new financing arrangement. Revenues at the airline rose 34.9 percent to $255.5 million.

In the spring of 1998, Evergreen added scheduled service from Indonesia to New York via Columbus, Ohio. Despite the Asian financial crisis, revenues rose 12 percent to $435 million in the fiscal year ending in February 1999. The airline accounted for about 65 percent of Evergreen International Aviation's total revenues.

Looking Back in 2000

Evergreen opened the Evergreen Aviation Museum in 2000. Its historic collection included the legendary "Spruce Goose" flying boat plus many other vintage civil and military aircraft, a number of them flyable.

Evergreen announced plans to open a scheduled route between Anchorage and Adak in the Russian Far East in early 2002 under a two-year subsidy from the U.S. Department of Transportation. The flights were intended to develop Alaska as a gateway from Russia. The company also based a Gulfstream 3 business jet in Anchorage to support cleanup of the military base on Amchitka Island and to provide other charter services. Evergreen was also expanding in Asia, adding the first direct air freight service between Columbus, Ohio, and Kuala Lumpur, Malaysia.

Principal Subsidiaries: Evergreen Agricultural Enterprises, Inc.; Evergreen Air Center, Inc.; Evergreen Aircraft Sales & Leasing Co.; Evergreen Aviation Ground Logistic Enterprises, Inc.; Evergreen Helicopters, Inc.; Evergreen International Airlines, Inc.; Quality Aviation Services, Inc.

Principal Competitors: Airborne, Inc.; Atlas Air Worldwide Holdings, Inc.; Cargolux Airlines International S.A.; Offshore Logistics, Inc.

Chronology

• Key Dates:
• 1960: Evergreen Helicopters is formed.
• 1974: The lease to the Central Intelligence Agency's Marana, Arizona, air maintenance facility is acquired.
• 1975: Evergreen buys Johnson Flying Service.
• 1978: A holding company and Evergreen Farms are formed.
• 1981: Evergreen sets up overnight freight service for United Parcel Service (UPS).
• 1987: Evergreen establishes an Express Mail hub in Indiana.
• 1989: Hong Kong-Columbus-New York freighter service begins.
• 1991: The company signs a major cargo contact with Japan Air Lines (JAL).
• 1993: The company enters the China market; JAL cancels its contract.
• 1995: FedEx buys the company's China routes.
• 2000: Evergreen Aviation Museum opens.