In August 2008, we reached a major milestone in our relationship with Bosch Rexroth, having been their distributor for hydraulics for an entire decade. Looking back to 1998 when we made the significant business decision to convert our hydraulic product line from Vickers to Rexroth, we can emphatically say that we made the right choice. By 1998, Airline had developed its reputation for an “engineered approach” to hydraulic applications and we took pride in building the best hydraulic systems with state-of-the-art technology. At that same time, Rexroth had become the global technology leader in hydraulics, but had weaker than required distribution in Pennsylvania, Maryland and New Jersey—exactly where Airline’s geographic strength was centered. After a year of negotiations, in August 1998, Airline was presented with a contract and became the Rexroth distributor for the entire area where we had the Vickers line. Within several years, we were asked by Rexroth to expand into New England and in 2002 we were able to acquire the Weinman territory which gave us Western Pa. and New York State. In 2003, Bosch bought Rexroth and the combination of the two lines made Bosch Rexroth the best in the world. Today, Bosch Rexroth is our major supplier, covering not only Hydraulics, but also Bosch Rexroth Pneumatics, Aluminum Structural Framing (formerly Bosch), Linear Motion and Electric Drives and Controls.

Airline officially began operations at our new Rochester, NY branch location in August of 2008. This new facility is located directly across from the old Kodak complex and includes approximately 3,400 sq. ft. of office space and 2,000 sq. ft. of warehouse/shop space. The opening of this office, along with our acquisition of the Bosch Rexroth Structural Framing line in New York State, will allow us to better serve our customers in the Upstate New York marketplace.

Airline has recently taken dramatic steps to increase our operations in upstate New York by adding the Bosch Rexroth Structural Framing and Conveyor lines to the arsenal of products—including Bosch Rexroth Hydraulics and Pneumatics—that we offer to our customers in that area. In addition to adding these product lines, we have hired three well-qualified outsides salespeople and two experienced automation designers to offer local support for our automation products. They will be joining our three application engineers in upstate New York who will primarily focus on our hydraulic product line. A new branch office is scheduled to open in Rochester this summer.

In addition, Airline added Bosch Rexroth Linear Motion products to the lines we carry in New England. This will add to our automation product offering such products as profiled rail systems, runner blocks, precision ball screw systems, linear bushings and shafts, linear modules and actuators, and Cartesian motion systems. Airline is now the exclusive source for Bosch Rexroth Hydraulics, Pneumatics, Structural Framing, Conveyors and Linear Motion & Assembly Technologies in the New England states.

Earlier in the year, Airline contracted with an outside agency to conduct a survey to establish a benchmark of Airline’s current level of customer satisfaction. 350 customers were randomly selected and asked their opinions on a number of topics including Airline’s outside sales force, inside customer service, delivery performance, responsiveness, overall performance, etc. On a scale of 1 to 5 we graded 4+ on almost every topic. While this is an excellent score, we all know there is always room for improvement and increasing this score will be our new challenge.

October proved to be another record-breaking month at Airline in terms of sales (orders shipped) and new orders booked during the month. Even better news is the fact that this is the second time this year that we’ve accomplished this achievement. In March of this year we broke the previous record hit in October 2006. This October, the increases over March’s figures were huge... a full 10% increase in sales and a 6% increase in bookings.

Effective January 1, 2007, our New England office has moved from its former Fitchburg location to:

2 Sterling Road, Unit 2C
North Billerica, MA 01862-2595

Phone numbers for our New England office will remain the same:

Voice: (978) 353-0200
Toll Free: (866) REXROTH (739-7684)
Fax: (978) 353-3084

This 8,000 sq. ft. facility, located less than 30 miles from Boston, includes customer service offices, engineering offices and a warehouse, offering Airline:

• A better working environment for our New England colleagues.
• Better infrastructure and resources to serve our New England customers.
• Space for customer presentations, demonstrations.
• Room for future growth.

A cold weather snap last spring slowed progress on our new addition but with the building construction basically behind us we can now focus on our transition plan which involves, among other things, transferring our warehouse inventory to four new state-of-the-art horizontal carousels. In addition, there will be a total reorganization of the existing warehouse into a value-added manufacturing resource. This transition has been carefully planned so as not to disrupt our normal course of business throughout this phase. Ultimately we will gain the equivalent of 35,000 sq. ft. of added warehouse space when considering the vertical dimensions of the new space.

Airline personnel have been hard at work rejuvenating the company’s website. Some of the many improvements in store include a standardized look and feel, an improved search function (capable of part number searches) and enhanced navigational features. New pages have also been added to announce upcoming events, company news, and to showcase recent application examples.

Construction of our 17,000 square foot addition began with site preparation on Monday October 16, 2006. This addition to our headquarters in Bensalem, Pa will allow for a larger in-house assembly area. Completion is expected in summer of ’07.

Airline booked over $7 million in new orders during the month of October—a company record. October’s incoming orders were diversified in product and size. However there was a definite upswing in the amount of “value added” orders, proving that today’s customers need business partners like Airline who provide product application and machine knowledge to make them more competitive.

On December 30, 2005 the ownership of Airline changed from a family-owned business to an employee-owned business. The new owner is The Airline Hydraulics Corporation Employee Stock Ownership Plan (“Airline ESOP”). The management of the Company will not change in the near future and there are no major personnel changes planned. The only change is that of ownership. Our goal is to grow 10% per year for the next 5 years…through year 2010. If we accomplish this, Airline employees will be the owners of a $100 million dollar company.