Blog

David Franson
November 28, 2012

A Fumbled Recovery

Since my youth, I’ve spent most Thanksgiving weekends either playing or watching football. This year was no exception. But, for some reason it seemed like the games I watched involved more fumbles than usual, including one miscue in the Michigan-Ohio State game that must have been touched by nearly every player on the field. The net result was that MIchigan ended up losing the ball, about 20 yards, and a late opportunity to score in a close game.

Unfortunately, the original miscue and subsequent mishandling of the football provides an all-too-apt metaphor for the “fumbled recovery” we’ve experienced in business aviation over the past few years. We haven’t generated much in the way of offense — or revenues — in the corporate aircraft segment of the industry since 2008 and it’s hard to relate to anyone who says the “Recovery” actually began in 2009. If that’s truly the case, why hasn’t anyone bothered to tell us Wichita. To us, it feels like we’re trying to run the ball against the 1985 Chicago Bears. And maybe that’s a big part of the problem–business aviation seems to be continually running up against “trash talkers” from Chicago–but these days they are more commonly known as the Obama Administration. The President and members of his cabinet and party have been invoking a class warfare campaign that involves vocal criticism of the “fat cats in their corporate jets” who they perceive aren’t paying their fair share. Their rhetorical blitzes have contributed to the sacking of a lot of pretty good players–around 13,000 in Wichita alone–and business aviation hasn’t really been able to get a firm grip on the situation , even three years into the so-called “recovery.” While it’s true that the number of certain, highly specialized jobs in Kansas has shown some minimal improvement over the past couple of years, the output of the state’s airplane manufacturers has been stagnant. In fact, one of the Air Capital of the World’s most venerable companies, Hawker Beechcraft, has declared bankruptcy and another icon, Boeing, has announced that it will close its Wichita facilities for good in 2014, eliminating, in one move, roughly the same number of jobs that those very selective re-hires have accounted for over the past two years. Even if Hawker Beechcraft–or as it now says it will be known when it emerges from Chapter 11–the Beechcraft Corporation, survives, it will apparently do so without it’s jet products. That means that it’s total employment will likely go down before–and if– it ever goes back up. HBC is currently completing a handful of jets for customers who haven’t cancelled their orders. Once those aircraft are delivered, the production lines will be shuttered and the workers assigned to those programs let go. At a press conference at the National Business Aviation Association (NBAA) Annual Meeting & Convention in Orlando last month, Hawker Beechcraft executives explained that they are continuing to “operate as normal” under debtor in possession circumstances while a new, amended recovery plan that doesn’t include acquisition of the company by Chinese investors, is reviewed by the Bankruptcy Court. But, it seems that recovery may be fumbled, too,. If the company’s total employment drops below a previously-agreed upon level of 3,600 people in Wichita, Beechcraft will lose the support of the state and local governments that have been subsidizing training and providing financial incentives. The latter will be subject to payback, too, at a time when the company is trying to define its ongoing market niche and placate hundreds of unhappy jet owners who feel disenfranchised because HBC also announced they will no longer honor the warranties or provide support for the Premier 1A or Hawker 4000 aircraft.

To make matters worse, one of the more resilient firms in Wichita’s aviation fraternity, Spirit AeroSystems has finally started to show signs of being impacted by the industry’s continued malaise. It recently reported a quarterly net loss of $134 million due to struggles with the development and early production on certain programs. Spirit, with its diverse product lines and solid business base in the commercial transport segment had, up to this point, managed to weather the fiscal storm, even as it dealt with significant damage to its physical facilities from a tornado in April of 2012. Now, even the strongest player on the field seems to limping along defensively as we await the next onslaught of offense from the Second Obama Administration. If harsh rhetoric, regulatory and taxation issues don’t jar Wichita’s planemakers too much, perhaps they’ll be able to put some points on the (order) board and put some players back into the game. Some analysts are even cautiously optimistic. But the resurrected threat of user fees, the continued characterization of corporate airplane operators as evil or greedy, and the willingness on the part of government to allow our previously unchallenged leadership in innovation and aircraft production to migrate offshore could undercut any potential trend towards a measurable recovery. If the hopeful signs of the past couple of years again turn out to be fakes, Wichita’s aviation community could end up stalled in the shadow of its own goalposts again in 2013. That’s always a bad place for another fumble!

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