December 16, 2009
Coleal, Pelton, and Boisture participate in the panel discussion
Top executives in the aircraft manufacturing industry are cautiously hopeful that the economic downturn has reached the bottom; most anticipate 12 to 18 months of stability before the industry sees any appreciable growth. Challenges include FAA funding and implementation of the NextGen air traffic control system. And outsourcing is here to stay as aircraft manufacturing embraces the global economy.
That’s what they told 350 people at the Wichita Aero Club’s monthly luncheon on Dec. 15. Jack Pelton of Cessna Aircraft Company, Bill Boisture of Hawker Beechcraft, and David Coleal of Bombardier Learjet joined Jeff Turner of Spirit AeroSystems and Scot Oathout of Boeing Integrated Defense Systems for a conversation about the state of the aircraft manufacturing industry in Wichita. J. Mac McClellan, editor of Flying magazine, moderated the discussion.
“It does look like the decline is over,” Pelton said. “Where we’ve been has been a traumatic period of time.” There seems to be stabilization, “but we don’t like where it’s stabilizing.” Pelton said he wasn’t going to call it the bottom, but he expects to see at least 12 to 18 months of stability before business increases.
“We’re prepared for 2010 to be a very difficult year, with low order intakes and low production rates,” Boisture said. Raytheon’s T-6 military trainer program and military applications of the Beech King Air have been bright spots, he noted, citing the delivery of 30 King Airs for use by coalition forces in Afghanistan. “We’re feeling for the rocks, and sometimes we’re finding them. To continue that analogy, we don’t know how wide the lake is—a snorkel may be required,” he added. “I think we’re in for a long haul.”
Flight hours are up slightly and used aircraft sales are trending down, which Coleal said were good signs. The challenge is finding the right production rate for the market, he explained, adding that financing and credit markets still are a challenge for customers.
“The Beechcraft T-6A trainer program (shown) and military applications of the Beech King Air have been bright spots,” said Boisture
“Clearly the jet transport market in this economy has not been hit to the extent that general aviation has,” said Jeff Turner of Spirit AeroSystems, which makes components and subassemblies for Boeing, Airbus, and other aircraft manufacturers. In the post-Sept. 11, 2001, downturn, the air transport segment was hit much harder than GA, he noted. Turner said there’s been a little slowing in the production of widebody airliners, but deliveries of single-aisle aircraft remains strong.
The military segment also has seen some reductions, because military spending is flat or declining slightly, Oathout said. “The wish list for Santa Claus is a little bigger than the checkbook will allow—that’s going to drive some hard decisions, especially for the Air Force,” he added. “We’re trying to get our production capacity in step with the market.”
“Do you want to talk about 2007? That was a great year,” Pelton commented. “We’re feeling pretty good that we’re stable for ’10, but it’s a much smaller company and lower production.” Cessna is hoping for incremental production and employment increases in 2011, possibly driven by deliveries of the new Citation CJ4, he said.
“What do we have to do to be here when we recover?” Boisture asked. “We talk a lot about that in our company.” He doesn’t see any significant employment increases in 2010. “We’re not expecting that kind of year.”
The first Citation CJ4 rolls out.
Despite staffing reductions at Bombardier Learjet, Coleal said the company still is investing in the development of new products, so that it can offer the best technology when demand recovers. “New product development stems new demand,” he noted.
Turner said Spirit was trying innovative things to keep people employed. “Instead of furloughing employees, we went to shorter work weeks,” he said. “I’m a firm believer that 60 percent of a good job is better than 100 percent of no job.”
A significant challenge is making sure the FAA continues to be funded with both a general fund contribution and fuel taxes, Pelton said. “That will give it the ability to do what’s necessary for growth—that’s the next-generation air traffic control technology.” Then the agency should step aside and let the industry implement NextGen. “The technology already exists,” he added.
Unlike the automotive industry, aircraft manufacturers “have never asked for anything,” Boisture observed. “We need to make sure the FAA is funded—and we need to keep our infrastructure, airports, and navaids healthy.” Aviation does not want financial help from the government, he continued; “We want people with vision” on the regulatory side.
“I think we need to recognize the role of public/private partnerships in all this,” Turner said. “The air traffic control system we all talk about—it has to be brought into the twenty-first century.”
“One of the challenges we have is to continue to educate about the importance of aviation to this country,” Coleal commented.
The idea of accessing aircraft on demand has seen a lot of success, noted Boisture, who was president of NetJets from late 2003 until January 2006. “What we haven’t gotten quite right with it is the economic model.” The original fractional-ownership model ignored the residual value of the asset, as well as capital replacement, he said. “I’m a firm believer that random access to business jet aircraft will be part of the future” of air transportation.
David Coleal of Bombardier Learjet and Jack Pelton of Cessna talk before the Wichita Aero Club luncheon.
It’s also a difficult time for fractional operators now because there is so much charter capacity available, Boisture added. “And it may be that not as many people can afford it.”
“I don’t think the fractional market is dead—there’s just too much capacity on the market,” Pelton agreed. “The concept will evolve.” Pelton compared the current situation to the housing market; there are so many airplanes available that there’s an oversupply. “Eventually those curves will catch up.”
“We are in a global sourcing environment, and I don’t think we can look at the world in any other way,” said Turner, adding that Spirit practices both insourcing and outsourcing. Down the road he hopes to have customers from around the globe, not just in the United States and Europe.
Bombardier has nine plants around the world, producing fuselages in Belfast and wings in Toronto, Coleal said. “We leverage the Bombardier network worldwide,” looking at who has the best capability to perform different tasks.
People view outsourcing as derogatory, but it’s nothing new, Pelton said. “It’s a decision that’s part of an overall strategy. We’ve been doing this in Wichita for 82 years.” When you turn to a supplier, that’s outsourcing, he explained. “As business leaders we need to look at where we’re allocating capital”—which provides the better return, building additional manufacturing capacity or investing in research and development?
Five years ago, 70 percent of Hawker Beechcraft’s products were sold in the United States, Boisture said. Because of the flat U.S. market and demand in other countries, he continued, this year about 80 percent of the company’s deliveries will be to customers outside of the United States. “The pendulum has swung dramatically,” he noted. “When we’re out in the world selling airplanes, people say, ‘We want them—but we also want to build part of them.’”
Pelton said Cessna was sending some work to a Cessna facility in Mexico, where the workers are Cessna employees. Eventually there will be a shortage of workers here, he said, adding that the company has an additional concern. “With the reductions, we’re now left with a workforce that is aging. We will need to focus on retaining skill sets.”
Dave Franson, executive director of the Wichita Aero Club, said the luncheon drew a record attendance of 350 people. That exceeded the club’s previous record of 240, set in January when Craig Fuller made his first public appearance as AOPA’s fourth president. The club was founded in October 2008.
AOPA partnered with the club, the National Aeronautics Association; ADR, Inc.; BBK, Inc.; and Flying magazine to sponsor an online simulcast of the panel discussion.
September 19, 2014 ePilot Training Tip: 'Detailed rules and requirements'
September 19, 2014 GA battles Ebola, terrorists; IMC equipment failure
The FAA announced Sept. 18 that it would host a “call to action summit” to address the barriers and potential challenges associated with equipping tens of thousands of aircraft for ADS-B, a move welcomed by AOPA.
VOLUNTEER AT AN AOPA FLY-IN NEAR YOU!
SHARE YOUR PASSION. VOLUNTEER AT AN AOPA FLY-IN. CLICK TO LEARN MORE >>>
VOLUNTEER LOCALLY AT AOPA FLY-IN! CLICK TO LEARN MORE >>>
BE A PART OF THE FLY-IN VOLUNTEER CREW! CLICK TO LEARN MORE >>>