April 1, 2012
By Thomas B Haines
A scorecard seems necessary to keep track of who's who in aviation today as globalization of company ownership continues. And while foreign ownership of traditionally U.S.-owned companies causes consternation among some American pilots, we have no one except ourselves to blame because it is the lack of U.S. investment that is, for the most part, driving the sale of these companies.
A generation ago, the top piston-aircraft producers were as predictable as the top auto manufacturers. Cessna, Piper, Beechcraft, and Mooney were the GM, Ford, Chrysler, and everybody else of the aviation world. Today, the world looks quite different. As has happened in the auto market during the past 20 years, foreign aircraft manufacturers have made great inroads into U.S. markets. Today, the top manufacturers of piston airplanes are Cessna (413 piston airplanes), Cirrus (255), Diamond (185), Piper (102), and at press time Hawker Beechcraft (28), although Hawker Beechcraft had not yet released its fourth-quarter shipments. Mooney produced no airplanes in 2011.
Some of the names are not the only things that have changed over the past 20 years. So have the corporate ownerships. Cirrus is owned by the Chinese government. Diamond is Canadian-owned and Austrian controlled. The Sultan of Brunei owns Piper, and a Canadian company owns half of Hawker Beechcraft. Only Cessna, which is owned by conglomerate Textron, is still primarily U.S.-held. Furthermore, it is worth noting that not all piston-powered aircraft are airplanes. Family-owned Robinson Helicopter, based in California, produced 268 piston-powered helicopters (and another 88 turbine-powered ones).
All in all, the number of piston-powered airplanes delivered was down 1.5 percent in 2011 compared to 2010, according to the General Aviation Manufacturers Association. Cirrus claims the best-selling model again in 2011, a position its SR22/SR22T has held for a decade. Cirrus also claims to have sold more certified single-engine piston airplanes than any other manufacturer, which is correct if you discount the 168 Skycatcher Light Sport Aircraft that Cessna sold. LSAs are technically not certified airplanes; they are built to an ASTM standard. Cirrus sold more airplanes in the fourth quarter than it has in any quarter since the end of 2008—a potential sign of an improving market, or a validation of the importance of the federal government’s 100-percent depreciation program that ended with 2011.
So you might think that if you want to buy American, you should buy a Cessna. But keep in mind that the Skycatcher is built in China, with final assembly in the United States. And, like Hawker Beechcraft and others, Cessna also has many major subassemblies for its various models built in Mexico. And it’s not just airframe manufacturers that are being gobbled up by foreign companies. Continental Motors was bought by the Chinese government in 2010.
It’s important to keep in mind that this globalization of aviation is not new. Israel Aircraft Industries purchased several Rockwell Jet Commander models decades ago and successfully morphed them into the Astra and Galaxy business jets. The product line was sold to Gulfstream Aerospace a few years ago, but IAI continues to build them. Bombardier, a Canadian conglomerate, bought the cash-strapped and iconic Learjet Corporation in the early 1990s. China’s purchase of Cirrus a year ago seemed to spark the most outcry from pilots, but don’t forget that the Duluth company has been foreign-owned since 2001 when it was acquired by the Bank of Bahrain.
So what’s China’s interest in U.S. aviation companies? Brian Foley, an aviation consultant who monitors such things, said shortly after the Cirrus acquisition, “What we’re seeing is a two-pronged strategy. First, the Chinese government is developing civil aviation as a national priority. Second, these are deals that make good economic and business sense. China is fortunate to have abundant cash from massive exports at precisely the time when general aviation is at the bottom of its market cycle, making it a logical buy.”
But it’s not just about the money. “In buying up established companies, China gets the management know-how, brand, distribution, and technology in days—not decades,” Foley explained.
Foley agrees that short-sighted U.S. investors are partly to blame for the exodus of American ownership. “Perhaps the West is risk-averse on general aviation because of previous bets that didn’t work out well,” he said. “That’s certainly understandable, but it’s playing now to patient China’s benefit.”
But stay tuned. Things may be about to take another turn. With the growing efficiency of U.S. workers and China’s burgeoning middle class demanding higher wages, the pendulum may start to swing back. Brazilian manufacturer Embraer in 2011 opened a new factory in Florida to assemble its Phenom business jets. Companies outside of aviation are recognizing that expected savings from building products in the Far East and Mexico are not materializing, causing them to rethink that strategy. Can aircraft manufacturers be far behind? And in the end, will such changes spark much-needed innovation in general aviation manufacturing? Time will tell.
E-mail the author at firstname.lastname@example.org; follow on Twitter: tomhaines29.
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