April 4, 2012
In an exclusive interview with AOPA, Morgan Stanley Managing Director Heidi Wood shed some new light on recent developments in the business aviation manufacturing segment.
Wood, who specializes in aerospace investments, views the recent strategic agreements between Cessna and Aviation Industry Corporation of China (AVIC) as not just a victory for Cessna, but as a Chinese rejection of several other manufacturers’ advances. Among them, Wood says, are Bombardier, Dassault Falcon Jet, Embraer, and Hawker Beechcraft Corp.
“They all came to the dance party, hoping to partner with the Chinese,” Wood said.
AVIC’s March 28 announcement at the Asian Business Aviation Conference and Exhibition (ABACE) affirmed that Cessna, AVIC, and the Chengdu provincial government will “jointly establish a range of products and services for general and business aviation in China. The agreements pave the way for a range of light and mid-size business jets, utility single-engine turboprops and single-engine piston aircraft to be manufactured and certified in China.” Wood said that the Chinese entities will also provide two-thirds of future research and development funds for Cessna. Financially troubled Hawker Beechcraft found no such relief.
“Obviously, there were a number of alternatives that Hawker Beechcraft was working on pretty hard that would have rescued the company, and one of them was joint venturing with China,” Wood said. “But that didn’t tilt in their favor. The ‘Chinese White Knight’ play didn’t work.
“The Chinese spent a year’s worth of research into who they would partner with, and they decided they were only going to team with only one company, and that company was Cessna, so for Hawker Beechcraft this was a setback.”
Speaking of Hawker Beechcraft’s future, Wood said, “The problem with airplanes is that when you run into difficulties, competitors can make the situation worse and aggravate the doubts of customers, which almost makes a self-fulfilling prophecy.”
Hawker Beechcraft is not in an impossible spiral, she asserted, but the company is in a tough situation. There have been a number of signs that have not helped their odds, either. “The delayed filing of its annual report was not the world’s best sign,” she said, “And neither was the replacement of Bill Boisture as CEO. People felt that if anyone could fix Hawker it was Boisture, who’s a lifelong business jet guy. So that decision was another sign of where the board, or Onex, or Goldman Sachs [owners of Hawker Beechcraft] are headed.”
For Cessna, the Chinese contracts are a wise move that will produce more airplanes and rejuvenate the company. Wood said that under the agreements, “Textron retains full, 100-percent, independent control over what they decide to do. The Chinese will contribute two-thirds of research and development funds, and Textron the other third. This gives them huge firepower.”
As for 2012 being a recovery year, Wood is bullish, predicting that the infusion of Chinese funds will lead to Cessna’s launching two to three new business jet models at this year’s National Business Aircraft Association convention. Industry-wide, there will be improved demand this year, with increases in orders and production rates. “This may be the year manufacturers feel the worst is behind them, and everybody gets back into the order game,” Wood said.
Aircraft Power and Fuel,
As the cold weather chills AOPA’s Headquarters in Frederick, many of us are inside generating new resources for flying clubs.
In my house, every Friday night is “Movie Night.” While the movies are rarely educational (I don’t think I learned anything from the Lego Movie), we look forward to the weekly opportunity to spend time together. Why not use the same concept for your Flying Club (with the addition of education, of course)?
The Aircraft Spotlight feature looks at an airplane type and evaluates it across six areas of particular interest to flying clubs and their members: Operating Cost, Maintenance, Insurability, Training, Cross-Country, and Fun Factor.
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 >>>