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Hawker Beechcraft: NetJets cancellation will have 'no material impact'Hawker Beechcraft: NetJets cancellation will have 'no material impact'

Hawker Beechcraft Corporation (HBC) announced that struggling fractional operator NetJets has cancelled a “significant” but unspecified number of orders for business jets. The orders, numbering “more than 20” according to HBC, consist of some 11 of HBC’s Hawker 4000 and an unspecified number of Hawker 900s. The cancellation will reduce HBC’s current order backlog by about $2.6 billion, according to a press release. That leaves HBC with a projected year-end backlog worth about $3.5 billion, factoring in fourth quarter sales that will amount to approximately $1.1 billion, said HBC chairman and CEO Bill Boisture.

“I want to emphasize that these cancellations will have minimal effect on our liquidity, earnings, and deliveries in 2009 and 2010,” Boisture said in a teleconference addressing the marketplace’s reaction to news of the cancellations. The NetJets orders were to have been delivered in the 2011-2020 time frame. “NetJets has been a customer of ours since 1997, and there have been occasional cancellations and reorders before, but the fact is that while NetJets accounts for a significant portion of our order backlog, it represents just 10 percent of our sales volume, and less than 5 percent of our revenue,” Boisture said. “Our biggest customer is the U.S. government.” This is a reference to the company’s T-6A training and light-attack aircraft, which will continue to be sold in the coming years to the U.S. Air Force and Navy, plus several foreign nations. Special-mission King Air turboprop twins also account for significant sales to the military. Business and other general aviation aircraft come in a distant second, with sales in “ones and twos,” according to Boisture.

NetJets made the cancellations last month, and HBC returned deposits worth $12.8 million. In all, HBC expects to post losses of between $725 million and $740 million for 2009. That number could change based on fourth quarter performance, which may be higher than anticipated because of the slightly improving economy and bonus tax depreciation advantages.

Although HBC says it continues to produce airplanes “at prices lower than we’d like,” as Boisture said, officials say that the company is in no danger of having its cash reserves drop below a liquidity requirement covenant imposed on it by owners Onex Partners and GS Capital Partners, an affiliate of Goldman Sachs. “Our strategy for 2009 and 2010 is to work down our in-progress inventory from 2008, run our production lines at careful rates, sell units at lower margins, and improve our ‘working capital velocity,’” Boisture said.

News of the NetJets cancellations comes after a year of massive layoffs at HBC, and with the recent disclosure that the company doesn’t have orders for all aircraft currently planned to be built in 2010. The cancellation also raises concern for the future of the Hawker 4000. However, Boisture said that HBC will deliver a “substantial number” of Hawker 4000s, that there will be “approaching 30” Hawker 4000s in service by year-end, and that the company can “stand on its own without NetJets.”

Thomas A. Horne

Thomas A. Horne

AOPA Pilot Editor at Large
AOPA Pilot Editor at Large Tom Horne has worked at AOPA since the early 1980s. He began flying in 1975 and has an airline transport pilot and flight instructor certificates. He’s flown everything from ultralights to Gulfstreams and ferried numerous piston airplanes across the Atlantic.

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