As announced a month ago, Hawker Beechcraft has moved ahead with a plan to close its Salina, Kan., facility that fabricates wings, spars, and subassemblies. There is no timeline for the closure.
There remain 240 employees working in the 13-building complex at Salina. Hawker Beechcraft officials continue formal conversations with the International Association of Machinists to make a viable business case for relocating jobs to Wichita. The union will respond to the company’s request within the next few weeks.
In preparation for 2010, a critical year for the industry, Hawker Beechcraft Chairman and CEO Bill Boisture initiated a series of meetings with union leaders. Boisture led the first meetings in mid-September to explore solutions to counter challenging economic times and job losses. Hawker Beechcraft has not issued a warning of layoffs since Oct. 22. It is unclear whether the Salina closing at some date in the future will require a new round of layoffs. Some of the work may be moved to Wichita.
The company recently reported third quarter results. Net sales for the three months ending Sept. 27 were $757.7 million, a decrease of $25.6 million compared to the third quarter of 2008. Continued weakness in the general aviation market significantly affected aircraft deliveries in the business and general aviation segment during the quarter. The company delivered 64 business and general aviation aircraft consisting of 25 jets, 30 turboprops, and nine piston aircraft, as compared to 86 aircraft during the same period in 2008, resulting in a decrease in business and general aviation sales of $98.6 million.
Parent company Onex reported a $180 million loss in the third quarter, largely due to Hawker Beechcraft “impairment” charges.
The decrease in Hawker Beechcraft sales for the business and general aviation segment was partially offset by a $92.3 million increase in trainer aircraft segment sales as a result of increased production volume in support of higher aircraft delivery volumes. Sales in the trainer aircraft segment were $169.7 million for the three months ending Sept. 27, compared to $77.4 million for the comparable period in 2008. Production volume in 2008 was affected by a strike and by a delivery suspension in place at that time.
Sales in the customer support segment were $100.2 million for the three months ending Sept. 27, compared to $125.7 million in the same period of 2008, reflecting reduced volumes and the impact of the sale of the fuel and line operations in late 2008. Hawker Beechcraft said the reduced volumes are primarily the result of lower GA aircraft usage due to recent economic conditions.
Excluding significant impairment and other charges, the company recorded an operating income of $5.3 million for the three months ending Sept. 27, compared to $15.3 million for the third quarter of 2008. The decline is primarily due to reduced business and general aviation deliveries partially offset by higher volume in the trainer aircraft segment.
Impairment and other charges totaling $726.4 million resulted in the company recording an operating loss of $721.1 million for the three months ending Sept. 27. During the quarter, the company recorded non-cash impairment charges totaling $521.3 million to reduce the carrying value of goodwill and intangible assets in the business and general aviation segment, including a full impairment of the $340.1 million of business and general aviation segment goodwill. The company also recorded additional charges of $205.1 million related to other asset impairments and to increase reserves for loss-making aircraft and potential supplier claims. The charges were primarily caused by the company’s updated expectations as to the timing of a GA market recovery, the resulting reduced production volumes, and increased downward pricing pressure on new aircraft sales.
For the three months ending Sept. 27, cash flow from operations was $58.5 million. The positive cash flow during the quarter was primarily because of a reduction in inventory on-hand as a result of aircraft delivered during the quarter, as well as lower new material receipts associated with revised production levels and improved inventory management, the company reported.
The backlog was $6.6 billion at Sept. 27, compared to $6.8 billion at June 28, and $7.9 billion at Sept. 28, 2008.
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