CEO Boisture Cautiously Optimistic about Future of ‘Smaller More Agile’ Hawker Beechcraft

 - May 18, 2011, 3:50 AM

“Cautious optimism” for the current business aviation market likely describes the consensus of opinion of the business aviation industry here at EBACE. It is, at least, the view of Bill Boisture, chairman and CEO, Hawker Beechcraft Corp., who told AIN that his plans for transforming the Wichita, Kansas OEM into “a smaller, more agile company” are progressing.

“It’s a right-now plan,” he said. “We spent most of 2010 planning what we would do and then started implementing parts of that with the [planned early 2012] closure of the plant in Salina [Kansas], and in October announcing the closure of several major facilities on the Wichita footprint. So by year-end, we will be about a million square feet smaller, in terms of occupied real estate, than we had been.”

The majority of the iconic airplane manufacturer’s work has been shifted to third-party suppliers, he explained, and to its new manufacturing facility in Chihuahua, Mexico, which by the end of this year will have about 500,000 sq ft and employ about 1,000 people.

The changes in the footprint, Boisture explained, are a physical manifestation “that matches changes to our manufacturing process with the aggressive application of lean principles.” The company has seen “some real progress in reducing cycle times and increasing the capacity of our engineering team,” he said, adding that Hawker Beechcraft has also seen “a good rationalization of our supply chain.” All of these are in progress and expected to be completed by the end of next year.

The company’s first quarter 2011 financial report notes that Hawker Beechcraft received $10 million in January from Kansas to develop new products and enhance existing aircraft, that 250 employees are benefiting from tuition reimbursement and that the company is hiring in key areas, such as engineering and marketing.

“We are investing heavily in the workforce we need to be that smaller, more agile company,” Boisture said. “Our approach is we will employ the number of people we need to do the work that is required to fulfill the market demand for our products. But we intend to do that with a much higher educated and trained workforce. I think that in 24 to 36 months we’ll have the most competent workforce in the industry.”

Hawker Beechcraft’s first quarter 2011 financial results, while mixed, do show signs that the company’s transformation strategy is beginning to work. At 45, the number of business and general aviation aircraft delivered in 1Q/2011 was 11 higher than those delivered in 1Q/2010 (34 units). However, sales revenue for this segment decreased quarter over quarter from $335.1 million to $286.2 million. The reason was the higher percentage of lower priced aircraft delivered in 1Q/2011. Of the 45 1Q/2011 deliveries, King Airs accounted for 24 units and piston airplanes another 10, compared to 15 and five, respectively, in 1Q/2010.

On the defense side, deliveries of T-6 trainer/attack aircraft rose by five from 16 in 1Q/2010 to 21 in 1Q/2011. Sales revenue also increased, from $142.4 million to $176.6 million, an improvement of $34.2 million in 1Q/2011.

Revenue from the company’s Global Customer Support segment also increased, albeit marginally, from $115.7 to $119.6 million in 1Q/2011, an improvement of $3.9 million.

Overall, while Hawker Beechcraft saw higher net sales quarter over quarter, it “recorded an operating loss of $37.9 million [for 1Q/2011], an increased loss of $12.8 million compared to [its loss of] $25.1 million during the same period of 2010,” according to the company.

More positively, the value of company’s order backlog on March 31, 2011, was $1.5 billion, compared to $1.4 billion on Dec. 31, 2010, with new orders of $714 million exceeding cancelations of $33 million.

Considering the next 12 months or so, Boisture concluded, “I think for our market segments, meaning midsize and down, we’ll see growth markets internationally, and overall see a year that, at least for the balance of 2011 and the first part of 2012, looks a lot like last year. We all are trying to convince ourselves that the recovery starts in 2012. I have no reason to think it won’t and I’m hopefully optimistic to see more signs of the recovery in the next six months. So, cautious optimism is where I would come out.”