The state of Kansas' business aviation industry

Business jet market recovery expected to be long and slow


That, and an eventual improvement in the market, will create a need for more jobs at some point, Coleal said.

At Cessna, Pelton said there's no fundamental changes in the works.

"We have a lot of capacity that is still underutilized," he said.

The downturn forced Cessna to close its Bend, Ore., plant and move work on its Corvalis models to Independence and to Chihuahua, Mexico.

In all, Cessna is consolidating 10 facilities with about 540,000 square feet of space to meet lower production needs, its parent company, Textron, said last month.

Cessna must improve its margins and increase profitability, officials said. It's striving to lower the cost of fabrications, production and engineering and to improve productivity, they said.

Pelton said it's difficult to tell what will happen with jobs in the future.

"It's all based on when demand comes back and what kind of production rates you might see," he said.

While not all the city's aviation jobs came back after the downturn following Sept. 11, 2001, Cessna's employment before this downturn exceeded its previous levels.

A 'nasty cycle'

Business jet demand depends on an economic recovery, the return of corporate profits and how quickly customers feel confident about buying.

While the numbers are improving, the quantity of used jets on the market remains high, prices remain down and usage continues to be lower. The lack of financing available for aircraft purchases also is still a problem.

"It's a pretty nasty cycle," said Cowen and Co. managing director and senior research analyst Cai von Rumohr. "The comeback usually takes a while to generate momentum."

Teal Group's Aboulafia said he expects recovery to begin in 2012.

Cessna isn't projecting when 2008 levels might return, Pelton said.

"It's fair to say it's going to be a ways down the road," he said. "We're not planning for it in the next five years."

Order cancellations have slowed to more manageable levels but haven't stopped entirely, Pelton said. Cessna is taking new orders but not at the rate of previous years.

"The good news is we're starting to see the economy starting to recover," he said.

Worldwide, planemakers delivered 1,315 business jets in 2008. It may take six to eight years for those levels to return, Aboulafia said.

Regardless, the long-term fundamental global need for travel using corporate aircraft will be there when the economy recovers, experts say. Emerging international markets also will evolve and stimulate demand.

"Time is important, and safety and security and the ability to do business are important," Boisture said.

Wichita planemakers are still developing new products to be ready to compete when the market improves.

One must take a long-term view, Coleal said.

"New products will improve safety, reliability and be more sensitive to the environment," he said. "All these things will be good for aviation."

New competition

When the market returns, the competition for business jets will have intensified for Wichita planemakers.

Gulfstream, for example, is developing the new super-midsize G250. The first plane rolled out of the factory earlier this month.

An even larger threat is Embraer, which is developing three business jets to add to the three jets it already has in the market.

" (Embraer is) gunning for the Wichita part of the business," Aboulafia said. "They're going for the lower end of the business jet market, and that's where the Wichita companies play."

The company builds good products and is aggressive on price, he said.

"If you look at each Embraer product, they're going after the Cessna or Hawker or Learjet product for a couple of hundred thousand dollars less," Aboulafia said.

The advantage for a company like Cessna, however, is customer loyalty and superb service, he said.

Because Embraer has built airliners for so long, it brings an eye toward ruggedness and reliability to the market, Hawker Beechcraft's Boisture said.

"I'm very concerned about them," he said. "They're a good engineering company."

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