Analyst: Wichita aviation looks good for next few years

Oct. 4--Richard Aboulafia, one of the nation's top aviation analysts, spent 10 years of his youth in Long Island, New York, a place that once was home to an aviation cluster.

"It no longer is," he said.

Wichita is lucky, Aboulafia said. With Seattle and Dallas-Fort Worth, it's one of the last three "great surviving U.S. aviation clusters."

"It's doing great to keep that mantle," he said. "It's kind of nice to see."

Aboulafia is vice president of analysis at the Teal Group, a Virginia-based company that provides information and analysis on the aerospace and defense industries. He spoke at this week's Wichita Area Economic Outlook Conference.

While in Wichita, he also toured Boeing Wichita, Cessna Aircraft and Spirit AeroSystems.

He sat down with The Eagle to share his thoughts on the aviation market, outsourcing, China and the companies he toured.

Your forecast predicts airline and business jet deliveries peaking in 2010, followed by a gentle downturn in the 2011 and 2012 time frame. That's nothing like the nasty down cycle of 2002 and 2003.

"After seven years of expansion, you just can't bank on good times rolling forever.

" (Instead of a decline) that could even stay at a plateau. Because of globalization you're seeing a strong chance that international demand really kicks in as U.S. demand slackens."

What about China? Would Wichita benefit if it opens up its air space?

"It's not just China.... Neighboring countries that have really lagged behind in terms of taking business jets -- Korea, Taiwan, Japan, Singapore -- the export-driven, high-cost, high-wage economies of Asia. They would start taking business jets, too, so they could access Chinese low-cost manufacturing sites.

"It could insulate us from a downturn or give us a double-peak upturn. Either way, it's good news if it happens."

The National Business Aviation Association's annual conference, which ended last week, garnered lots of orders, but no new product launches. What did you think of this year's show?

"It was like a Seinfield show. It was a show about nothing.

"Everyone expected four or five new product launches, and there were exactly zero.... Maybe there was risk avoidance, but more likely, maybe people didn't want to cannibalize their existing very strong current product revenue.

"Still, its hard to feel disappointed when the numbers are fantastic."

You mentioned that three trends will help business at Boeing Wichita, which services and supports military products. What are they?

"There's no money to replace these (military) platforms. The recapitalization budget is not there. It's a miracle they funded any tankers.

"Second, the utilization of all of these have been very high because of the global war on terror.

"Finally, these are platforms that lend themselves to upgrade. It's tough to design a better long-range bomber... than the B-52. For Air Force One and all the other stuff they work on... there's a quantity of modification upgrade work."

Other thoughts on the Wichita site?

"Very impressive in terms of capabilities and in terms of legacy.... I like their business base; I like their plan.... I like their capabilities a lot. I like their legacy a lot. But there's no disguising the importance of the KC-X (the name the U.S. Air Force has given to a new refueling tanker project. Boeing has bid on the program.)"

You also toured Cessna Aircraft and mentioned that one of its challenges is from new market entrants, specifically Embraer. What are other challenges ahead?

"In the short and medium term, things are just fantastic.... (But) they also need to move into more of a manufacturing integrator model where they get other structures builders to share risks and help do the heavy lifting.

"Outsourcing doesn't mean offshoring. It could mean moving it across town to Spirit or to Texas to Vought (Aerospace.)"

Speaking of Spirit...