May 13—DULUTH — You could say Cirrus Aircraft faces an enviable problem.
The Duluth-based company can't quite keep pace with demand for the airplanes it produces — both its piston-engine SR models and its signature high-end personal jet, the Vision SF50.
Cirrus CEO Zean Nielsen said the company has nearly doubled its production of aircraft in the past three years, yet long lead times persist.
"So, from a demand perspective, the last two years we've actually been outselling our production capacity by quite a margin, which is good. So, the backlog is really healthy. It's actually at a record level right now for both the jet and the SR," Nielsen said.
A Cirrus customer looking to buy an aircraft today could reasonably expect to take delivery of an order for most models no sooner than late 2024.
Nielsen wants to shorten those lead times, but that's no simple proposition, given labor and supply constraints.
In a tight local labor market, Nielsen said Cirrus has appreciably increased the wages and benefits it offers and has been actively advertising its employment opportunities both for experienced and entry-level positions. It also has been promoting the mobility its employees enjoy, with multiple avenues to advance in the company.
Nielsen believes Cirrus would be well-poised to recruit more people to take jobs in Duluth, he said, but "the biggest hurdle we have is helping them find housing."
"If I could make a plea to policymakers and the city and others, it would be that they become a lot more aggressive with developing land and potentially offering tax incentives to developers and builders and companies that will come in and expand Duluth's housing inventory, because there's a mismatch between what manufacturing companies can pay, vis-a-vis what a very basic entry-level house costs in Duluth," he said.
"If they want companies like ours to expand in Duluth, which we totally want to do — I mean our DNA is in Duluth — they have to help. And it should not always be the companies that are out knocking on the doors of the city and the policymakers to develop housing. My job is to run a profitable company and it's to make it a great place to work. It shouldn't necessarily be on the companies to figure out where our employees will live," Nielsen said.
Nevertheless, Nielsen said he would be open to partnering with other large employers to do something together with the city or state to better meet the local need for affordable housing.
Developers have been taking notice, and there have been some encouraging signs of late, noted Adam Fulton, deputy director of the city's planning and economic development division, as he discussed a recently proposed 194- to198-unit apartment building in the Duluth Heights neighborhood, as well as a project that is expected bring up to 130 units of housing to the Historic Old Central High School building.
"The recruitment piece is huge for our local employers," he said, commenting on the need for additional housing. "We want to see more."
Three years ago, Cirrus employed about 1,300 people. Today, that number is about 2,100, with more than 1,200 working in Duluth. And Nielsen said the company is looking to fill about another 400 positions this year.
While Nielsen wouldn't say exactly what that meant for production goals, he said it stands to reason Cirrus would expect to see corresponding growth in output.
As its production grows, Cirrus is looking to expand into the Duluth aircraft maintenance base formerly occupied by AAR. It also recently completed a 16,000-square-foot expansion of its paint shop.
Yet Nielsen said the company's facility needs can be significantly moderated, if it can increase the size of its work force.
Cirrus' production workers in Duluth put in four 10-hour shifts a week, but Nielsen said that with sufficient staff the company could add a full second shift, substantially boosting its output without radically expanding its footprint.
The pandemic has presented some production obstacles for Cirrus, as well.
Nielsen said about 95% of Cirrus' components are produced in North America. Nevertheless, the company has experienced occasionally troublesome kinks in its supply chain and some price hikes since 2020.
"So, we took a little hit on the profitability that year. We were still very profitable. But it was more of a bottom-line hit," Nielsen said.
Customer orders for new Cirrus airplanes have held surprisingly strong in the past couple years. Nielsen said the break from normal during the COVID-19 pandemic provided time and space for a number of people to pursue their interests in aviation.
That's not to mention the trepidation many travelers felt about sharing space with large numbers of fellow commercial airline passengers, particularly when virus transmission surged and appeared to pose such a serious public risk. Switching to more private general aviation flight seemed like a wise move to many.
Cirrus has been working hard to foster a growing customer base, with many clients new to aviation.
Nielsen noted that the washout rate for people pursuing a private pilot's license is nearly 90%, and he recognized that narrow success level as a business opportunity.
"So, by focusing on flight training as a discipline, you can widen that funnel. It's just simple math. If 90% are dropping out, and let's say you can get that down to 80%, you've essentially doubled your addressable market, which is huge," he said.
Those efforts to help people become pilots seem to be paying off. In all, 39% of the orders Cirrus received in 2021 were from people who were not yet pilots, but were on the path to receiving licenses, according to Nielsen.
"So, these initiatives are clearly making a bigger pie. We're reaching much further out than the traditional aviation enthusiast, if you will," he said.
In 2021, Cirrus shipped 528 new aircraft to customers, booking almost $633 million in sales, according to the General Aviation Manufacturers Association. That's nearly a 16% increase in business compared to what it did in 2019, prior to the pandemic.
Nielsen believes that upward trajectory will continue, and Cirrus must meet the challenge of growing demand for its aircraft, even if it means shifting some work around.
Nielsen said that if Cirrus can't find the talent in Duluth to continue to scale, either because the population is declining or because people can't find housing, "we are forced to look elsewhere."
"There's just no alternative," he said. "There's no robot that can do what our staff can do."
"We're starting to get more and more calls from other cities and states that are seeing these micro- and macro-signs on the wall," he said, noting that prospective tax incentives and development offers have been placed on the table to relocate.
"Now, we don't really want to have those conversations. We would prefer to grow and scale in Duluth. But what's the alternative, right, if we can't? So, my hope is that everybody comes together and solves this problem," Nielsen said.
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