By Frank Joseph Rowe
Kansas is a land of extremes.
Summer heat that feels like a blast-furnace, never-ending winds that sweep across its plains and scour its cities; hail storms that pummel cars and lend waste to crops and livestock; and mile-wide tornados that churn-up the countryside and occasionally level whole towns in their wake.
Kansans it is said descend from a hardy, faith-based stock. It’s in their DNA and generational make-up to be able to rationalize the extreme forces of nature that shapes their world. Storms of epic size and severity it seems are the expectation.
With grit and determination, Kansans perennially emerge from their storm cellars to rebuild their worlds, and move forward with their daily lives.
While not one of Kansas’ natural cataclysms, the Great Recession of 2008/2009 came to test the will and resolve of Kansans just as much as any super cell-based storm.
Lasting roughly from December 2007 through June 2009, at 18 months, the Great Recession was to be the most influential of the 13 recessions to have occurred in the United States since the Great Depression of 1929 through 1933. The recession was preceded by an exceptionally robust market that, from 2003 through 2007, was marked by 17% annual market growth rates.
Just as some of the most destructive Kansas storms are the result of just the right combination of meteorological factors (usually extreme amounts of convective instability, wind shear and a forcing mechanism) so too was the Kansas aviation industry ravaged by a mixture of factors that resulted in the “perfect financial storm”.
Those factors included the global credit crisis, low-cost foreign competition, political vilification of business aircraft ownership and an increasingly self-destructive tendency at times for Kansas aviation manufacturers to operate inefficiently with out-of-control costs, wanton amounts of waste and disjointed internal processes.
Triggered by a liquidity shortfall in the U.S. banking system, the resulting financial storm (consisting of a massive downturn of worldwide stock markets and a precipitous fall in consumer confidence) forced Kansas business’s, and especially Kansas Aviation companies to in turn operate in survival-mode. Kansas general aviation OEM’s reverted to launching massive layoffs, extended furloughs and shuttering / divesting plants in order to survive the prolonged effects of a recession that at times teetered on the brink of an all-out depression.
Long hailed as the Air Capital of the World, Wichita’s premier aircraft companies consisting of Cessna, Hawker Beechcraft, Bombardier Learjet, Spirit AeroSyetems, Boeing and scores of other local suppliers and machine shops increasingly felt the effects of the recession. Especially impacted were the “Big 3” general aviation manufacturers of Cessna, Hawker Beechcraft and Bombardier Learjet.
To make matters even worse, factor-in a political climate that unwittingly cast a negative pall on the use of business jets, and it seemed that the entire world was conspiring to unmercifully oppress one of the United States most stellar centers of excellence in terms of manufacturing and export.
The resulting impact of the Great Recession on Wichita general aviation translated into the loss of approximately between 13,000-14,000 general aviation OEM jobs. To put that in perspective, it would be the equivalent of losing an entire top-line aircraft company (plus more) in terms of the number of employees lost to layoffs.
To further compound the direct OEM layoffs, a domino-effect was experienced by the more than 150 local parts suppliers and service providers throughout the community. Based upon a formula from the U.S. Bureau of Economic Analysis, every aircraft manufacturing job that is created directly or indirectly provides 3.42 additional jobs within the community. Conversely, every aircraft manufacturing job lost would also adversely impact the community through laid-off contractors, machine shop personnel, food services, retail store clerks and many others throughout a broad spectrum of employees. That number would raise an additional estimated 40,000+ employees impacted by the aircraft layoffs with either short-term or long-term layoffs / wage cuts and furloughs within the community.
It would not be until the spring of 2011 that global market indicators even began to suggest that the general aviation industry might be poised for a comeback, with most industry analysts hedging that it would not be until 2012 (about 4 years since the beginning of the recession) that the market actually sees significant improvement. Even with that promising speculation, past trends indicate that general aviation industry profits typically lag the rest of the world’s industries by approximately 8 quarters. Given that, most analysts seem to agree that it would not be until 2015 or 2016 that the market might realize anything that begins to approach the sales that were seen prior to the Great Recession.
But it became clear to Wichita general aviation manufacturers that this latest economic upheaval would require much more to survive than merely leveraging large-scale reductions-in-force and waiting for an eventual recovery. Survival would mean examining every business-case detail of current operations, determining how to reinvent the company to perform within the leanest of margins, (yet maximizing cash-flow and profits) as well as capturing new market share within the context of fierce global competition.
As each general aviation manufacturer turned its focus inwards in an attempt to restructure itself, significant effort was channeled into determining what should be considered its core business operations versus what could be “off-shored” to places like Mexico, India and China, as well as what could be “rural-outsourced”, primarily to locations in the southern states, where low-wage labor and tax incentives could allow Wichita aviation manufacturers to remain competitive in price as compared to the threat from Embraer, as well as eventual competition from Asia.
For Wichita general aviation manufacturers to effectively recover and significantly compete within the new world order, it also became clear that it would be essential that they optimize every aspect of their business. Particular attention would need to be paid to the following:
- Controlling manufacturing costs (to a much higher degree than ever before)
- Employing the very best talent for re-defined OEM core responsibilities
- Employing Program Management that delivers on-time/within-budget
- Maximizing brand appeal for multi-cultural markets
- Selectively partnering with suppliers who work as an extension of the OEM
- Leveraging global risk-sharing partners
- Achieving highest quality standards and safety record
- Continuing to expand global network of service centers
- Innovation that leads the world and sets new global benchmarks
While most all of the above may be considered a common set of “givens” in terms of means to being able to compete in today’s global market, it may well be the aviation manufacturer that can aggressively develop innovative technology, either internally, or through proprietary partnerships that can create an advantage that translates into increased sales and prolonged market share.
Technological innovation can be a combination of: power plant improvements (performance, fuel efficiency, improved TBO, reduced weight), structural advancements, avionics improvements (navigation, communication, weather, anti collision), systems improvements (flight control, environmental, oxygen, electrical, hydraulics) and “smart cabin” interior improvements (e-cabin connectivity, modularity).
An example of this might be suggested in the recently published announcement that NASA has awarded research contracts to Cessna Aircraft Company (in addition to Boeing Research and Technology, Massachusetts Institute of Technology and Northrop Grumman Systems) to perform research and development on issues that are targeted to advance aviation performance in terms of improved fuel economy, performance and maintenance. Cessna Aircraft, in conjunction with GE Aircraft Engines and Georgia Tech developed a proposal in which advanced systems should be capable of realizing a 70 percent reduction in fuel burn. The mere notion of technology that could achieve such fuel savings would provide an astounding global advantage for the OEM who developed and employed it.
While the projected timeframe for actually implementing such technology (known as “N+3”, meaning 3 generations in advanced of today) would be between 2030 to 2035, it is this type of cooperative innovation that would be key to providing an edge for U.S. general aviation companies.
Similar advanced studies conducted between Wichita general aviation manufacturers and Kansas Universities, including Wichita State’s National Institute for Aviation research (NIAR) are critical for maintaining and expanding a competitive advantage for Wichita-based General Aviation OEM’s.
American innovation and ingenuity, carefully safeguarded and funded for practical business application has always been a resource that has allowed American-based business to grow and expand market share. The strength of U.S. innovation (in the form of patents, licensed intellectual property and proprietary new product development) should be a key factor in helping to ensure future global leadership and sales success.
In addition to becoming more efficient and globally competitive as General Aviation manufacturers, Cessna, Hawker Beechcraft and Bombardier Learjet may also be able to expand work outside of its usual niche in terms of providing research and development and a certain amount of manufacturing in support of privatized space flight/exploration companies.
Dr. Alan Weston, director of programs at the NASA Ames Research Center suggested recently at a Wichita Aero Club meeting that Wichita General Aviation manufacturers were ideally suited to provide parts and assemblies to the growing commercialized space travel industry.
While it is critical that a revamped, leaner and more cost-conscious general aviation industry be created to compete globally, it will also be absolutely imperative that state and local government, (as well as the community as a whole) work ever so closely with Wichita General Aviation OEM’s to create the business support climate necessary to retain and continue to grow the industry. Within reason, government and community must invest and develop a close partnership with Kansas-based General Aviation OEM’s. What in prior years were independent businesses can no longer operate as such when matched against foreign manufacturers who have been substantially supported by foreign governments. Government and business must develop a roadmap for success to ensure continued prosperity in spite of global and domestic competition. This, combined with specialized local infrastructure such as The National Center for Aviation Training, The National Institute for Aviation Research as well as local area technical colleges firmly establishes the type of support system necessary to ensure long-term business success.
Finally, perhaps the ultimate factor that may influence future continued success of Kansas general aviation manufacturers resides to a great extent within the judgment, conviction and ring-generalship of those who today and tomorrow will occupy the highest positions of leadership within these companies.
It will be today’s CEO’s that are entrusted to carry-on the inspired visions of American pioneers of industry such as Clyde Cessna, Dwayne Wallace, Walter and Olive Ann Beech and Bill Lear, especially during times that challenge those with lesser accountabilities and motivation. To be able to weather the most severe storms, and adapt to ever-transforming financial landscapes has always been the truest test of past, present and future senior leadership.
While the complexities of leading Kansas general aviation manufacturing companies today requires exceptional ability to operate in a very far-reaching and multi-dimensional manner, the rewards of being able to do so offers the promise of compounding the rich and powerful legacy of Kansas aviation even more-so into the future.