06.11.2020
by Frank Joseph Rowe
With much of the worlds great manufacturing centers still reeling from the impact of COVID-19, and dealing with the market instability stemming from international trade disputes, it would be understandable to question the future of many of our businesses. Given the unique nature of the forces acting upon the world’s economies, many industries are looking at near-term as well as long-term strategies, not just to achieve profitability, but to actually survive.
Wichita, Kansas has long been known as the “General Aviation Capital of the World”, having produced close to one-quarter million of the world’s aircraft, including the 10,000th Boeing 737 jetliner fuselage. Aircraft produced in Wichita account for $5 billion annually of Kansas GDP, with Wichita accounting for the highest concentration of aerospace manufacturing employment in the nation (52% of Wichita manufacturing jobs, or 27,500 persons). From business jets to turboprops, piston twins to single engines, crop-dusters to medevacs, from special-mission to strategic bombers, Wichita has through time weathered multiple world wars, economic depressions (and not to mention the occasional tornado) to emerge each time stronger as one of the world’s most highly skilled centers of high-end manufacturing.
Historically, Wichita initially developed into an Aviation Capital primarily due to several key factors, specifically: 1) investment into the fledgling aviation start-ups mostly from local oil entrepreneurs, 2) a nucleus of talented workers and visionaries brimming with mid-western work ethic and resourcefulness and 3) the spirited support from local government and newspapers that from the outset, whole-heartedly embraced and strongly promoted the early concept of “Air-mindedness.” In 1929, the Aeronautical Chamber of Commerce of America declared Wichita “America’s Air Capital”.
Traditionally, aside from government military aircraft orders, much of the sales of new aircraft in Wichita has been cyclical in nature. During times of prosperity, the local economy booms with high paying jobs and generous bonuses for its skilled work force… and then sheds hundreds and even thousands of jobs during inevitable market downturns. If you are an aviation worker in Wichita, you come to accept this cyclical roller-coaster and anticipate the inevitable hard times as well as the good years.
While painfully disruptive, Wichita aircraft companies have a history of adjusting to the new realities, just as they have successfully emerged from the Great Depression, the recession of the early 1980’s, the 2002 dot-com bubble-burst, the Great Recession of 2008 as well as the impact of the COVID-19 global pandemic.
The development of “Wichita the Aviation Capital” has spanned well over 100 years since the earliest experiments at flight, and has grown to include through time some of the most legendary aircraft brands in the industry. World renowned Companies such as Cessna, Hawker-Beechcraft, Boeing, Airbus, Bombardier Learjet, Mooney, Alon, Bede, Piaggio, Raytheon, and Spirit AeroSystems (and dozens more) have all at some point either have been, or continue to be directly a part of this unique aircraft manufacturing center. Today’s principal airframe manufacturers are also supported by a supply chain network of some 400 machine shops and parts suppliers.
But while the recipe for initial success for the early companies such as E. M. Laird Airplane Company, Swallow Airplane Company, Stearman Aircraft Corporation, Travel Air Manufacturing Company and many others would serve to cement a foundation upon which to build a world-renowned manufacturing capital, a whole new formula for success would need to be developed through succeeding decades to ensure the growth and evolution of this unique manufacturing center.
Some of the strengths that have contributed to sustaining “Wichita the Aviation Capital of the World”, and should help to continue to favor a strong future include the following:
- Historically, there has existed a very strong relationship between Wichita aviation manufacturers and the City of Wichita, Sedgwick County and the State of Kansas governments. This partnership has included providing tax, training and growth incentives in turn for manufacturers to remain and expand.
- The willingness of Wichita General Aviation Manufacturing leaders, as well as State Government leadership, to initiate and proactively lobby the Federal Government seeking enactment of legislation that protects the health of the General Aviation industry. This includes for example, the passing of the General Aviation Revitalization Act of 1994 that places caps on GA liability.
- Strategic partnerships between aviation manufacturers and local centers of learning to develop a highly trained, indigenous work force (e.g.: Wichita State University (WSU), Wichita Area Technical College (WATC) and The National Center for Aviation Training (NCAT).
- A local network of independent aviation-based Research & Development institutions to provide expanded support to Wichita aviation manufacturers for evaluation of new design, materials, technologies and processes, as well as state-of-the-art testing facilities (e.g. : The National Institute of Aviation Research (NIAR) as well as the recent establishment of the 18.5 acre Innovation Campus at Wichita State University). Past and future success of Wichita General Aviation Manufacturers have always involved in-house innovation involving Advanced Design matched to understanding customer needs. Whether it’s the Travel Air Mystery R Racer, the Beech Starship or the Cessna Citation X, Wichita the Aviation Capital has always captured the public’s attention with cutting-edge advanced aircraft designs that set the standards for the future.
- The reinvention of local aviation manufacturers using evolving business models to best structure their operations with the intent to become leaner, improve efficiencies, reduce product development cycle times and increase net operating profits (NOP).
In recent times, the need and opportunity for the Wichita Aviation industry to change and evolve has brought about the emergence of two major reorganizations that could go a long ways towards powerfully reinforcing the future of Wichita the Aviation Capital:
- Mergers/Consolidation of separate aviation OEM companies into a single- source, multi-brand manufacturer (e.g.: Hawker-Beechcraft merging with Cessna Aircraft in 2014 to become Textron Aviation). The consolidation of two legendary companies (3 iconic brands) within an umbrella parent company preserves the brands while streamlining common support operations such as supply-chain, engineering, manufacturing, inventory, human resources and other functions into one pipeline for increased efficiencies. As recently as the first quarter of 2020, the Wall Street Journal reported on talks between Textron Aviation and Bombardier of Canada regarding Textron possibly acquiring the Bombardier business jet unit, which would include Learjet, Challenger and Global Express business jet lines. If such an acquisition occurred, it could provide the Wichita Kansas-based Textron Aviation with up to 6 brands of legendary aircraft, making Textron Aviation potentially in control of more than half of all world-wide business jet production.
- Reorganization of a Major Civil Aviation Division (Single Source Supplier) into a totally independent, multi-customer Contract Development and Manufacturing Organization (CDMO) (e.g.: Boeing-Wichita reorganizing in 2005 as Spirit AeroSystems Inc.). Spirit AeroSystems Inc is currently the world’s largest Tier-1 aero-structures manufacturer in the world, providing aircraft assemblies to clients such as Boeing, Airbus, Bell Helicopter, Bombardier, Northrop Grumman, Mitsubishi, Rolls Royce, and Sikorski Helicopter. Interestingly, Spirit AeroSystems can trace its lineage back to one of the earliest Wichita-based companies that helped establish Wichita Kansas as the aviation capital: Stearman Aircraft Company. The transition of Boeing-Wichita into Spirit AeroSystems Inc. is perhaps the most innovatively adaptive business-model, allowing a former traditional single-source OEM Division to now aggressively pursue multiple sources of revenue streams from a wide range of contract clients. With work scope targeted to increasingly pursue expanded defense contracts (currently accounting for just around 3% of total work), the opportunities for sustained growth should continue to be greatly enhanced.
- The success of Wichita the Aviation Capital would be greatly diminished if it were not for the strategy through time of developing a prolific national and global network of factory-backed service centers. Aircraft are extremely dependent on sometimes complex systems that have to be properly maintained by skilled service personnel to minimize any length of AOG (Aircraft on ground). While any discussion about GA market dominance by OEM’s usually looks at annual aircraft model sales, a major reason that Wichita continues to be associated with the title “Aviation Capital of the World” is that its General Aviation OEM’s service what they produce, and continue to expand its network of global support for its high-end products. Service “after the sale” is what instills confidence in customers to continue to purchase Wichita-built aircraft products.
- With a cost of living (COL) nearly 10% below the national average, and combined with affordable housing, the skilled workforce in Wichita Kansas is able to make their salaries go further for a higher quality lifestyle. Contrast this to other aircraft centers such as Los Angeles (111% higher cost of living / 433% higher median home cost) or Ft. Lauderdale (43.6 % higher cost of living / 143 % higher median home cost) and the geographic-based costs could be an additional incentive to retain and expand a skilled labor force in Wichita.
While there are many compelling reasons to believe that Wichita the Aviation Capital should be well prepared to continue to have a successful future, there are still some challenges/opportunities that may well surface during this new era. Some of the challenges are very real and immediate, while some are near-term possibilities, and some are more abstract and possibly lurking in the distant future.
A few of these challenges/opportunities could include:
- Shrinking Local Labor Force – With the tail-end of the “Boomer Generation” retiring from skilled positions at Wichita aircraft business’s, the need for qualified workers is already beginning to be felt. The multi-generational work force that once supplied Wichita manufacturers with decades of A&P Mechanics (Airframe & Power plant), technicians and other demanding skills has begun to reduce in size. The challenge of competing with other attractive out-of-state aviation job locations (such as Florida where notably Embraer Aircraft of Ft. Lauderdale, and Piper Aircraft of Vero Beach are located) is also a challenge.
- Emergence of Asia-Pacific Aviation – With China’s Central Cabinet targeting to build over 500 new general aviation airports by 2020, and to also increase the number of general aviation aircraft by 5,000, China represents a huge potential opportunity for manufacturing and sales (both foreign and domestic). Once General Aviation airspace, infrastructure, protocols and manufacturing certification issues are internally resolved, China will most likely contend as a noteworthy global aviation capital as well. With massive government funding (similar to what China has accomplished for High Speed Rail (HSR) development), China should become a major GA market (as well as a potential manufacturing power). This is also true when considering the possibilities of India evolving into a General Aviation manufacturing hub. The duality of potential expanding Asia-Pacific sales markets for Wichita aircraft manufacturers, as well as a possible source of future competition from Asian-Pacific GA manufacturers themselves makes for an interesting scenario.
- General Aviation Market Changes – Since the 2007-2009 recession, deliveries of piston-powered aircraft and business jets have significantly declined, with recent deliveries nowhere near the peak sales of 2007. This market erosion has seen deliveries almost cut in half, with manufacturers having to dramatically increase prices for most models of GA aircraft by almost double. Combine this with a declining GA pilot population due to the exit of the Baby Boomer generation, high operating costs such as aviation fuel, and most of the immediate market opportunity is for the manufacture and sale of higher-end business jets. With a projected Compound Annual Growth Rate (CAGR) of 3.52% through 2025, most trade experts expect the industry to see modest improvement for the short term. Per the latest General Aviation and Manufacturers Association (GAMA) statistics, business jet manufacturing accounts for 90.3% (U.S.) sales revenue, with piston-powered aircraft sales accounting for just 3.3% (U.S.) sales. The Light-Sport Aircraft (LSA) niche category may spur some traditional pilot reengagement, but the greatest potential for (non business jet) General Aviation future expansion appears to be with the development of all-electric personal and all-electric air-taxi vehicles.
- Electric Technology Revolution – Green aircraft technology (not only alternative fuel), but hybrid electric / all-electric powered flight most likely represents the next generation of general aviation products. Indeed, electric propulsion will most likely be a major “Game-Changer” that greatly impacts how aircraft are overall designed as well as used. Developmental partnerships between Wichita OEM’s and leading-edge electric propulsion technology developers will be crucial to allow Wichita-based general aviation OEM’s to pace development/certification of new products versus its competitors. In particular, the development of electric eVTOL (electric Vertical Take Off and Landing) Air Taxis is seen as a major new General Aviation market benefiting from this technology. With automotive OEM’s such as Hyundai planning to design / mass produce Electric Air Taxis for Uber, the General Aviation market could see an influx of new players. Other automotive OEM’s exploring All-electric air taxi’s include Daimler, as well as Porsche in partnership with Boeing. While eVTOL may require some time to allow for technology validation as well as regulatory acceptance (especially for non-piloted versions), transitional e-technology already is planned for the first all-electric air taxi service to begin in Los Angeles in 2021. Quantum XYZ plans to use its electric Urban Air Mobility (UAM) aircraft utilizing its Bye Aerospace eFlyers operating under the eCTOL (electric Conventional Take Off and Landing) category.
- Product Diversity – While most assuredly, “Wichita the Aviation Capital” will continue to capitalize on its core product offerings (General Aviation aircraft, contracted commercial aircraft major sub assemblies and service after the sale). This should also continue to be nicely supplemented by expanded government contracts/sales for military and special mission aircraft. With that said, “putting all your eggs in one basket” (aircraft/aerospace) can have a downside when that market segment feels the impact of an inevitable market-correction. The possibility of offering design, engineering and production manufacturing services for non-aircraft related products might greatly enhance Wichita Aircraft manufacturer’s portfolios. Non-traditional products such as the contract fabrication of next generation onshore/offshore wind turbines, high-speed rail (HSR) train cars and other products might be able to provide just enough product line diversity to partially offset declining revenue of GA aircraft when markets tighten for that segment.
Wichita the Aviation Capital of the World has a predictably favorable future for some time to come. It may at times be challenged by other air-centers that reside in other parts of the globe, but its proven history to be able to adapt to and overcome ever-evolving business landscapes is testimony to its leadership, skilled work force and commitment to manufacturing ingenuity.