Beechcraft is weighing bids for the sale or sales of its Hawker 4000 and Premier aircraft programs, along with tooling and associated facilities, as the reshaped company looks to downsize its footprint and focus on its core lines of businesses.
The company “got interest in all” bids on July 2 and is “now negotiating for the sale of each of those assets” for the type certificates, along with associated spare parts, tooling and facilities, and Beechcraft hopes to tie up a sale by the end of the year, Beechcraft CEO Bill Boisture said during a roundtable with Aviation Week editors.
In addition to selling the airplane programs themselves, Beechcraft is selling the associated paint and completions plant in Little Rock, Ark. Beechcraft has also consolidated its pistons and turboprops production into a single facility in Wichita, closing the pistons plant. That facility, Boisture says, is on its way to becoming a big box store. Other plans include efforts to sell its composites plant (Plant 3) in Wichita, along with the associated technologies. He said the sale of Plant 3 and property at the south end of the Beechcraft campus will reduce its so-called “square mile” on Wichita’s east side by about 20%.
Beechcraft has also worked to “rationalize” its service network, including closing and/or selling its Mesa, Ariz., San Antonio and Little Rock facilities.
The decision to sell off the business-jet and composites-technology assets – after failing to find profitability in that market sector over the past three decades through three different aircraft programs – will enable Beechcraft to become a much simpler company that does not have to divert resources to supporting them, which Boisture says have “mediocre reliability, maintainability, operability, etc. – all the - ilities.”
As for its existing service centers, Beechcraft is maneuvering to build up the business supporting its own types, including the Hawker 125 and Hawker/Beechjet 400 families, for which it is retaining the type certificates. The company is also establishing “centers of excellence” at its facilities working on the XPR upgrade programs for the Hawker 800 and Beechjet/Hawker 400.
The company has a number of bidders for the programs and facilities, Boisture says, but he would not predict how the sale would proceed. The company has received interest from three categories of bidders – those who are seeking to purchase of all of the assets, those who want groups of the assets and others just interested in the pieces.
He envisions purchasers of the Hawker 4000 and Premier programs would establish a support company similar to Sabreliner. Their combined fleet numbers about 400, with the Hawker 4000 accounting for 73 of them.” He is more skeptical about the likelihood those aircraft would return to production. Such an effort would take four to five years and require an investment of $200-300 million before any updates to the aircraft, he says. “Unless there was a strategic national [interest], you probably wouldn’t undertake it,” he adds. While he concedes there has been some international interest in the programs, he also notes that such transactions can be complex, and Beechcraft is hoping to complete a sale before moving into 2014.
Boisture says the planned sales of the programs and facilities will only have a financial upside for Beechcraft, since the company, which emerged from bankruptcy in February, did not account for the programs as material assets on its balance sheet.
Without the programs, Beechcraft continues to focus on re-establishing its brand in the market and restoring customer and supplier confidence. Boisture was upbeat about working toward those goals, saying that despite the company’s recent history, the suppliers have been working closely with the company.
The customers have also provided positive feedback, he says. “Beechcraft customers know the focus of the company was diffused through,” he said.
As for branding, the company is returning to its roots, he says, noting that before the past couple of decades, “Beechcraft had been one of the benchmarks.” But in recent decades it had been “pummeled,” he says.
Beechcraft is hoping to stabilize following several years of financial uncertainty. After Goldman Sachs and Onex bought the company fromfor a “startling price” of $3.3 billion in 2007, with each putting in $500 million of their own cash along with borrowing additional funds, the company became “leveraged to the hilt.” In 2009, “its fate was sealed by the downturn … you simply had to do the math” to know restructuring would be on the horizon, he says.
The planning for reorganization began months in advance, going back to late 2011, which enabled the company to enter protection with a prearranged restructuring plan. The two pieces that were not yet in place were an agreement with the union on pensions, along with the Pension Benefit Guaranty Corp. But Beechcraft was able to secure those agreements within months of filing for bankruptcy.
While the plan was in place for reorganization, investors and executives agreed it would be worth considering strategic buyers, which led to the July 2012 announcement of a potential accord with Chinese firm Superior Aviation Beijing, “which began a journey in of itself,” Boisture concedes. That deal ultimately collapsed on Oct. 31, leading Boisture to refer to it as the “trick-or-treat decision,” adding “there would be no treat” even though it expended $50 million of the Chinese firm’s money to keep its jet facilities operating during the exploratory period.
He cited dealings with the governments on both sides as an underlying cause for the collapse, but also acknowledges that a learning curve on working with the Chinese played into it. Asked if the Chinese used the process to absorb his company’s intellectual property, Boisture was adamant in his denial: “Absolutely not!”
But in the end, Beechcraft emerged as a stand-alone, smaller company, shed of 85% of its former $2.4 billion in debt, along with production of its costly jet programs. And as a result, the company will be profitable this year and won’t have to draw on its line of credit. The company, which now employs 5,400 workers worldwide, is expected to bring in $1.8 billion in revenues, about one-quarter of which will come from its defense/training business, another 35-40% from Global Customer Support and the remaining from its commercial aircraft business – 30% of that from special-mission aircraft.
Another by-product of the elimination of debt and sale of its unprofitable jet programs and composites technology is the ability of Beechcraft to invest trifold into its now core competencies – pistons, turboprops and military/trainer/special mission aircraft. This means the continuation of exploring the market for a new single-engine turboprop and ultimately contemplating long-term engine and avionics upgrades for its venerable King Airs.
Boisture is hesitant to provide details on new products, telling Aviation Week earlier this year that as the company regained its footing he wanted to “talk a lot less” about new aircraft. Instead, he wants the company to assume a “Skunk Works mentality.” But during the most recent European Business Aviation Convention and Exhibition in Geneva, Shawn Vick, president of Beechcraft International Services Co., said the company expects to bring new diesel variants of the Bonanza and Baron aircraft to market by the end of 2014 and remains “highly interested” in the single-turboprop market. Research is continuing on such a product, with more specifics anticipated over the next couple of years.
Boisture says Beechcraft’s focus on the single turboprop has been to determine which parameters would differentiate it in the market, what the competition would be, and how much it could cost. But he would not put a timeline on a go-ahead. As for the diesel variants, Boisture notes the difficulty in obtaining aviation gasoline in international markets. “We know we’ve got to make some changes,” he says, “That will be necessary to keeping them in production.”
While Boisture acknowledged the tumultuous past and says the company has been striving for stability, he acknowledges that changes may be ahead down the line. Three of the major shareholders are those that specialize in distressed properties. He says in those cases, the question comes up on whether they’re long-term owners. “I wouldn’t think so,” he says. But he adds that he does not know whether that means three years or 10 years.
Editor’s Note: This article incorporates changes to reflect a company request and to the Hawker 4000 fleet composition.