Bill Boisture: ‘Beechcraft Corporation will be a very strong business’
“I came in knowing it was going to be tough,” says Bill Boisture, chairman of Hawker Beechcraft Corporation. “But I didn’t think the business environment would be this tough. I certainly didn’t come in thinking we would go into bankruptcy.”
Boisture (pictured, left) was hired in March 2009 by Onex and Goldman Sachs, two private equity firms that had bought Hawker Beechcraft by borrowing $2.5 billion in debt. That debt made the last three-and-a-half years incredibly tough for the company.
As the former leader of Hawker at British Aerospace in the early 1990s; a former customer in his role as CEO of NetJets; and a former competitor while leading Gulfstream: Boisture was uniquely qualified to lead Hawker Beechcraft.
His team has achieved a lot in a short term. Changes included implementing a new SAP operating system; redesigning the manufacturing process – including outsourcing more work; negotiating new contracts with suppliers; and growing segments of the business including customer services.
These were all ambitious changes and not all of them worked perfectly. Problems with the SAP system delayed billing at a time when the business was short of cash. But other projects – most noticeably customer service and support – were big successes. In 2009, the customer services division made $45.5 million in profit. In 2011, this had risen to $95 million. Unfortunately, it was not enough and Hawker Beechcraft had a $633 million net loss for 2011.
Despite Boisture’s and his team’s efforts, the main problem was that Hawker Beechcraft needed more people to buy aircraft.
“The business is highly dependent on the economy,” he says. “Aircraft manufacturers do not run well at low volumes with high leverage on them.”
In late 2011, it became clear that Hawker Beechcraft was running out of money. The company started to prepare for Chapter 11, eventually filling in May 2012. (This was despite Onex and Goldman hiring restructuring specialist Steve Miller as chief executive in February and incentivising him to avoid Chapter 11.)
Dealing with Superior Aviation
In July, three months after filing, Hawker Beechcraft announced that it had entered into exclusive negotiations with China’s Superior Aviation – with the deal reliant on Hawker Beechcraft splitting off its defence business. Superior bid $1.79 billion for Hawker Beechcraft and paid a $50 million deposit.
It was a fantastic deal for Hawker Beechcraft and guaranteed that it would keep building Hawker aircraft and keep valuable manufacturing jobs in Wichita. It also made sense for China, which is keen to build a business jet industry.
The talks eventually collapsed. Boisture says that there were several reasons why the deal failed. “It was a complex transaction and it took a while to understand all of the issues,” he says. “It was also hard splitting a business that had grown together for 80 plus years.”
The team had travelled to China seven or eight times to negotiate the sale. Did the collapse come as a blow? “You pick yourself up and go on working hard,” he says.
Building Beechcraft Corporation
The new plan is to build a company around the profitable Beechcraft aircraft, special mission and military business, and the customer services division.
Beechcraft Corporation plans to emerge from bankruptcy by the end of February 2013. The company has already reached agreement with most debtors and all of them will be asked to vote in January.
“At the core, this is a great company and Beechcraft is a very strong, diversified business participating in the business and general aviation, defence and service markets. Through all the external problems Beechcraft has been a highly profitable and sustainable business,” he says.
This was not clear before bankruptcy as the company did not split Hawker and Beechcraft revenues.
Although Beechcraft is the future, he stresses that he and the management team are working hard to sell the Hawker product lines. “We have to do both,” says Boisture. “The court requires that we do everything to maximise value for creditors.”
Hawker Beechcraft is happy to talk with any potential buyers. This could include allowing Superior to enter negotiations for Hawker, but Boisture said they may require tougher pre-conditions.
As part of the reorganisation, Hawker has asked the bankruptcy court to allow it to reject aircraft warranties for the Hawker 400 and Premier aircraft. It also wants the right to sell its remaining Hawker inventory quickly. There has been strong opposition from some owners and there is a hearing to discuss this on December 11.
Boisture says that the warranty change is necessary but stresses that it is only the Hawker 4000 and Premier obligations that would go. Other suppliers including engine manufacturers would still need to support the aircraft. The company is also in talks with third parties about offering warranties.
Not giving up
Whilst he is confident that Beechcraft Corporation will be a success, Boisture says he cannot predict the upturn. “I can tell you when it is not coming. It will not happen in the next 12 months. It may not happen in the next 18 months,” says Boisture. “We need buyers to be more confident about the economy.”
After three years of constant challenges and problems, Boisture could be forgiven for being tired. He says this is not true: “I feel energised by the people around me and the responsibility I have to this great company. Beechcraft is a very strong business.”