Hawker Beechcraft’s problems are in Wichita and Beijing
Superior Aviation’s planned acquisition of Hawker Beechcraft was a complex transaction and, as with any deal, there were numerous things that may have stopped it from succeeding. According to people in China most of the problems were in Beijing – rather than 9,998 nautical miles away in Wichita. It appears that the Municipal Government of Beijing, the main funder of Superior Aviation, was not ready to close the deal. But really it is irrelevant now.
Hawker Beechcraft’s management team must be exhausted (and not just because there is 14 hours’ time difference between the two companies). They have been running on stress for the last year and faced numerous challenges. All through this they have been fighting to save the business and to save their employee’s jobs.
They were – of course – right to try and sell the business to the highest bidder. Critics should remember that the vast majority of planned mergers and acquisitions fail before closing (as BAE Systems and EADS showed last week). They are also are right to be working on a new plan now.
The biggest problem is still the lack of demand for new aircraft. That is very much a Wichita (and US problem) and not a Beijing one. It is not just Hawker. During a conference call this week Scott Donnelly, chairman and CEO, of Textron said there was still a “weak business jet demand environment.” Cessna’s aircraft deliveries were down this quarter although it did a good job selling pre-owned aircraft. A few brokers say business is good. Some will admit that the market is not improving – particularly with uncertainty about the US election – others say it is deteriorating.
I think I am naturally an optimist, but wherever you look the financial news is pretty bleak. The number of people buying aircraft has fallen for a variety of reasons (including the fact that the financial news is bleak). Of course aircraft are still selling but one-off transactions do not make a trend. I can’t help thinking that inventory is partly falling as sellers stop advertising pre-owned aircraft that are not selling (although this is just a theory).
Maybe I need Mickey Mouse and the Florida sun of NBAA to cheer me up. But I can’t help thinking that a lot of green shoots that people are highlighting are more like Chinese rice that Kansas corn. Rice germinates whilst it is still underwater.
Despite this depressing email, please have a great weekend! Alasdair Whyte, editor, Corporate Jet Investor