““[Bill Gates] has been historically one of my best supporters…One of my favorite e-mails he ever sent me…I proposed this crazy project. And he sent back this two-line response: ‘This has got to be the craziest thing you’ve ever suggested. Please proceed.’” ”
Editor's Desk: Why Wichita isn't the next Detroit
I've heard so many people comparing Wichita with Detroit lately that I've started to wonder whether maybe, this time, the talk is true.
Chart the numbers on a graph and the rapid rises in unemployment in Wichita and Detroit appear strikingly similar-even though Detroit's unemployment rate spiked several percentage points higher when the auto industry's wheels came off two years ago. But ask anyone who lives in Wichita and they'll tell you times are as tough as any they can remember. And that's saying something for a city that has faced its share of tough times.
Wichita has shed more than 14,000 aviation jobs since the economic downturn started in 2008. The city's three major business jet manufacturers-Cessna, Hawker Beechcraft and Learjet-watched as billions of dollars in orders were wiped off their books. Analysts predict it will take years for the industry to recover. Some are wondering whether Wichita can ever fully rebound.
In the last 30 years the business aircraft manufacturing industry has suffered four major downturns: in 1981, 1991, 2002 and now. In every past instance, the sector has not only bounced back, the subsequent up cycle has seen aircraft deliveries soar to new heights.
So why might that not be the case in Wichita this time around?
Like the Detroit automakers, business aircraft manufacturers in Wichita were slow to innovate as they faced growing competition from foreign manufacturers focused on producing more efficient models that cost less to buy and own. At least that's the argument offered by people I've talked to, many of whom seem convinced that Wichita's best days are now nothing more than a fading vapor trail.
Certainly it's true that Embraer, the Brazilian aircraft maker, is finding success in business aviation with a growing family of airplanes that are stealing market share from builders in Wichita. To a lesser extent, perhaps, Honda is viewed as a threat because of its deep pockets and brand exposure.
Striking proof of Embraer's ascendancy in business aviation came with the October announcement that fractional-ownership giant NetJets plans to purchase up to 125 of the company's Phenom 300 light jets in a deal potentially worth more than $1 billion. Bulk aircraft orders from NetJets had become almost the expected norm at the height of the bizjet bubble. In this economy, and with NetJets proclaiming it already has too many airplanes to meet its current level of demand, the announcement was a shocker.
Cessna has responded by moving assembly work to Mexico, and it now builds its single-engine SkyCatcher in China. Workers at Hawker Beechcraft have agreed to a 10-percent pay cut and other concessions just to keep the company from moving out of Wichita. And Learjet, a subsidiary of Canada's Bombardier, has built a factory Queretaro, Mexico, where it will produce components for the Learjet 85.
Still, the more I think about it the less I buy into the argument that Wichita, the self-titled aviation capital of the world, will fall victim to the same mistakes as Detroit and slip into eternal industrial decline. I've seen Wichita rebound too many times to believe it can't climb back into the ring against its talented competitors in Brazil, Japan or wherever else they might emerge.
There are already signs Wichita is doing just that. At the National Business Aviation Association Convention in October Cessna introduced a new version of the Citation X (now called the "Ten") with a stretched cabin and an all-new, lower-cost avionics system from Garmin. The company said the Ten would be the first of "several" product announcements it expects to make at a rate of about one a year.
Also, while it's true Learjet will build Model 85 components in Mexico, final assembly and interior completions will remain in Wichita. And nobody would fault that model for a lack of innovation.
Hawker Beechcraft, meanwhile, stands alone as the only business jet maker delivering airplanes with fuselages built of advanced carbon fiber. And although it has been selling King Air turboprops since 1964, it has improved the model over the years with modern avionics, more efficient engines and upgraded interiors. In fact, yet another new King Air, the Model 250, made its debut in October to the delight of buyers.
There's no question it will take time for the business aircraft manufacturing industry to recover. But it will recover. And I'm betting that when it does, Wichita will bounce back stronger than ever.
Just as it always has.