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Friday, July 25, 2014

Hawker Beechcraft loses out on big Air Force contract

By Dan Voorhis
The Wichita Eagle

Hawker Beechcraft Corp. says the Air Force has informed the company that it lost out on a military contract worth nearly $1 billion.

The company had hoped to win the Light Air Support contract with its AT-6, an armed version of its T-6 trainer. But on Friday, the company said it received a letter from the Air Force saying the AT-6 had been excluded from the competition. The company wants an explanation.

According to the company’s news release: “The letter provides no basis for the exclusion. We are both confounded and troubled by this decision, as we have been working closely with the Air Force for two years and, with our partners Lockheed Martin, CMC Esterline, Pratt & Whitney Canada, L-3 WESCAM and CAE, have invested more than $100 million preparing to meet the Air Force’s specific requirements.”

The piston planes are designed for counterinsurgency, close air support, armed overwatch and homeland security.

Hawker Beechcraft said it continues to believe the AT-6 is the most capable, affordable and sustainable aircraft in the competition based on the Air Force’s specifications. The company has said that winning the award would have kept its T-6 production line running after 2015. The company has said that 1,400 employees in 20 states – including 800 at Hawker Beechcraft in Wichita – work on the AT-6 and T-6 programs at the company and its U.S. suppliers and partners.

The company said Friday that it had no further comment, for now.

The decision appears to leave the field open to the Super Tucano built by Brazil’s Embraer for the initial contract to supply 35 with the potential for 55 aircraft worth up to $950 million. And that doesn’t include foreign sales.

The Air Force’s move surprised aircraft industry analyst Richard Aboulafia of the Teal Group.

“They seemed to be the front runner for the contract,” he said of Hawker. “They had the most infrastructure spread over the most states and the most political support.”

He said the loss is not critical to the company’s survival, but it would have been a great boost to maintaining work and workers as the company’s T-6 contract runs down.

“The challenge is to build for the military market until the civil market comes back,” Aboulafia said. “And nobody knows when the civil market will come back, probably some time next year, but there’s no guarantee.”

Analyst Wayne Plucker, industry manager for aerospace at Frost & Sullivan, downplayed the importance of the contract to the company.

“It might lead to more layoffs and other adjustments internally, but I don’t think it significantly affects them as a going concern,” he said. “They just need to find another product niche.”

He said the Super Tucano was built specifically for this kind of mission, while the AT-6 is an adaption that wasn’t perfect. Embraer has struggled to sell enough of the planes so it has priced them very aggressively.

U.S. Rep. Mike Pompeo, R-Wichita, said in an e-mailed statement that he was disappointed by the decision..

“I have already demanded answers from the Pentagon on why they made this very unfortunate decision, and will continue to do so,” he wrote. “This contract is critical both to our nation’s security and to jobs in Wichita, Kansas.”

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