Hawker Beechcraft bankruptcy plan outlines 3 options

02/19/2013 6:03 AM

08/08/2014 10:10 AM

Hawker Beechcraft’s Chapter 11 bankruptcy filing includes a plan called “Project Flight,” which assesses what the company could look like as it emerges from reorganization.

The document, among the materials provided by Hawker Beechcraft as an exhibit when the company filed for bankruptcy last month, outlines three options, each one eliminating all or some business jet models.

The “strategic options” assessment, dated April 5, gives the court and the public an indication of the direction that Hawker Beechcraft CEO Robert “Steve” Miller envisions for the debt-plagued aircraft manufacturer.

In all three options, Hawker Beechcraft would keep its military aircraft, King Air and piston business. But all three options eliminate the Premier jet program and halt development of the Hawker 200, an upgraded Premier.

Two of the three options halt production of the Hawker 4000 business jet. One option eliminates business jet production altogether.

“It’s not good news,” Teal Group aerospace analyst Richard Aboulafia said of the options.

“There’s no way to put a brave face on this,” Aboulafia said. “They are getting rid of debt, but they’re also getting rid of product and market share. It’s not a happy story. It means that a lot of the very hard work in creating new technology and new products over the last 15 years have reached somewhat of a dead end.”

As the company moves through the bankruptcy process, there has been speculation about whether ownership of the company would change and how – and whether it would remain intact or whether parts of it might be sold.

In the filing, the company said all three options regarding products are subject to revision and change.

Parts of Hawker Beechcraft would be attractive to buyers, Aboulafia said.

“But the idea of anybody buying it outright and preserving all its product lines seems like a remote prospect at this point,” Aboulafia said.

Along with the restructuring, Hawker Beechcraft has said it’s accepting offers from potential buyers.

Bids from interested parties were due earlier this month, but they won’t be made public as part of the bankruptcy filing, company spokeswoman Nicole Alexander said.

Hawker Beechcraft intends to emerge as an independent company, Alexander last month. “But as is the case with every other company, we must evaluate all of our options in order to be positioned for the future.”

Its approach

In its approach to assessing its options, Hawker Beechcraft revisited the organization from the “bottom up,” considering cash flow, brands and execution risk for the period 2013 to 2016, the filing said.

“Three natural alternatives were identified for modeling purposes,” it said.

The assessments assume a stable market share in pistons, turboprops and mid-size jets, moderate industry volume recovery from the depressed levels of 2009 to 2011, and a normalization of pricing.

And they take into account a restructured balance sheet from the bankruptcy and the continuation of the employee’s pension plan.

The company plans to file a restructuring plan with the court by June 30 and expects to emerge from bankruptcy by the end of the year.

Hawker Beechcraft manufactures business jet, turboprop and piston aircraft, special mission and trainer and attack aircraft under the Hawker and Beechcraft names.

It also operates a global network of more than 100 service centers that support a fleet of more than 34,000 aircraft currently in service.

Hawker Beechcraft filed for bankruptcy restructuring in May following a prolonged downturn in the business jet market and carrying a heavy debt load it took on when Goldman Sachs and Onex Partners bought the company in 2007 from Raytheon Inc.

The bankruptcy will eliminate $2.5 billion in debt. The company also secured a $400 million loan to help it conduct business during the restructuring process.

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