Special Reports

February 24, 2012

Spirit ‘a beacon of hope’ as Wichita aviation struggles, says analyst

Wichita’s aviation industry has taken more than its share of hard knocks.

Wichita’s aviation industry has taken more than its share of hard knocks.

The smaller half of the business jet market, which Wichita manufacturers produce, has fallen 60 percent by value in the last three years.

In November, Hawker Beechcraft was disqualified from a lucrative Air Force contract.

And last month, Boeing announced it was closing its Wichita facility, a move that affects 2,160 employees and ends the company’s more than 80-year legacy in Wichita.

“Through all the carnage in Wichita, Spirit AeroSystems stands out as a beacon of hope,” Richard Aboulafia, aviation and aerospace analyst with the Teal Group, wrote in a January newsletter.

Spirit is Wichita’s biggest private employer with about 10,800 people. The company was formed in 2005 after Boeing sold its commercial business in Wichita to Onex Corp., a Canadian investment firm. It became a publicly-traded company in 2006.

Since its formation, Spirit has hedged against risk by diversifying its products and markets, Aboulafia wrote. And unlike Wichita’s general aviation industry, Spirit made it through the economic downturn unharmed.

Now the company is growing. Last year, Spirit added about 1,000 new employees worldwide, including about 500 in Wichita.

Last year was a big year for Spirit, said Mike King, senior vice president and chief operations officer for Spirit. The company successfully increased Boeing 737 fuselage production from 31 planes per month to 35.

That is “really a good accomplishment for us, and it really helps us grow our business and our revenue going forward,” he said.

Last year’s revenue rose to $4.86 billion, up 17 percent from 2010.

Spirit CEO Jeff Turner praised the company’s workforce for its success at a Wichita Aero Club gala last month.

“It’s amazing what a group of people (can) do when they’re faced with the business realities of what they have to do,” Turner said.

Spirit is facing a pivotal 2012.

“It’s turning around and taking our performance to the next level,” King said.

Several of Spirit’s major programs face production rate hikes this year, including Boeing’s 737, 787 and 777.

“This is really our biggest challenge as we look at it – to go through the rate increases flawlessly,” King said.

Spirit must have factory improvements and enhancements in place to make sure it’s prepared for the rate hikes. The company also will hire for critical skills to fill niches, but in a measured way, officials say.

With Boeing’s closure by the end of 2013, Spirit will eventually evaluate Boeing’s workforce as it becomes available, King said.

“There are some people we might pick up, and there are some people we may not pick up,” he said. It depends on their skills and whether they fit openings at the time, King said.

Spirit is well positioned to take on Boeing’s upgrades to the 737, the 737neo, and Airbus’ upgrades to its A320, the A320 MAX. The two planes eventually will replace the current 737 and A320 line of products. Sales have been strong on both models.

When Boeing and Airbus announced the upgrades, “It was a joyful day for us,” King said. “They are key programs that are going to be enhanced.”

In addition to preparing for the production increases, it must keep working on new programs as well, and as King said, “bringing our new programs home.”

Spirit is a global company with facilities in Scotland, France, Russia and China. That’s in addition to facilities in Wichita, Tulsa, McAllister, Okla., and Kinston, N.C.,

The global presence is reflected in King’s office in southeast Wichita, where six clocks on the wall indicate the time in the various time zones.

This year, King will look at Spirit’s global facilities to understand what work Spirit will do at each site. The company will also look at its supplier-partners to see “who will we take along for the journey for the long-term,” he said.

And although it has a full slate of programs Spirit has undertaken, it will continue to bid on new ones, where they make sense, King said.

“It’s really critical if there’s an opportunity to get on a new product,” he said. A new aircraft is around for decades.

“The key thing is the cycle,” King said. “If you miss the cycle when a new product comes out, you missed that product for over 30 years.”

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