Aviation

Deal cements it: Hawker will stay

Hawker Beechcraft (October 18, 2010)
Hawker Beechcraft (October 18, 2010) The Wichita Eagle

Months of waiting to see whether one of the city's keystone businesses would leave Wichita ended Tuesday in handshakes and congratulations.

At a news conference at the National Center for Aviation Training at Jabara Airport, Hawker Beechcraft and state and local officials announced a deal that will keep 4,000 jobs and most of the company's operations in Wichita until at least 2020.

In return, the state will give the company $40 million, and the city and county will add $5 million. The money will pay to train workers and to upgrade the company's products and reconfigure operations.

The state's contribution will be in the form of tax-exempt bonds that will be paid off by revenue from Hawker Beechcraft workers' payroll tax withholdings.

Relief was palpable Tuesday in the comments of Gov. Mark Parkinson, Hawker Beechcraft CEO Bill Boisture, Mayor Carl Brewer and County Commission chairman Karl Peterjohn.

"I think this is an early Christmas present, and we very much appreciate everyone who has helped make it so," Boisture said.

The company has committed to keep its headquarters, engineering, supply chain management, composite fuselage manufacturing, aircraft final assembly, flight testing and global customer service and support in Wichita.

The company already had announced plans to close two plants at its Wichita facility and send the operations to outside suppliers and to Mexico, a move that will be completed by August. A total of 1,300 people work in the two plants.

On Tuesday, the company said it has about 5,000 workers, which doesn't include any jobs headed to Mexico, so the employment at Hawker Beechcraft in Wichita will get close to the 4,000 jobs in the agreement by mid-2011.

Parkinson said that keeping the 4,000 employees is important, but so is preserving the company's product lines.

It means, he said, that when the economy rebounds and the company starts building more planes, it will do so in Wichita. That 4,000 will grow to 5,000 or 6,000 or more, he said.

Cost of the deal

The $45 million sounds like a lot of money, Parkinson said, but it isn't much compared to the value of retaining the company.

That assessment is borne out by a quick estimate of economic impact from the Center for Economic Development and Business Research at Wichita State University.

Center director Jeremy Hill said the economic impact of the deal to state government was more than $300 million over 10 years, far less than the $40 million it is spending.

The city and county governments also come out ahead, he said. The city and county are each spending $2.5 million. The city will see a nearly $14 million impact and the county nearly $6 million over 10 years, he said.

However, Hill noted, there is no new economic benefit to the community because the jobs and plant already exist. The impact would be negative if the jobs were to disappear.

Parkinson said the deal announced Tuesday was close to the same one he negotiated in October before a vote by Hawker Beechcraft's Machinists union. The biggest difference, he said, is that the state negotiated to pay the amount over several years, rather than up front.

"We asked Hawker to take the money out over time simply to provide us a little more assurance that they could get through the contract negotiations, that the company was on sound footing going forward," he said.

Community impact

Since it became widely known in July that Hawker Beechcraft was seriously entertaining offers to move, the decision had unsettled Wichita.

Even in a community used to deep layoffs, people were worried that this time the losses would be permanent. It would also mean the loss of a marquee company that was founded in Wichita in 1932, which might say something about Wichita's ability to compete in the 21st century.

Lynn Nichols, president of Yingling Aviation and chairman of the board of the Wichita Metro Chamber of Commerce, said the city has been on edge since the summer.

"For months, everybody in this community has been living in suspense, with Hawker Beechcraft as the elephant in the room," Nichols said. "Today, the elephant left the room, taking a lot of anxiety with it."

That suspense not only fouled Wichita's mood, it hurt its pocketbook, said Hill, the center director.

"This is a turning point," he said. "A lot of people here are holding their money and not creating new jobs because a lot of them were scared of what would happen here."

Union vote

One big piece of Hawker Beechcraft's future financial picture remains unsettled: the Machinists union contract, which comes up for renewal in August.

Many Hawker Beechcraft workers feel that they've borne the brunt of sacrifices, and will continue to as hundreds of jobs head to Mexico.

It's a feeling that helped drive the rejection of a proposed Machinists contract in October. Despite the possibility of the company leaving town, workers failed to approve what many members saw as an unacceptable seven-year contract that contained a 10 percent wage cut and benefit reductions.

Tuesday's agreement to stay may change the dynamics of the upcoming union negotiations. Boisture struck a positive note Tuesday:

"They know what we need, and we know what they need, and I'm optimistic that we will be able to have a negotiation about that in the summer that will be mutually acceptable to both of us," he said.

Messages left with the Machinists union were not returned Tuesday.

Louisiana left out

The deal also sends a message to other states that Kansas will protect what's important, Parkinson and Brewer said.

Parkinson said that when he was at this year's international airshow in Farnborough, England, five other governors — all from Southern states — were there wooing aircraft companies.

"I would leave a meeting and see one of my colleagues in the waiting room," Parkinson said. "There is no doubt in my mind that Hawker Beechcraft could have gotten a lot more than $45 million if they had been willing to move."

Boisture wouldn't say how much Louisiana offered, nor would Louisiana Gov. Bobby Jindal. But Jindal acknowledged the state discussed a move with Boisture.

"They weren't confident they could meet the job commitments they would have to make to come to Baton Rouge so it just didn't make sense at this time," Jindal said.

Brewer acknowledged that paying a company to stay in Wichita creates a dangerous precedent, but that's the way of the world. As long as other states have large war chests, Wichita's largest companies are at risk to leave, he said.

State and local officials in July arranged a deal to lock up Bombardier in Wichita and got programs that created 300 new jobs.

Brewer said he hasn't heard any requests from other Wichita companies.

Tuesday, Brewer said, was a declaration that Kansas and Wichita will fight to keep its aircraft industry.

"We have to let the other states know that: 'You're not going to take what's most important to us,' and that's our aviation industry."

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