Incentive package helps Hawker Beechcraft remain competitive

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

The $45 million incentive package Hawker Beechcraft will receive from the state and local government will help it sustain its long-term competitiveness, CEO Bill Boisture told The Eagle on Wednesday.

The money will help increase Hawker's capabilities for advanced design, research and development and the application of composite technologies, Boisture said.

"That in the long run is extremely important," he said.

It also will help the company with a well-trained, well-educated work force, he said.

Those were the issues Boisture brought up when Gov. Mark Parkinson asked in October what it would take to keep the company in Wichita, Boisture said.

"You need a product line and you need people," Boisture told Parkinson.

The company "would have done these things anyway, but not to the level and not with the excellence that this will allow us to do," he said Wednesday.

Boisture and Parkinson announced Tuesday a deal to keep Hawker's operations and at least 4,000 jobs in Wichita until at least 2020 in exchange for $40 million in incentives from the state and $2.5 million each from the city and county.

The state will provide its funds over several years, rather than up front. It will be repaid through the income tax withholdings of Hawker Beechcraft employees.

Hawker will use $35 million for research and development and changes in its assembly line, and $10 million will be training funds for use at the National Center for Aviation Training, Wichita State University or other regent schools.

The incentives were in response to other states attempt to lure Hawker away from Wichita, including a well-publicized offer from Louisiana.

They will help Hawker be innovative in its three product areas: the business and general aviation market, the trainer and attack market and the special mission market.

Each take "a variety of skills and products," Boisture said Wednesday.

The governor made it clear the program was not about bailing out or saving Hawker Beechcraft, Boisture said.

"This is about providing a level of excellence above and beyond what we would have been able to afford ourselves, and frankly a level of excellence consistent with the environment and the terms of support that the alternative locations were offering," Boisture said.

NCAT, WSU and the National Institute for Aviation Research provide support "that others were making aggressive attempts to duplicate," Boisture said.

But in the Kansas incentives, Parkinson "made them available to use readily, and we can begin to use those as early as the first quarter of next year," he said.

The incentives are positive news for Hawker but won't solve all of its problems, analysts say.

"Every little bit helps," said Teal Group analyst Richard Aboulafia. "But I would call this exactly that — a little bit."

It came at the right time, however.

Analysts agree that the biggest thing to help Hawker Beechcraft — and others in its industry — for the long term would be the return of the market for small and midsize business jets.

"If the market starts to firm up, and we move some used aircraft, that will make life substantially more pleasant for all of these folks," said Cowen and Co. analyst Cai von Rumohr. "Even the market leader (Cessna) is having a difficult time here."

Hawker must also freshen up its product line, he said.

Aboulafia agrees. It's important to do so to compete with Embraer, an aggressive new competitor in the market.

"They need to push ahead with product development just when their market has been hit by the worst downturn we've seen in the business," Aboulafia said. "It's tough."

The company announced the Hawker 200 in October, an upgrade to the Premier II.

"That's a start," he said.

Within the decade, the company must make incremental improvements to its King Air line, improve the Hawker 4000 and do a major upgrade of its Hawker 800 series.

The company also must restore profitability, said Edwin Wiest, vice president and senior analyst with Moody's Investors Service.

Sometime in 2013, the company must be on healthy footing so it can successfully refinance $1.4 billion that's due the next year, Wiest has said.

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