Hawker says it's working on supply disruptions

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

Supply disruptions at Hawker Beechcraft that have hindered deliveries of some of its products are expected to be smoothed out by the end of the year, company officials said Tuesday.

Hawker Beechcraft recorded lower revenues and deliveries in the third quarter because of those problems and because of continued weak global economies, the company said.

Still, it was a positive quarter for booking orders, Hawker Beechcraft CEO Bill Boisture told analysts in a conference call Tuesday.

The company took $526 million in new orders, exceeding its expectations, Boisture said. Cancellations, meanwhile, totaled $30 million.

Cancellations were a significant problem in 2009 and 2010, Boisture said. But changes in its selling, contract and deposit processes have offset most of the cancellations.

"We're confident in our ability to retain those (existing) contracts based on the deposit structure we are putting around that business now," he said.

Hawker Beechcraft is working out the supply disruptions that are affecting deliveries of Hawker 4000, King Air and piston aircraft.

Shipments of Hawker 4000 business jets have resumed in the U.S., but the company is waiting to receive European approval for upgrades on the jet before deliveries can be made to customers there. They are expected by the end of the year, Boisture said.

The company also is expecting stability in the King Air supply chain by the end of the year, he said.

"The King Air disruptions occurred because we moved piece parts and assemblies from our older, higher-cost facilities here in Kansas to both third parties and our own operations in Mexico," Boisture said. "We're talking about the transfer of literally thousands of parts."

During the process, disruptions in some King Air parts led to a slowdown in the production line.

"We'll be in much better shape by the beginning of the first quarter," Boisture said.

Hawker Beechcraft delivered 38 planes in the third quarter, compared with 49 in the same period a year ago.

For the year, it has delivered 127 planes, compared with 137 a year ago.

Sales totaled $518.8 million, down from $594.7 million a year ago. It recorded operating losses of $42.2 million in the quarter, down from a loss of $81.4 million.

The company continues to deliver T-6 trainers to the U.S. Navy. And it has several international campaigns in progress to sell trainers to Mexico, Jordan and other countries, Boisture said.

Hawker Beechcraft also is waiting to hear whether the U.S. Air Force will award it a Light Air Support contract for AT-6 attack aircraft. A decision on the contract was scheduled for Monday.

"We clearly have no news or we'd be sharing it with you," Boisture said.

A decision is expected by the end of the year.

"Of course, that's up to the Air Force," he said.

The National Business Aviation Association's annual convention and exhibit in October didn't provide any new insights into the business jet market, Boisture said, "other than it continues to look as though it's going to continue to be a very tough market because the key indicators are all signaling that."

The company is preparing for 2012 to look a lot like 2011, which looked a lot like 2010, he said.

Long-term, its focus includes investing in its customer support network, inventory and systems, continuing to lower manufacturing costs, following a disciplined product development strategy and focusing on retrofit upgrades to existing products.