Aircraft manufacturers waiting, watching for ‘Brexit’ effect

Wichita’s aircraft manufacturers aren’t sure how – or whether – the United Kingdom’s vote to leave the European Union will affect their business.

For now, officials said, it’s about waiting and watching for any effect from the so-called “Brexit.”

“At this point, we are monitoring events closely,” Rosa Lee Argotsinger, spokeswoman for Cessna and Beechcraft’s parent, said in an e-mail to The Eagle this week. “It is too early to determine what effect Brexit will have on Textron Aviation.”

Officials at Bombardier Business Aircraft, the parent of Wichita’s Learjet, said there’s no point in speculating on something that hasn’t happened yet – that is, the U.K.’s actual exit from the EU, a time frame for which hasn’t yet been determined.

“Our focus as this unfolds is to remain committed to our businesses, all our employees and our customers in the UK, and continue to work with the Government and other industry stakeholders to ensure our future success,” Bombardier Business Aircraft spokesman Mark Masluch said in an e-mail to The Eagle.

Besides selling aircraft in Europe, Bombardier also maintains manufacturing facilities in Belfast, Northern Ireland.

Industry analysts do think there will be several effects from Brexit, namely a sustained drop in the value of the British pound, slower economic growth and a rising value of the U.S. dollar.

“Modern economies look above all for stability; the UK economy must now anticipate at least two years, probably more of political, financial, and economic instability,” Robert Stallard, an RBC Capital Markets analyst who covers the aerospace industry, wrote in a note to investors on Tuesday.

Seth Seifman, a JPMorgan analyst, said in a note to investors last week that the chief risk of Brexit is slower global growth, which in turn could be a “financial contagion” for commercial aircraft orders as well as business jets, “though bizjet OEMs with the most US exposure (i.e. Textron) may be relatively insulated.”

Seifman also wrote in the note that Spirit AeroSystems, which makes parts of all Boeing and some Airbus jetliners, could have some “modest risk” between a lower pound and a higher dollar.

Nine percent of Spirit’s 2015 sales were in the U.K., “and a portion of these, principally for (the Airbus) A320, are denominated in pounds along with their associated costs,” Seifman wrote. “This exposes Spirit to some translation risk as a result of the weaker pound, though we would note that Spirit’s A350 contract is denominated in dollars.”

Spirit acknowledged in a statement to The Eagle on Tuesday there would be “some impact” because of the weaker pound.

“We are monitoring the situation very closely,” the statement said. “Spirit is a global company with customers and suppliers all over the world including the UK.”

Spirit also has operations in Prestwick, Scotland.

“But since most of our contracts are based on the dollar we do not expect a material impact,” the statement said.

This story was originally published June 29, 2016 at 6:50 AM with the headline "Aircraft manufacturers waiting, watching for ‘Brexit’ effect."