China, Hawker Beechcraft and What You're Missing
A couple week’s ago I spelled out the reasons why I thought China would probably buy the assets of bankrupt Hawker Beechcraft, and why I also thought it would be a smart move. Now, in the wake of the announcement that a Chinese firm is indeed pulling the trigger on the deal, potentially worth a hefty $1.79 billion (a sum that does not – and cannot, by U.S. law – include Hawker Beech’s defense business), it seems that everybody is lamenting this development as yet another example of how our country is going down in flames.
Well, maybe this will put things in perspective: The presidents and CEOs of every other major business jet manufacturer – we’re talking about Cessna, Gulfstream, Bombardier, Dassault Falcon and Embraer – are delighted by what they see happening in China. In fact, even as Hawker Beechcraft is being sold off to the Chinese, these companies are working behind the scenes to strike deals to build airplanes in China or set up sales offices there.
Why aren’t business jet manufactures worried about China? The answer is obvious. China represents the largest untapped market for business jets in the world. This is exactly the market environment and shift in attitude business jet makers have been waiting for – and it’s also just what they need to lift their own economic fortunes, whether their home country happens to be the United States, France, Brazil, Canada or, as we’re seeing now, China.
In a decade’s time, sales of private jets to buyers inside China will be heralded as driving industry growth and muting the negative impact of future economic downturns. That’s the positive implication of what’s going on – China’s purchases of Hawker Beechcraft, Cirrus and other U.S. aerospace companies are merely symbols of the broader trend.
If you really want something to worry about, it’s the impact business aviation will have on the ability of Chinese entrepreneurs to compete globally. The movers and shakers in China already understand that they need business aviation to take their success to a higher level. Once those shiny new airplanes start ending up in the hands of the business people in China who matter the most, that’s when the rules of the game really start to change.
Is America up to the challenge? We'd better be.