Beechcraft Reborn?

The former Wichita giant reimagines itself with new airplanes and a laser focus on the market.

Beechcraft King Air Single

Beechcraft King Air Single

** Is the plan wishful thinking or solid business?**

For bad and for good, the story of Beechcraft is a classic American tale more than 80 years in the making.

The iconic Wichita, Kansas, light airplane manufacturer, which catapulted to prominence with what amounted to the Depression-era bizjet, the still-sexy Beechcraft D-17 Staggerwing, rose through the subsequent decades on the fortunes of a hall-of-fame lineup of products, top-notch support, a dealer network without peer and a brand that stayed loyal to its heritage arguably throughout its history.

Today, the company is a shell of its former self. Gone are thousands of workers, let go over the past five years in the wake of the global economic bust. And many product lines, including those for the Premier and Hawker 4000, have stood idle for some time as the markets for those airplanes dried up.

The decline wasn't for lack of effort. "The untold story," said Shawn Vick, executive vice president, customers, of Hawker Beechcraft Corp., in an interview with Flying shortly after its announcements at the National Business Aviation Association convention, "is the level of effort and focus that the people at Hawker Beechcraft have gone through, not just since the filing for protection but over the last three years. The work that was done across all facets of the organization was remarkable. All the manufacturers felt it [the effects of the downturn]; we certainly were no different than any other, but we had the unfortunate issue of the business having been acquired by two knowledgeable and capable private equity organizations, Goldman Sachs and Onex ... virtually on the eve of the economic reset."

How HBC got to this point is another classic story, though not a good one. It is the story of the modern economic model failing a good company with good products, service and, most importantly, people.

While Beechcraft in its various ownership incarnations has weathered a number of slumps and hurdles over the past few decades, what it couldn’t overcome was the fallout from the leveraged buyout of 2007 coupled with a continued global economic recession that crippled airplane sales. As a result of these factors, the company’s debt, more than $2.5 billion, proved impossible to pay down, which stifled its ability to develop new products and market the ones it has, not to mention service the debt. Last year, HBC came to the difficult conclusion that, as hard as it might try, it couldn’t sell its way out of debt.

In May 2012 it entered into -Chapter 11 bankruptcy with the intent to liquidate the debt and emerge whole. A number of bidders emerged, and by July the company announced it had entered into an “exclusivity agreement” with a Chinese-controlled company, Superior Aviation Beijing, for the potential sale of HBC’s assets, excluding defense businesses, to Superior for $1.79 billion.

The sale, as you probably know, did not go as planned. In October, talks collapsed, and shortly thereafter HBC announced its intentions to emerge as a stand-alone company. A couple of weeks later, it filed the details of that plan, which gave more than 80 percent control to four secured creditors, Angelo, Gordon and Co.; Centerbridge Partners; Sankaty -Advisors; and Capital Research & Management. As we reported online shortly after the filing, the rest of the equity went to creditors. Goldman Sachs and Onex Capital Partners, which purchased HBC in a leveraged buyout just before the market tumble, would have no further involvement.

The new plan included a new name, simply Beechcraft Corp., and a pared-down lineup that would jettison the company’s jet portfolio, which included the light Premier 1A and Hawker 400 (formerly the Beechjet and, before that, the -Mitsubishi -Diamond Jet), the super-midsize Hawker 4000 (nee Horizon) and the midsize Hawker 900XP.

The fate of all of those airplanes is in the wind. There are thousands of still very active Hawkers and Beechjets in the fleet, making them attractive to a company looking not to restart production but simply to build spare parts and provide service. Much less attractive for this are the Premier 1A and Hawker 4000, which together represent relatively few airplanes.

The sad news, delivered solemnly by HBC Chairman Bill Boisture at an opening day press conference at the NBAA convention, was that the company was voiding the Support Plus service contracts for a total of 150 Premier 1A aircraft and Hawker 4000s. While owners will still be able to find service for their 1As and 4000s, the move will likely reduce the value of those airplanes and force owners to pay for maintenance and repairs out of pocket.

The decision to cancel the warranties on the two airplanes was made, said Boisture, with great reluctance. “We are truly sorry to have disappointed our customers with this decision,” Boisture told reporters at the event. Disappointment, however, is likely to be the least of customers’ concerns. It’s a terrible blow to those owners, though Boisture did point out it is likely the manufacturers of the aircraft’s engines and avionics would honor warranties for those systems.

Sadly, there’s more pain and suffering associated with the transition from Hawker Beechcraft to Beechcraft. Recently, the company told hundreds of its workers at Hawker Beechcraft Service facilities in San Antonio, Texas, Little Rock, Arkansas, and Mesa, -Arizona, that they are out of work. HBC plans to close all three facilities as it streamlines its services offerings into fewer existing locations.

One area it doesn’t plan to abandon is the refurbishment business. It currently offers two products, the Hawker 400XPR, a re-engined and refurbished Beechjet/Hawker 400, and the Hawker 800XPR, a refurbishment program for the midsize Hawker jets. The company also announced a Beechcraft Bonanza Xtra refurbishment program through its factory-owned services network (the same that is losing the three aforementioned facilities). The Bonanza program would install new Garmin avionics, D’Shannon tip tanks and new interior, glass and paint on eligible 36-series Bonanzas.

Can the Plan Work?

There are two schools of thought on the future of the company.

The first is that the circumstances that resulted in the company’s bankruptcy filing will haunt its future path. The layoffs, relative lack of product development over the past many years, uncertainty on the part of potential customers (due in part to the cancelation of the warranties on the Premier 1A and Hawker 4000), reluctance of investors to underwrite development and the caution of vendors in supplying needed parts and materials will all weigh on the company.

The flip side of that argument is the new Beechcraft will emerge from Chapter 11 without the crippling debt and without the cost of supporting its money-losing jet side of the business. The new company will therefore be a better bet for investors, customers and vendors alike.

The funding side of that equation looks to be under control, as its new owners agreed to support product development of the new lineup. HBC's vice president of marketing and communications, Ron Gunnarson, told Flying "it's well-understood what the return on that investment will be," because, he agreed, there's no longer the crippling debt associated with the company.

Can this transformation play out? Looking at the history of such things, it's a good bet that it can. The most recent case of a company with a good lineup and lots of debt that came out of Chapter 11 in good shape, refocused on its most profitable products, was Piper. Its lineup, moreover, was composed most notably of the PA-46, in different iterations, Mirage, -Meridian and, eventually, Matrix. While it didn't discontinue its light singles and twins, it effectively put several of them on hiatus. In some years, Piper's sales were 90 percent by dollar value PA-46 sales. One Piper official told Flying Piper (New Piper at the time) was "essentially a PA-46 company."

With a lineup running from the Bonanza at about $800,000, the B-58 Baron, the C-90, 250 and 350 King Airs, along with the special mission King Air, Beechcraft will have a range of airplanes that were profitable even during the downturn.

New Lineup

At the press conference, HBC announced the shape of its new lineup, and it was a big departure from business as usual.

While the new Beechcraft will keep every propeller airplane in its current lineup, it will add a number of new propeller-driven derivatives, giving it a range of models from about $800,000 through about $8 million that will constitute Beechcraft’s entire new-airplane product line. That segment, says HBC, is worth approximately $3 billion a year. The new company will continue to build every one of the models in that market niche it builds today, modify some with new propulsion technology and create exciting new ones.

Beechcraft plans to expand that lineup of six airplanes into 10, though it is understandably guarding many of the details associated with that plan. A light jet, it stresses, is not in the cards. As tempting as they can be, such programs are inherently risky because of their monumental R&D and certification costs.

New models will likely include turbodiesel versions of the Bonanza and Baron, at least one turboprop single and a new twin turboprop. HBC's vice president of marketing, Jim -Holcombe, told Flying they would all be very much within the heritage of Beechcraft that came before.

The lineup will very tightly but smartly fill the target niche, Holcombe said, giving buyers the ability to move easily from one platform to the next within the Beechcraft lineup. Holcombe said 70 percent of individual King Air owners, for example, owned a Bonanza and/or a Baron in the past.

This Is a King Air

Perhaps the most intriguing product floated by HBC at its NBAA press conference was a single-engine turboprop. The company says the airplane has no public name or designation but will “absolutely,” said Holcombe, be “called a King Air.” That name, of course, has never been bestowed upon a single-engine airplane before.

This King Air, however, will be no scaled-back PT-6 single. Like the remarkably roomy and powerful Pilatus PC-12, the Beechcraft single will be big. Its fuselage will be — get this — based on that of the Premier 1A, which, HBC claims, has the best cabin of any bizjet in its class. It will certainly be huge for a single. In addition to the voluminous cabin, the single would feature a large side loading door, room for eight to 11 occupants and industry-leading pressurization. The composite fuselage allows for efficient pressurization. HBC says it will build the fuselage in the same way it builds the Premier 1A today, using state-of-the-art winding technology for extremely light and strong composite structures.

The use of a composite fuselage is an intriguing choice for a couple of reasons. First, the departure from the all-metal King Air design is worthy of note. Beech Aircraft has built more than 7,000 King Airs over the past almost 50 years, so it’s a big step to go composite with the fuselage of that iconic model.

But a composite fuselage makes a lot of sense. For one thing, you can pump up the cabin more effectively — because there’s little leakage — than you can with a sheet metal structure, so passengers can enjoy a lower-altitude cabin. This is increasingly a big selling point with business aircraft.

You can also save weight. The specifications HBC floated for its concept King Air single include impressive payload and full-fuel payload figures. HBC claims the airplane could have a max payload more than 500 pounds better than an unnamed rival airplane and a full-fuel payload more than
800 pounds greater.

At the same time, the King Air single would boast high speeds, projected to be better than 300 knots, which it will achieve via a combination of its slippery fuselage, new-design metal wings and an under-development Pratt & Whitney Canada turboprop that will increase the power of the PT-6, possibly to more than 1,800 shp. The combination of room, power and speed, if it all comes to pass, would indeed seem worthy of the King Air name.

What about price? HBC isn’t floating a price point yet, but it’s a good guess it will be within shouting distance of its turboprop competitors, though if the new Beechcraft is indeed bigger and faster with more payload, the market might bear more.

It also hasn’t announced any timetable for the new model, for obvious reasons, but it insists all of its new models will be brought to market within the window of its five-year plan. That five-year plan, in fact, could get started very soon, possibly by the time you read this, though Vick stressed that the process would be “robust” and Beechcraft would go methodically through “a very structured product development process” that will involve every segment of the business and include extensive discussions with potential customers. This process will begin only after the company emerges from Chapter 11, said Vick.

Diesels

Another approach to the future HBC will pursue as a new, stand-alone company involves turbodiesel models, similar in broad concept to the one we featured in our cover story on the Cessna 182 JT-A in October. While HBC didn’t share many details of programs, it did say it would transform the Bonanza and Baron into jet-A burners, stressing that the market internationally is already begging for alternate fuel options, with 100LL being increasingly difficult to find or afford in foreign markets.

Additionally, diesels have the added advantage of lower fuel burn. All things being equal (weight, speed, climb performance and fuel capacity), turbodiesels bestow upon an airplane a great deal of additional range, a characteristic GA pilots love, for obvious reasons, but that also makes airplanes desirable for special missions purposes, such as surveillance or maritime patrol.

While it emphasizes its commitment to the piston market, the company has not, however, indicated any desire to re-enter that segment at a point lower than $800,000, which is the approximate price of its Bonanza piston single. So don’t expect to see the company relaunch the Sierra or -Musketeer any time soon.

This Is a New King Air

Understandably, HBC is exercising caution in its discussions of future products. At the same time, it hopes to stir up excitement and optimism by throwing out a few morsels, including a short set of proposed specs for the King Air single.

It also showed a chart of its tentative new lineup that had a grayed-out spot in it for a new King Air, though it shared no other details. The problem with a new King Air is finding a niche for it between the entry-level C90GTx, with a maximum weight of about 10,500 pounds, and the King Air 350i, which has a max ramp weight of better than 15,000 pounds. The thoroughly modernized King Air 250, the latest version of the B200 model (one of the most popular cabin class airplanes ever) sits midway between the 350i and the C90GTx.

Even if there were no new niches within the lineup, a modernization program might make sense. All models currently come equipped with the Rockwell Collins Pro Line 21 flight deck. That company’s new Fusion line is, of course, the current state-of-the-art. Garmin would surely like to get in on the conversation, as its G3000 and G5000 suites are moving upscale and might prove a good fit. It already has suites in the Baron and Bonanza. New King Airs might also feature upgraded engines, though all three models already boast late-generation Pratt & Whitney engines.

Another possibility, now that HBC raised the subject, is a composite fuselage King Air twin. Such a structure would bestow upon the airplane all the same benefits — better top speeds, pressurization, cabin room and payloads — it would bring (in theory) to the concept single. The development program for such an airplane would surely be expensive, though.

In the end, the new Beechcraft will come about in one form or another, though the pain for owners, employees, vendors and partners has been great and will continue to be so for some time. It’s possible, indeed probable, that new developments in the story will emerge after we’ve sent this story off to the printer, though it does seem likely we’ve seen the last of Beechcraft as a manufacturer of business jets, at least for many years to come.

What we are almost certain to see is a leaner Beechcraft, one focused on a range of aircraft that, one might argue, was its strength all these years — airplanes with propellers that work hard, carry a good load, are fun to fly and make money for their operators.

If all goes as planned, a Beechcraft like that might just fly.