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HBC Continues Restructuring

Dying is one thing. Being reborn is quite another, as Hawker Beechcraft, its employees, lenders and creditors are discovering during the current bankruptcy and restructuring.

At the NBAA Convention last month, HBC chairman Bill Boisture explained recent events to that point and outlined the Wichita OEM’s future, which he confirmed will not include its business jet line.

The company that emerges from Chapter 11 reorganization in next year’s first quarter will be rebranded Beechcraft Corporation and will focus on its turboprop and piston aircraft lines, ceasing production of business jets.

A bid by Superior Aviation Beijing to acquire HBC for $1.79 billion fell through shortly before the NBAA show opened. Boisture attributed the failure to a number of factors, including challenges of conducting negotiations across cultural and language barriers, as well as requirements for approval of the deal by both the Chinese and U.S. governments.

He added that following the collapse of the Superior Aviation deal, HBC was revisiting other bids that had come in at about the same time, with an eye to selling the business jet line. In the meantime, he said, production of the business jet line–the Hawker 4000, 900XP and Premier IA–is winding down as the company “continues to adjust…production capacity to what we see in the market in terms of demand,” he said, adding, “The jet product lines have been in a furloughed position for several months now as we go through this process.”

Product Support

Boisture also made an effort to clarify HBC’s position with regard to warranties and support.

The company plans to return to bankruptcy court for “permission to cancel certain warranties and factory-sponsored programs, including our guaranteed maintenance program.” This, he said, would include the guaranteed maintenance program known as SupportPlus and the Hawker 4000 Upgrade and Enhancement program. Engine warranties, however, would be unaffected remain the responsibility of the respective suppliers.

HBC has said it is in discussions with several third parties regarding alternatives to provide continued services and maintenance for Hawker 4000 and Premier IA operators. In fact, Jet Support Services (JSSI) has already offered Premier IA owners coverage via JSSI’s hourly cost maintenance programs. “We’re here to complement or supplement HBC in any way they desire,” said JSSI co-president Neil Book, adding, “We’re not looking to encroach on their customer base.”

During the restructuring, Hawker Beechcraft Global Customer Support, said the company, will remain available to provide service, maintenance and technical support for aircraft through Hawker Beechcraft service facilities and the Hawker Beechcraft parts and distribution network.

As for the Hawker 900XP, Hawker 750 and Hawker 400XP, Boisture said, “All warranties, including those for engines, avionics, airframe and systems, will continue to be honored in the ordinary course of business.”

The company plans to replace existing SupportPlus agreements with an amended agreement tailored to its out-of-production aircraft, “details of which are still being evaluated.” The company expects no lapse in coverage during the transition.

Concerns mount among owners over not only support and service, but also aircraft residual value and whether HBC might cancel the type certificates. The type certificate guarantees the availability of spare parts and technical engineering. Cancellation could leave owners with a grounded airplane, unless it were assumed by a third party.

There are also approximately a dozen Hawker 4000s that have not complied with requirements for flammability reduction in the fuel tanks. The requirement has a March 2014 deadline, and compliance typically requires 90 to 120 days. Failure to comply would essentially ground the aircraft.

Amendments as part of the Plan of Reorganization were to have been placed before the bankruptcy court for approval on November 15 but were rescheduled for November 29.

Meanwhile, bankruptcy judge Stuart Bernstein has declined to sign an order allowing Hawker Beechcraft to expedite the sale of approximately 13 new, three in-production and four used Hawker 4000s. The decision to deny HBC’s request to expedite the sale was in response to an objection filed by an ad hoc committee of Hawker 4000 customers. A hearing on HBC’s original request for liquidation of the Hawker 4000 inventory was also scheduled for November 29.

 

Turboprop Future

As the company continues restructuring, it is focusing on current and future turboprops. At the NBAA Convention executive v-p Shawn Vick revealed plans for a number of new aircraft.

A proposed single-engine King Air concept appeared to garner the most interest, and Vick provided more detail with regard to construction and performance expectations. It would use the Premier IA twinjet composite fuselage but with new wings and empennage, as well as a longer nose to accommodate the turboprop engine. According to the spec sheet, Beechcraft expects the airplane to carry as many as 11 passengers, fly 1,750 nm (NBAA/IFR) and have a high-speed cruise of 301 knots.

At last month’s Airshow China 2012, the HBC static display featured none of its jets, highlighting only a King Air 350i and a King Air C90GTx at the company chalet.

The company believes that China is developing an appetite for smaller, short-range aircraft. “This view is supported by the fact that more than 60 percent of aviation finance experts recently interviewed expect demand for business aviation finance in China to grow dramatically between now and 2017, much higher than in any other country,” concluded Sean McGeough, HBC president for Africa, Asia-Pacific, Europe and the Middle East.

Beyond Reorganization

At the NBAA Convention Vick said HBC expects to come through the bankruptcy process with a new company that is “strong, resolute, focused” and that it might be producing 600 aircraft a year.

In the meantime, however, the revival is sometimes painful. In October, the company announced it would begin the process of closing Hawker Beechcraft Services facilities in Little Rock, Ark.; Mesa, Ariz.; and San Antonio. It also confirmed that approximately 240 employees would be affected at these locations.

Also announced was implementation of a separate reduction in force that will affect approximately 170 employees at its HBC entities in Wichita and Little Rock as jet production winds down. AIN has learned from a reliable source that HBC has laid off its Hawker jet sales force, following exit/out briefings, and will pay them through the end of this year.

On the other side of the Atlantic, a dispute continues with Airbus, which manufactured airframe components for Hawker 125-series jets–despite a settlement reached in May 2011 in favor of Airbus to the tune of $14.2 million. In that case, the arbitrator–the International Chamber of Commerce–imposed the award for damages related to HBC’s purchase volume obligations for fuselages, wings, track kits and spare parts under an airframe purchase and support agreement.

Airbus is now awaiting a decision by the chamber regarding claims that HBC should have to pay it $60 million in penalties for undelivered assemblies for the Wichita company’s jet line. Airbus claims Hawker Beechcraft unilaterally reduced the number of shipments it would purchase, forcing Airbus to suspend production and lay off employees.

December 3, 2012, 3:45 AM




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