Beechcraft and Cessna have occupied opposite corners of Wichita, Kansas for some 82 years, stationed only 21km apart on the eastern and western fringes of Kellogg Avenue. Such proximity bred a special kind of internecine corporate conflict, with even families divided by opposing allegiances to two of the city’s largest employers.
So it was a rich form of irony when Cessna and Beechcraft fell under the common corporate umbrella of Textron Aviation, a division formed following Cessna parent Textron’s acquisition of Beechcraft out of bankruptcy.
After the $1.4 billion deal was finalised in March, the focus shifted to the challenge of combining these two iconic corporate cultures in the same organisation chart.
Even the architecture of the two companies seems incompatible. Pre-acquisition, what is now known as the “west campus” was Beechcraft’s headquarters, a curving, five-storey green structure, which is internally nicknamed the “spaceship”. The “east campus” is the site of the Cessna factory, a low-slung complex of straightforward rectangular, whitewashed structures housing assembly bays, test facilities and office buildings.
The combined company is now preparing to make its first appearance at the NBAA convention in Orlando, which will feature the debut of the Cessna Citation Latitude, a new jet in the midsize segment. That launch could push the debut of the Textron Aviation brand out of the headlines at NBAA, but chief executive Scott Ernest is not concerned. Indeed, he wants to move past the Cessna-Beechcraft integration story.
“We don’t even talk anymore so much about integration, but just ‘west’ and ‘east’ campus,” says Ernest, in a conference room on the east side of town. “I personally feel we’re kind of through the integration process.”
If the integration task was that simple, it may have had something to do with the corporate history that brought the companies together.
Cessna and Beechcraft rode the mid-2000s light jet boom to record production rates, despite a dearth of new products coming to market. For Beechcraft, it was also a time of strategic confusion, as Raytheon Aircraft fulfilled a decade-long desire to sell off the company, which was rebranded Hawker Beechcraft.
The buyers – a combination of private equity gurus Goldman Sachs and Onex – also seemed to have no long-term interest in the company, with little re-investment in technology and new product lines.
The global financial crisis that devastated the light jet sector after 2008 hit Cessna and Beechcraft particularly hard. Both companies faced not only a collapse in demand but also a new and well-funded competitor in Embraer, which introduced the Phenom 100 in 2008 and the Phenom 300 in 2009. That combination of factors drove Hawker Beechcraft into bankruptcy protection in May 2012.
For the first time in at least a decade, the company founded by Walter and Olive Ann Beech has an owner that wants to take a long-term view of the business. Embraer’s entrance into the market with fresh technology spelt the end for the neglected Hawker jet series. Although the Hawker brand is out of production, Beechcraft’s turboprops and piston-driven platforms remain highly competitive in their sectors, yet still need new investment and – perhaps – a single-engined turboprop to fill a strategic gap in the portfolio.
Beechcraft has not unveiled a new product or major upgrade since before entering bankruptcy more than two years ago. The brand now has an owner with the financial resources and market awareness to end that drought.
“Textron has the ability to reinvest in product,” Ernest says. “We can invest in the product and invest in Beech. It wasn’t Beech’s fault. They were just strapped in the situation they were in. The feedback from the people at Beech has been extremely positive, knowing that they’re going to get someone who can invest in them.”
Closing down Hawker jet production was a painful move in 2013, but the decision had the unintended benefit of creating a seamless product portfolio under Textron Aviation.
No other company in the industry can boast a product line-up that stretches from the light-sport category of piston-powered aircraft all the way up to the super-midsize jet segment with no overlap and perhaps only one obvious gap. The combination of the brands creates new avenues for luring new customers and upgrading existing ones.
Textron Aviation is still not ready to comment on the only potential gap in the portfolio. TBM and Pilatus have shared the market for single-engined turboprops. That has encouraged a wide range of start-ups with varying degrees of success. It also attracted interest from Beechcraft even during its bankruptcy period. Then-Hawker Beechcraft chairman Bill Boisture unveiled a concept for a single-engined turboprop at the 2012 NBAA convention, showing a drawing of an aircraft resembling a Premier 1 with a nose-mounted propeller.
Another feature of Textron Aviation is the sheer size and scale of the operation. In addition to having 21 different platforms available for sale, the three brands now share a customer base of more than 17,000 jet- and turboprop-powered aircraft, along with more than 200,000 piston-driven vehicles.
The combination also brings together under one corporate roof 21 company-owned service centres, 44 mobile service units and eight distribution centres. These facilities are now specialised by product, but the opportunity exists under the integration process to convert them into a universal, globe-spanning support network.
Such possibilities clearly offered relief to Hawker and Beech operators, who endured years of uncertainty as the manufacturer struggled and lapsed into bankruptcy. Now they have the promise of access to a broader service network than ever previously imagined.
“The feedback [from Beech customers] has been very positive,” Ernest says. “I think people can feel that it’s good that we’ve been able to put a strong face together with respect to all the service activities that we do. They’ve made big investments, and they want to make sure that somebody can take care of that product.”
The next step in the integration process, however, is purely internal. Textron Aviation has initiated negotiations with the International Association of Machinists and Aerospace Workers (IAM) to combine the Cessna and Beechcraft workforces under a single labour pact.
Labour relations at both companies had been strained amid the financial hardships of the post-2008 market slump. Beechcraft’s union went on strike that year. Cessna’s union voted to strike two years later, but accepted a last-minute deal that averted a work stoppage. Keeping both workforces happy could prove tricky, but Ernest is optimistic. He sees both sides reaching a deal later this month on a combined labour agreement.
The most critical challenge of the integration process may not become visible for several years. With more than 21 platforms ranging across a wide swath of market segments, Textron Aviation must carefully balance development priorities to stay competitive. The super-midsize Cessna Citation Longitude is the next product in the company’s development pipeline, with a notional entry into service in 2017. The next development opportunity could be the single-engined turboprop to bridge the gap between the King Air and the piston fleet. Alternatively, Textron Aviation may want to bolster its light jet line-up with a clean-sheet design, if that segment of the market finally recovers.
Despite such possibly competing priorities, Ernest says the company’s track record should speak for itself, as the Latitude remains on track for certification next year and the Textron AirLand Scorpion is now in flight-testing after programme launch only three years ago.
Source: FlightGlobal.com
