Airbus complaint could put Hawker Beechcraft further in red

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Hawker Beechcraft is awaiting a decision from the International Chamber of Commerce as to whether the company will have to pay Airbus close to $60 million in penalties for undelivered assemblies for its Hawker business jet line.

Airbus components made in its Broughton plant for the US airframer include the wings and fuselages for the Hawker 750/850/900 business jets, a teaming that began when the type was owned by Hawker Siddeley.

According to financial statements filed by Hawker Beechcraft, Airbus claims the US company "unilaterally reduced the number of shipsets that it would purchase in breach of its contractual obligations". Hawker Beechcraft fought back, "denying liability and asserting a counterclaim against Airbus" for about $10 million, according to financial filings with the Security Exchange Commission. "We are awaiting the decision of the tribunal," says Hawker Beechcraft.

Robert Knutson, a UK-based arbitrator who worked for the International Chamber of Commerce international court of arbitration from 2000-05, has told Flightglobal that International Chamber of Commerce awards essentially become US court judgements and "are generally enforceable" in all states of the USA, though the settlement can take "a few months to several years" to conclude.

A win for Airbus would exacerbate Hawker Beechcraft's predicament, recently highlighted in its third quarter earnings report. While its losses have slowed, the company reported an operating loss of $123 million in the quarter, delivering 49 aircraft, a 23% reduction from the same period last year.

To further reduce costs, the company has laid off another 8% of its workforce, cut out 800 hourly-wage factory workers and suspended manufacturing of its $7.5 million Hawker 400XP light jet for up to 24 months as a result of continued market weakness.

"We suspended this programme as carefully as anyone I've ever seen," says company president Bill Boisture. "We paid particular attention to all existing technical data and the intellectual property that goes with itWe made a purposeful decision to be able to restart from a good basis."

The notion that Hawker Beechcraft could leave Wichita for Louisiana, reported in October, remains a possibility. "We were offered an incentive from Louisiana," Boisture said during the third quarter earnings call on 12 November.

He says the company also received an offer from Kansas, but the deal was contingent on completing a successful contract with its labour union, the International Association of Machinists.

IAM members, however, rejected the most recent seven-year contract offer in October, and Boisture says he has "no plans to open new talks" with the union before its contract ends in August 2011.