Manufacturer is cutting costs and improving customer support in bid to improve image

General aviation manufacturer Raytheon Aircraft is showing signs of recovery following years of poor results and negative cashflow, according to its new management team. "Productivity has already turned the corner," says chief executive Jim Schuster.

The new management is trying to return Raytheon to the values that made its Beechcraft brand a highly respected name in general aviation. The company is cutting costs aggressively while improving customer support to tackle parts availability, pricing and aircraft-on-ground response time issues.

Schuster says the company's financial position was "pretty serious" when he took over last year. "The company has been cashflow negative for three years and consumed $500 million in cash last year," he says. "The cost structure was out of balance with the business. We took out over 2,500 people and cut the capital expense budget. We cut as much cost as quickly as we could, but it was not enough."

The next step was a management overhaul and the introduction of business performance metrics. For the first quarter of this year, Raytheon produced a positive cashflow of $34 million.

The financial problems are largely due to delays in development of two new business jets, the entry-level Premier I and super mid-size Hawker Horizon, both of which slipped several years.

The situation was not helped by its "aggressive" winning bid for the US Air Force/Navy Joint Primary Aircraft Training System contract, which relied on securing export orders for the T-6 trainer which have not materialised. The T-6 programme "is now very healthy and is not a problem for us", Schuster says.

The company's older product line has suffered from the market downturn. Production of Beechjet 400As, Hawker 800XPs and King Airs has been cut dramatically, and assembly of the Beech 1900D regional airliner will stop if no new cash customer is secured this year, says Schuster.

Because of the Premier and Horizon delays, development of the Hawker 450 light mid-size jet has been put on hold. A new product development strategy for everything from jets to pistons will include upgrades to make the current aircraft more competitive. But Schuster is still not convinced that Raytheon can continue building piston-powered aircraft at the current low production rates.

Despite improving productivity by 25-30% and cutting almost $250 million in overheads, Raytheon will still lose over $50 million this year and will only break even next year. "It is a pivotal period in the history of this business," says Schuster. "It either comes out of the next couple of years on its feet, or not. And failure would be disastrous."

Source: Flight International