'Air Capital of the World' Looks to Lure New Industries as Tight Credit Markets, Stigma of Corporate Jets Weigh on Key Sector
October 12, 2009
WICHITA, KS - At the sprawling Cessna Aircraft Co. factory here, business jets sit half-assembled after work was halted midstream. Across town at rival Hawker Beechcraft Corp., massive machines that build fuselages are quiet.
Until recently, this city of 366,000 possessed something few other regions in America could claim: a robust manufacturing sector. Wichita, the self-proclaimed "Air Capital of the World," is home to dozens of plane makers and suppliers. These companies provided thousands of stable, well-paying jobs for factory workers and engineers alike.
Even as manufacturers of products from household appliances to textiles fled to lower-cost factories abroad, Wichita's airplane-making businesses thrived. As recently as mid-2008, companies such as Cessna and Bombardier Learjet, a unit of Bombardier Inc., were reporting stellar results, as easy credit fueled strong sales of corporate jets and recreational airplanes.
But the recession, tight credit markets and popular outrage at executives traveling on private aircraft combined to drag business to a near-standstill here in the second half of 2008. "We had customers with $1 million deposits for jets who just walked away and left their money," said one Cessna official.
Cessna, a unit of Textron Inc., has announced 8,200 layoffs and has forced hundreds of other workers to take furloughs. Closely held Hawker Beechcraft has cut at least 2,600 jobs this year and has announced plans for more. Bombardier Learjet has shed 800 workers and pushed others to take furloughs.
All told, more than a quarter of the area's aviation work force has been let go, not including thousands more layoffs among parts suppliers and support businesses. Wichita's unemployment rate was 8.9% in August, still below the national average of 9.7% that month.
Many are now trying to figure out what it would take to bring the industry back. Few expect credit markets to return to the levels that, not long ago, allowed even small companies to finance the purchase of their own aircraft. In addition, the stigma of buying corporate jets has yet to fade. And even if the industry does rebound, it isn't clear that jobs would return here. Many manufacturers had already begun to build up production facilities abroad during the boom times to create extra capacity.
"We're feeling the crunch now and it will stay around throughout 2010," said Jeremy Hill, director at the Center for Economic Development and Business Research at Wichita State University.
Wichita's mayor, Carl Brewer, a former factory hand and engineer who once worked at both Cessna and Boeing Co. supplier Spirit AeroSystems Inc., said he was concerned that the city might not be able to count on aviation in the future the way it has in the past.
"We're going out and trying to recruit new businesses here to diversify what we have and we're also looking for additional aviation opportunities," he said.
In 1925, Clyde Cessna, Walter Beech and Lloyd Stearman -- all aviation pioneers in their own right -- joined to form the Travel Air Manufacturing Co., which built planes in Wichita. After only a few years, Mr. Cessna left to form his own company and Mr. Beech in the early 1930s started Beech Aircraft Co. Mr. Stearman eventually formed his own firm that over the years became part of Boeing. Wichita became a hub of military-aircraft manufacturing during World War II and turned out thousands of airplanes to fight the war.
The industry weathered ups and downs in the past, but always rebounded. That created a steady supply of well-paying manufacturing jobs that allowed even those with moderate education and skills to earn a decent living.
Harelda Goldston, who began as a sheet-metal assembler at Hawker Beechcraft in 1990, was laid off last month in the latest round of cuts. The 59-year-old Wichita native was making about $30 an hour when she lost her job -- a wage she said would be nearly impossible to match outside the industry.
"I'll try to find a decent job while I'm drawing my unemployment, but the ability to find something for near what I was making is none to nil," she said. "Even if I work two jobs, I think it will be hard to make up for it."
She has looked into a job-retraining program offered by the city but found there were already 990 people on the waiting list and that the program was short on funding.
Adding to the uncertainty about the future is the recent push to manufacture offshore that many Wichita aerospace companies have embarked on. Some companies have opened operations in Mexico. During the boom times in late 2007, Cessna announced it would build a new, small propeller plane in China. That plane would be shipped to Wichita for reassembly and delivery to U.S. customers.
While the companies are guarded about their plans in light of the downturn, officials concede that it is unlikely that they would expand their Wichita operations beyond today's level. Any future growth would probably happen abroad.
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