US, CANADA: Business aircraft makers face severe test

Publisher Name: 
Financial Times

Business jet makers reeling from the US
political attack on some of their highest profile corporate high fliers
are being forced to make increasingly drastic cuts in production and
jobs in the face of the deepening global recession.

Jim Schuster,
chief executive of Hawker Beechcraft, one of the leading US corporate
jet suppliers, said: "We are undoubtedly facing one of the most severe
tests in our company's history."

The group said last week it
would remove 2,300 jobs on top of an initial 500 it eliminated late
last year, a combined reduction of close to 30 per cent of the
workforce of about 10,000.

Big production and job cuts have also been announced by Cessna, part of the US Textron group, and by Canada's Bombardier.

The
downturn and the credit crunch are biting deeper and more quickly into
the operations of the business jet makers than the suppliers of
commercial jets, although Boeing has also announced recently it is
cutting 4,500 or close to seven per cent of the jobs from its
commercial aircraft division.

Mr Schuster said Hawker Beechcraft
was being forced to reduce production and workforce levels further "due
to the increasing severity of the global economic decline".

He
said the US government's stimulus package had failed sufficiently to
loosen credit markets, which were "absolutely vital" to the success of
the business aviation sector.

At the same time, orders from
previously high-volume business segments, in particular fractional jet
ownership groups such as NetJets, part of Warren Buffett's Berkshire Hathaway group, had slowed considerably.

Mr
Schuster condemned the political attacks in the US that had "cast
general aviation as a wasteful extravagance instead of a critical
business tool and the source of millions of American jobs."

Corporate
use of business jets has come under increasing fire in the US since the
leaders of US carmakers flew to Washington by private jet to plead for
government financial help.

Intervention by Treasury officials forced Citigroup to scrap the purchase of a Gulfstream jet.

Jack
Pelton, chief executive of Cessna, the world's biggest maker of light
and mid-sized corporate jets, said since the third quarter last year
jet orders had dropped significantly and cancellations and deferrals of
orders were seriously affecting 2009 production growth.

The
number of hours being flown by the existing business jet fleet had
slowed, inventories of used aircraft were growing, the US domestic
market remained very soft, and "the international markets that were
very strong a year ago are now quiet," said Mr Pelton.

Cessna had also been hit by a deferral of a significant number of planes by NetJets that were scheduled for delivery in 2009.

It
is eliminating another 2,000 jobs, bringing the total cuts to 4,600 in
three months, and is planning to reduce jet production by 20 per cent
to 375 in 2009 from a record 467 last year.

Mr Pelton said: "The challenges we face are unprecedented in recent memory".

Customers and potential customers continued to feel the impact of declining corporate profits and tight credit markets.

Bombardier,
the world's leading business jet maker by value of deliveries, said
last week its business jet orders had fallen by 42 per cent from 452 to
262 in the 12 months to the end of January.

The group had been
hit by a "greater than usual" level of order deferrals and
cancellations and was cutting deliveries in 2009 by about 10 per cent
from 239 in 2008.

Bombardier is removing about 1,360 jobs or 4.5
per cent of its 30,000 strong workforce, comprising 1,010 temporary
jobs and subcontractors and 350 permanent employees - at its plants in
Montreal, Wichita, Kansas and Belfast in Northern Ireland.

Guy
Hachey, Bombardier Aerospace president said: "The industry is
experiencing strong turbulence and we anticipate more volatility in the
short term".

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