Reborn Beechcraft emerges from bankruptcy protection

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Beechcraft emerges on 19 February from bankruptcy protection with a new business plan and a restored leadership team - and without its Hawker-branded business jet division and more than $2 billion of debt, both shed during a 10-month-long financial restructuring process.

The bankruptcy court's approval of Beechcraft's recovery plan means the new streamlined and standalone company must face a stubbornly sluggish market that has already driven its business jet segment out of production.

Bill Boisture, who is again chief executive after a year-long term as chairman, instead points to the continued demand for the King Air turboprop through the post-2008 recession, its increasing application in the special missions market and low inventory levels for recently manufactured versions of the aircraft.

"Those three factors give us strong optimism about how Beechcraft will be able to compete and win orders around the world with our business and general aviation products," Boisture says.

The King Air family will lead a surviving product line-up that, including the piston-driven Bonanza and Baron, were mainly originally introduced in the early 1960s.

However, new product development will be a renewed priority for Beechcraft's turboprop and piston-driven aircraft. The elimination of the Hawker-series jets means there will be more cash for the company's other products.

"We will be spending three times what we were going forward on the Beechcraft product line in product development," Boisture says.

In October, then-Hawker Beechcraft unveiled five new product concepts, including a near-term focus on introducing an eight-seat, single-engine turboprop. Boisture says the concepts remain at the preliminary design stage as the company performs market research.

Producing the aircraft profitably will be one of the key considerations. Since 2007, the company has been shifting low-value sheet metal and structures work to Chihuahua, Mexico, from its unionised factories in Wichita, Kansas. As such, Beechcraft's employment in Wichita has dropped several hundred jobs below the 4,000-threshold set when the state and local governments awarded the company special tax incentives to prevent job losses.

And the outflow of work from Wichita has yet to reach its limit, Boisture says. "We will continue to move portions of our manufacturing of small assemblies and piece parts to our lower-cost operations in Mexico, but will stay focused on high quality final assembly in Wichita," Boisture says. "The cost-reduction process in the company is not over."

Another factor in Beechcraft's success will be its military division. This faces a critical contract award decision later this week, when the US Air Force places its light air support contract on 23 February. Two years ago, Beechcraft's T-6 Texan II lost the contract to the Sierra Nevada/Embraer A-29 Super Tucano, but that decision was "set aside" by the USAF after discovering undisclosed problems in the documentation process.

"We're confident we've invested properly to meet the critiera," Boisture says. The armed attack version of the T-6 will be certified later this year, if the USAF selects the aircraft for the contract to equip the Afghan air force, Boisture says.

The estimated $300 million contract, with a total potential value projected at $1 billion, is essential for Beechcraft to retain one of its most lucrative businesses. Since 2000, Beechrcraft has supplied the trainer version of the T-6 to the USAF and US Navy in annual lots worth about $280 million. The deliveries are scheduled to end in the 2014 fiscal year.

The final piece of Beechcraft's business will be the global services and support business for all of the company's aircraft models, including the business jets. This includes rolling out product updates, such as the re-engined and winglet-equipped version of the Hawker 400XPR.