Six months ago, Wichita business jet manufacturers were confident their record order backlogs would cushion them through a downturn in the U.S. economy.
International markets were strong, accounting for half of their orders. Manufacturers couldn´t get planes to customers fast enough.
In August, the General Aviation Manufacturers Association noted shipments and billings were on pace for a record year.
For most of 2008, life was good.
How quickly things change.
The deepening U.S. economic crisis and credit crunch helped unravel economies throughout the world, sending the aviation industry into a sudden downturn.
People didn´t think the problems would be as widespread as they are, said Dundee Securities analyst Richard Stoneman.
Teal Group vice president of analysis Richard Aboulafia agreed.
"Sure enough, the rest of the world was just as overleveraged as we were," said.
There´s no way to know how long the downturn will last or how severe it will be. But one thing seems certain.
"It´s guaranteed that this unpleasant process is just starting," Aboulafia said.
A cyclical business
Wichita´s aerospace industry has long been marked by cycles. And after several years of a strong upturn, the cycle has changed again.
"Every six or seven years, it´s the end of the world," Stoneman said.
The nation was heading into a downturn before 9/11, and things quickly worsened.
In the days following, Boeing Wichita said it would cut 5,000 jobs here. Over time, other Wichita planemakers cut their work forces as well.
But when the market came back, it did so at a record pace.
Since 2003, the business jet industry has grown an average of 19 percent annually, a rate Aboulafia called crazy.
"You don´t generally see those numbers in mature markets," he said.
Now falling profits and financing difficulties have hurt business jet customers. That has led to order cancellations and deferrals, although companies haven´t divulged specifics.
Other customers haven´t been in a big hurry to move up their delivery schedules to fill open slots, Cowen and Co. managing director and senior research analyst Cai von Rumohr said.
They´re taking a wait-and-see approach, he said.
And new sales are harder to come by.
Cessna and Hawker Beechcraft have each announced two rounds of layoffs as they take production rates down.
Cessna, the city´s largest employer, said last week it was cutting 2,000 jobs systemwide. It´s not yet known how many of those cuts will be in Wichita. But 12,000 of its 15,000 employees work here. In November, Cessna said it was trimming 500 jobs.
Hawker Beechcraft also warned of more layoffs to come but has not yet said how many. In November, it cut 5 percent of its work force, about 490 jobs.
Bombardier Learjet has not cut its work force, but it´s taking the situation seriously, spokesman Leo Knaapen said.
"We look at the economic situations every day, and we double-check with our customers sometimes once a day, sometimes every second or third day, to make sure their situations have not changed," Knaapen said.
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