I Need IFF For My Business

            Shortly after announcing its need for possible bankruptcy protection, American aviation manufacturing firm Hawker Beechcraft announced that it had been sold to a Chinese firm. As the ink is drying from the Hawker Beechcraft sale, Cessna Aircraft Company leaders announce their own interest in collaborating with Chinese businesses. These announcements are actually the norm in the aviation industry today. The alignment of an economic depression, an emerging market, and major political changes in the east has led to what may be a defining moment in aviation and world history. How will partnering in China affect our aviation industry? Why the sudden growth in Chinese aviation? What will the future of global aviation look like?

            Economic hard times have had a net negative affect on nearly every industry in America for nearly the past decade. General Aviation has been, perhaps, one of the most smitten industries of all. According to the General Aviation Manufacturing Association, in 2011 shipments of general aviation airplanes worldwide declined 3.5%. This marked 4 consecutive years of decline in the industry, and 3.5% represented the smallest annual decline yet. The officials at GAMA are quite an optimistic bunch, this is quoted from the sentence following the announcement of declined sales; “Shipments in all three segments (business jets, turbo-prop, and pistons) declined from the previous year, but the declines reached single digits which indicate general aviation hitting the trough…” (General Aviation Manufacturers Association, 2012). Perhaps this optimism is not unfounded. Many aviation industry companies have been finding respite in the emerging market of China. American companies on this list include Cirrus (sold to a Chinese manufacturing firm), the aforementioned Hawker Beechcraft (sale to Chinese firm pending, Enstrom Helicopter (sold to a Chinese firm), GE (joint-venture production and development contract w/Chinese firm), Gulfstream (joint-venture production agreement w/Chinese firm), Net-Jets (upstart and development co-op with Chinese firm), and many more to come. These types of business relationships are being formed in masses by aerospace engineering companies the world-over as well. Bombardier and Embraer have also recently made formal relationships with Chinese firms. Almost all of these relationships have formed due to the need for capital funding, as well as the need to be a part of this emerging market. The firms that have been sold wholly to Chinese firms were nearly all in dire economic standing, much like Hawker Beechcraft. A simple visit to the homepage of forbesbusinessaviation.com will reveal article after article describing a newly found relationship with a Chinese firm (Forbes, 2013). If this cure-all has been available all-along, why have more companies not taken advantage of this opportunity sooner?

            China does not have the best track record at playing friendly with outsiders when it comes to business. There is a long and sordid history of companies partnering with Chinese firms only to find that the proprietary trade information that they had shared in confidence has been stolen and “new” Chinese competition has beat them to the sales “punch” (Negroni, 2012). In many of these instances, the Chinese government has protected the offending firm, even in the face of damning and obvious evidence of the misdeed. There are also the complications of an unsure and slowly evolving political ethos of the governing body of China. There is no promise that the Chinese government will follow through with the promised infrastructure and airspace developments that are necessary to breathe life into these start-up aviation firms. Major developments in recent years, including a comprehensive airspace management plan, have begun to make business prospect look up in China. An article in China Daily online magazine identified that were a total of about 500,000 flight hours of general aviation flight in China for 2011, the majority of which were of the business jet type. The same article states that projected general aviation flight hours will reach 2 million by 2020. Now, I understand that these numbers cannot always be trusted, but the fact that there is a plan in place is proving to be enough evidence for aerospace manufacturers (Wen, 2012). Incidentally, America’s annual general aviation flight time is about 24 million hours, so China has quite a way to go to catch up to our current capacity. Many people are worried that American aircraft manufacturing firms being sold to China could result in fewer American jobs, which could ultimately hurt the US in a big and long-term way.

            There may be reason for concern with regards to lost American jobs, but not right away. In the case of Cirrus, a Chinese firm bought the company as a means for understanding the general aviation industry and having a foundation to build off. The original Cirrus headquarters is still the company’s main place of operation, the original employees still have their jobs, and the Chinese firm injected $150 million dollars into the development of a new lightweight jet. In most cases, initially anyway, these Chinese firms will find keeping the American portion of their production operations open vital because this allows for the FAA to certify their newly produced aircraft. This will be a valuable certification if the jets are flown internationally (Manufacturing.net, 2012). As time goes on and the aviation industry in China is strengthened and has earned a “name” internationally, our certification may not be as much a difficulty or necessity. For the time being, it appears that Chinese business just might be the lifeline that general aviation needs. As far as graduating aviation professionals are concerned, it is probably just good that these companies continue to exist, and that the industry is showing signs of growth. Today’s graduates will have a whole-new host of competition issues and international relationships to develop as our careers go on.   

     

Works Cited

Forbes. (2013, February 25). forbesbusinessaviation.com. Retrieved February 25, 2013, from homepage: http://www.forbesbusinessaviation.com/

General Aviation Manufacturers Association. (2012, January 1). Statistical Databook & Industry Outlook. Retrieved February 25, 2013, from erau.edu: http://libraryonline.erau.edu/online-full-text/books-online/GAMA-DATABOOK-2011.pdf

Manufacturing.net. (2012, July 16). U.S. Plane Makers Teaming With Chinese Firms. Retrieved February 25, 2013, from manufacturing.net: http://www.manufacturing.net/news/2012/07/us-plane-makers-teaming-with-chinese-firms

Negroni, C. (2012, May 14). China Market Challenges Plane Makers. Retrieved February 25, 2013, from nytimes.com: http://www.nytimes.com/2012/05/14/business/global/14iht-rav-china14.html?_r=0

Wen, W. (2012, November 13). General Aviation set for takeoff as more airspace is available. Retrieved February 25, 2013, from chinadaily.com: http://www.chinadaily.com.cn/cndy/2012-11/13/content_15920216.htm