July 11, 2012
Hawker Beechcraft looks likely to become the next Western company that will have business jets made in China.
But unlike Cessna and Embraer, which have announced Chinese assembly programs for business jets this year, the complete civil operations of Hawker Beechcraft will belong to a Chinese company if a proposed deal goes through. There is little doubt that local production of business jets has been a Chinese objective.
Hawker Beechcraft says it is negotiating “a strategic combination” exclusively with Superior Aviation Beijing, which proposes to pay $1.79 billion for the bankrupt U.S. aircraft builder, without taking over its defense business. The buyer is 40% owned by the Beijing city government.
Superior Aviation is already involved in general aviation (GA) manufacturing in China, developing an unmanned helicopter based on the U.S. Brantly B-2B. The company also owns Superior Air Parts in the U.S.
Although the firm is 60% privately held, the involvement of the Beijing government and the considerable sale price point clearly to a strategic economic move by an arm of the Chinese state.
In its announcement, the U.S. company stressed that Superior Aviation would keep production in Wichita and Little Rock, Ark. Hawker Beechcraft notes that its domestic and international operations will “continue to operate uninterrupted, led by the current management team.” The company also states that it will invest capital into the existing product lines, and “Superior is committed to maintaining Hawker Beechcraft’s strong presence in the U.S.”
But clearly, Beijing wants to join a recent craze among Chinese municipalities for building aircraft, especially for GA. To industry executives in China watching the proposed sale with interest, there is no doubt that a finalized deal in the long term would result in complete aircraft rolling out of factory doors within the city limits of Beijing — just as late next year Embraer 600s and 650s should begin emerging from a plant in Harbin and Cessna Citation Sovereigns from one in Chengdu.
One executive, who has closely studied the relative economics of Western and Chinese business jet manufacturing, sees no pressing economic reason to shift Hawker Beechcraft production, at least in the short term. “You don’t necessarily get lower costs, especially in the beginning” by moving production to China, he says.
Accepting, however, that Beijing must want local production, the rational move would be first to make components in the city, the executive says. Yet that would not be enough, he is quick to add: “The Chinese side will want to start with assembly, for face.”