Hawker Beechcraft Corporation (HBC) was an American aerospace manufacturing company that built the Beechcraft and Hawker business jet lines of aircraft between 2006 and 2013. The company headquarters was in Wichita, Kansas, United States, with maintenance and manufacturing locations worldwide. The history of Hawker Beechcraft originated in 1994 when Raytheon merged its Beech Aircraft Corporation and Raytheon Corporate Jets units.
In 2006, Raytheon sold the company to a consortium of Goldman Sachs and Onex Corporation. This deal left the company with a heavy burden of debt which it struggled to support from the economic crisis of 2008 onwards. In April 2012 it defaulted on interest payments and was in breach of banking covenants; this caused widespread speculation that it would enter bankruptcy.
On May 3, 2012, the company entered bankruptcy, filing voluntary petitions under Chapter 11 in US Bankruptcy Court. The bankruptcy resulted in the company accepting an offer to be purchased by Superior Aviation Beijing. By October 18, 2012, the negotiations for the sale had failed and the company decided to cease jet production and exited bankruptcy on its own on February 19, 2013, under a new name, Beechcraft Corporation.
History On February 8, 1980, Beech Aircraft Corporation became a subsidiary of Raytheon. In August 1993, Raytheon Company acquired British Aerospace Corporate Jets (producers of the midsized British Aerospace BAe 125 line) from British Aerospace and renamed the company Raytheon Corporate Jets. In mid-September 1994, Beech Aircraft Corporation and Raytheon Corporate Jets were merged to form Raytheon Aircraft. Raytheon decided to use the Hawker name to show the lineage of the series from Hawker Siddeley and Hawker Aircraft.
2000s In early 2002, Raytheon announced the return of the Hawker and Beechcraft brands after having marketed them as Raytheon aircraft at the National Business Aviation Association annual convention.
Raytheon announced in July 2006 the sale of its aircraft manufacturing business to focus on its core defense-related business. Bidders for the company included The Carlyle Group, Cerberus Capital Management and Onex Corporation.
In October 2006, Raytheon Aircraft Company commenced a US$16.3-million facility expansion for Hawker 4000 completion work in Little Rock, Arkansas. The expansion included a new hangar bay, as well as extensions to existing buildings to provide additional woodshop, upholstery, sheet metal and storage space.
In March 2007, the purchase of Raytheon Aircraft Company was finalised at US$3.3B. Hawker Beechcraft Inc. was a new company formed by Onex Partners and Goldman Sachs Alternatives. It operated under the name Hawker Beechcraft Corporation (HBC).
2007 marked the 75th anniversary of Beechcraft and the 60th anniversary of the Beechcraft Bonanza, which is the longest running production line of all time.
In 2007 and 2008, the company increased its overseas expansion efforts. On October 25, 2007, HBC officially opened a new aerospace manufacturing facility in Chihuahua, Mexico and, on March 26, 2010, appointed Hawker Pacific Singapore as its first Hawker 4000 authorized service center in Southeast Asia.
Late-2000s recession
In response to the late-2000s recession the company announced the lay-off of 490 employees at its Wichita facility in January 2009.
On February 3, 2009, CEO Jim Schuster announced that a further 2,300 employees would be laid off before the end of the year. The company indicated that orders for aircraft had slowed down, especially by fractional jet operators. Schuster said:
After completing cuts of 25% of its workforce (2800 employees) between October 2008 and August 2009, the company indicated that further significant cuts were required. The company's second quarter 2009 results over 2008 data showed that aircraft deliveries had fallen from 129 to 78 aircraft. The company achieved orders of US$450M during the period April to June 2009, but had orders totalling US$366M cancelled in the same period. Overall the company's sales were reduced from US$1.03B in the second quarter of 2008 to US$816.3M in the same period of 2009. One customer, NetJets, cancelled orders for 12 aircraft and deferred all other scheduled deliveries until the end of 2010.
By late August 2009, the company laid off an additional 300 workers, bringing the total number of layoffs to 3100. On August 31, 2009, the company indicated that it was slowing development of the Beechcraft Premier II, moving its first delivery date into late 2012 or early 2013 due to the poor market for business aircraft. In late September 2009 the company issued 60-day lay-off notices for another 240 employees. These cuts included 87 positions on the Horizon production line and the rest in the King Air line. This set of lay-offs brought the total lay-offs to 3,553 since October 2008, which was about 36 percent of the company workforce.
The company reported that it lost more than US$63M in the first quarter of 2010, even after it cut 2,700 jobs in 2009. In July 2010 the union representing workers at Hawker Beechcraft sent a letter to its members explaining that it was in negotiations at the company's request to deal with, as the company stated "serious challenges... a spectrum of possibilities for the company's future footprint...the likely impact on its workforce in all its locations." The union warned its members in the letter, "The picture we are getting is of a Hawker Beechcraft Wichita that will shrink almost immediately by 75 percent or more within two years, without a guarantee of even the last few jobs staying". The move would reduce the company's work force from 6000 to 1500 workers. CEO Bill Boisture confirmed the situation indicating that demand for the company's products had declined drastically and permanently and that the company may move significant amounts of work to Mississippi, Louisiana, or even outside the United States.
In September 2010 the company announced further cuts of 350 salaried positions to be completed by the end of October 2010. On October 16, 2010, union machinists at Hawker Beechcraft voted against a new seven-year contract that would have included a 10% pay cut and higher worker health insurance contributions aimed at keeping the company from moving its operations out of Kansas. Union leadership had recommended that its rank and file accept the company's offer rather than risk losing their jobs, but a majority of the union workers voted against the contract, citing their belief that the company will leave Kansas regardless of incentives and concessions. In December 2010 the company signed an agreement with the Kansas state government to retain facilities in Wichita until at least 2020 and a minimum of 4000 employees in exchange for a US$40M incentive package. Kansas Governor Mark Parkinson termed it "not a huge bailout".
2010s bankruptcy and restructuring
In early 2010, the company, in partnership with FlightSafety International, opened the Maintenance Learning Center, for technician training.
By September 2011, the company had US$2.14 billion of debt outstanding. In December 2011, the company announced that it was slowing down development of the Hawker 200 jet due to the uncertain state of the economy. CEO Bill Boisture indicated the program was not canceled, saying that the aircraft program is "well positioned to continue...when the time is right." The company also announced that it was looking for relief from payments on a US$182 million revolving line of credit, due to the general poor economic conditions and low sales of light jets. The company was close to defaulting, but Sam Goodyear, an analyst at CreditSights predicted that the lenders would rearrange the debt rather than force the company to liquidate, as their return in the prevailing market conditions would be poor.
In January 2012, the company's Beechcraft AT-6 lost out to Embraer's Tucano in a competition to supply 20 light attack jets to Afghanistan. This contract has since been cancelled due to mistakes in the paperwork and Hawker Beechcraft challenged the deal in court.
The company underwent management changes in February 2012, with CEO Bill Boisture becoming chairman of the company's operating subsidiary Hawker Beechcraft Corp. The board of directors named company turn-around expert Steve Miller as the new CEO.
In March 2012, the general media began carrying stories that the company would have to soon enter bankruptcy, even though the new CEO Miller had indicated he would work hard to avoid that. In February 2012 Miller had said, "My assignment is to figure out how to get through these financial headwinds without even having to think about Chapter 11 filing. Chapter 11 doesn’t do anybody any good. It’s usually not necessary." Some financial analysts indicated that with so much debt and low share prices that the owners, Onex and Goldman's share in the company may well now be zero. Some analysts indicated that bankruptcy was inevitable. Scott Chan, an analyst with Canaccord Genuity in Toronto stated, "Unless things turn around, this company could go bankrupt soon. Time is running out." Another analyst added, "I think everybody is pretty sure it’s when, not if."
On March 27, 2012, the company struck a deal for $120m of interim financing to give it time to recapitalize the company. Lenders holding about 70 percent of its bank debt agreed to waive covenants on that debt, and defer interest payments until June 29, 2012. The following day Reuters reported rumours that the company was negotiating a prearranged bankruptcy "within the next several weeks" to include debtor-in-possession (DIP) financing of less than $500M. On March 30, the company failed to pay interest on its secured credit facility, which Standard & Poors considered a "selective default" and on April 2 it failed to pay $28 million of interest on its unsecured and subordinated notes, which S&P rated as a full default. Hawker also reported that it had breached banking covenants and had failed to file its 10-K for 2011 on time because of problems with its internal financial reporting systems.
In April 2012, the company filed its delayed year-end report with the U.S. Securities and Exchange Commission. The filing stated that "management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern...Due to the fact that we have recurring negative cash flows from operations and recurring losses from operations, we will need to seek additional financing. There is substantial doubt that we will be able to obtain additional equity or debt financing on favorable terms, or at all, in order to have sufficient liquidity to meet our cash requirements for the next twelve months." The company reported that it had lost over US$1B in the previous two years, had US$2.3B in debt and had already missed some interest payments. The SEC filing also stated that the company might sell off assets and equity, renegotiate its debt and may have to enter Chapter 11 bankruptcy to resolve its problems. CEO Miller stated that the company will "decide on a path forward for Hawker Beechcraft that will include a plan that will put the company on firm financial footing and better position Hawker Beechcraft for the future."
On May 3, 2012, the company filed for Chapter 11 bankruptcy after having laid off 350 employees in late April.