Gloom deepens for US business jet manufacturers

By Stephen Trimble

The outlook for US-based business jet manufacturers is increasingly gloomy following a second wave of political attacks and layoffs in as many months.

In politics, Representative Barney Frank has proposed forcing bank executives to disown travel by private aircraft, such as business jets, if they are to qualify to receive a second round of bailout money. Similar restrictions were tied to last month's federal bailout for auto companies.

The new provision, revealed in The Hill newspaper, quickly prompted a storm of protest from a business jet community that was also targeted in December by the federal bailout of auto companies.

Franks' requirement would cause "irreparable damage to the American aircraft industry, an essential manufacturing sector that still has a positive trade balance", says Kansas governor Kathleen Sebelius, whose US state appears especially vulnerable to the sudden reversal of fortunes for the once-mighty business jet industry. In December, Wichita-based Cessna and Hawker Beechcraft announced layoffs of 665 and 500 workers, respectively.

Cessna announced a second wave of layoffs on 12 January, striking another 2,200 employees from the payroll as the company anticipates slower production. The combined losses represent about 20% of Cessna's total workforce. Cessna's revised production forecast will be announced during parent company Textron's annual earnings presentation, scheduled for 29 January.

Cessna says neither the layoffs nor the production slowdown will change the schedule for developing new products - the Citation Columbus large-cabin jet and the CJ4 light jet, earmarked for US certification in 2012 and later this year, respectively.

The US industry also faces other severe pressures from government regulators. Since 6 January, the Transportation Security Agency has launched a series of five public hearings on proposed new security rules. The TSA has proposed lowering the weight minimum of private aircraft that require security screening from 45,540kg (100,310lb) to 5,675kg - or anything larger than a CJ1.

Industry officials and private aircraft owners are concerned the rules would impose bureaucratic reporting requirements on an industry that trades on its reputation for privacy and flexibility.

US trade body, the General Aviation Manufacturers Association, is in the process of preparing an alternative security policy for TSA's consideration. Most importantly, GAMA wants to raise the minimum weight limit significantly higher than 5,675kg.

"There are a number of different things we do already to enhance security," says GAMA's vice-president of operations Jens Hannig,. "We should embrace what the industry is already doing instead of just creating a bureaucratic structure."

© Reed Business Information 2009

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