AIN Staff

Among other measures, manufacturers are increasingly looking to layoffs for cost-cutting as demand dwindles and aircraft production rates drop. Analysts and industry observers look for things to get worse before they get better.
In mid-January, Cessna chairman, president and CEO Jack Pelton announced that the Wichita-based OEM will lay off 2,000 workers by the end of next month. This is in addition to 665 layoffs in December (500 in Wichita and 165 in Bend, Ore.). The combined layoffs represent approximately 4.5 percent of Cessna’s workforce in Wichita and Independence.
Pelton attributed the layoffs to “a global economic environment that continues to worsen and has caused an adjustment to our 2009 production schedule.”
Cessna will initially offer employees a voluntary layoff program, and those identified for layoff would receive a 60-day notice in accordance with the Worker Adjustment and Retraining Notification Act.
The story is similar at Cessna’s Wichita-based competitor Hawker Beechcraft, which warned employees early last month of a planned reduction in the workforce. 
The letter from Hawker Beechcraft CEO Jim Schuster to workers did not say how many employees might lose their jobs. Schuster wrote, “The general aviation market has slowed; new orders have fallen off considerably; many existing orders have been terminated and used inventory has increased dramatically. Simply put, consumer demand for aircraft and services has declined precipitously.”
If there’s any question as to the downturn in aircraft demand, consider that on January 15, Executive Controller’s Online marketplace had listings for 23 Phenom 100 positions as well as 22 Cessna Mustang positions.
It was the second round of layoffs at Hawker Beechcraft since the economy started its nosedive. In October, a similar letter notified workers of pending layoffs totaling 500.
At Gulfstream, a spokesman said, “We have no plans for [workforce] reductions in our Savannah facility or any of our other large-cabin facilities.” He added that the company is looking at the effect of the current economic environment on its midsize cabin operations in Dallas and has let employees there know that layoffs are a possibility. “We have let some contract employees go and are looking at how to minimize impact on full-time employees,” he said.
Meanwhile, in Brazil, Embraer CEO Frederico Fleury Curado denied local press reports of plans to lay off 4,000 workers, approximately 20 percent of the total workforce, at the company’s plants near São Paulo. Last summer, Embraer released about 250 workers, but as a result of a consolidation of its organizational structure rather than in response to any economic stress.
At Bombardier, a spokeswoman said the Montreal-based OEM has made no announcements of layoffs and declined to discuss production schedules. While Bombardier is wearing a corporate smile, and competitor Gulfstream is expressing confidence, the fact is that the market for large-cabin aircraft such as the Globals and Gulfstreams is taking a hit.
According to Bill Quinn, founder and president of Aviation Management Systems of Portsmouth, N.H., as of January 13 there were 10 Global 5000s on the market, three of which were 2010 deliveries and another three for 2012. He also noted that with the growing inventory of used and new aircraft, prices have fallen dramatically. A Global 5000 that was selling for as much as $60 million is now as low as $45 million.
“A year ago, when the market was hot,” said Quinn, if a position came available, it would be scooped up in less than 30 days. Today, there are 17 G550s on the market; 14 of them are positions, and nobody’s waiting in line to buy them.”
In the past, some OEMs would speculate, building airplanes for which they didn’t have orders. “They wanted to keep the order book strong,” explained Quinn. “Now the inventories are building and the prices are coming down and they’re trying to avoid an aluminum overcast of unsold airplanes from crowding the ramps.”
As inventory levels rise, added Quinn, so will layoffs. But the OEMs are worried about losing talent and then having to ramp back up with the next economic upswing.
Quinn anticipates the present situation will bottom out late this year or “maybe in early 2010.” Or maybe not. He recalls going to a conference recently and listening to an economist expound on the market crisis. She admitted, said Quinn, “We don’t know what to do to correct it. But we do know that what we knew in the past isn’t going to work now.” &nbsp;&nbsp;&nbsp;

As demand declines, OEMs scale back production plans 

Among other measures, manufacturers are increasingly looking to layoffs for cost-cutting as demand dwindles and aircraft production rates drop.

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