White Collar Reset: We're not in Kansas anymore
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I don't know why I was surprised. All those taxpayers and investors who recently came to view the corporate jet as the symbol of all that was wrong with this country have gotten their wish: the general aviation industry has gone into a precipitous nose dive. Two weeks ago, the General Aviation Manufacturers Association released its latest industry sales figures. First and second quarter shipments of new private aircraft produced in the U.S. are off 46 percent. Cessna, the leader in the small-to-mid-size jets that were the workhorses of the nation's business aviation fleet is on pace for more cancellations of orders in 2009 than actual orders.
Last October -- right around the time that the company was flying a new plane for my magazine out to L.A. for a cover shoot with Craig Ferguson -- Cessna's payroll stood at nearly 16,000. Today, fewer than 8,000 work for the 82-year-old manufacturer. The situation is only marginally better at Hawker Beechcraft, Learjet, Boeing and the dozens of suppliers and tool shops that also make their homes in Wichita, a city so closely tied to the aircraft industry that its nickname is the "Air Capital." It's estimated that one out of every eight jobs in this tidy, tight-knit Plains city of 300,000 is aviation-related. Last year that amounted to roughly 40,000 jobs. The figure is now thought to be closer to 30,000, and Hawker Beech recently announced that another sizable round of cuts is due any day.
Personally, I'm not cheering these developments. Admittedly, editing a magazine for the users of $20 million modes of private transport capable of consuming 500 gallons of fuel per hour wasn't the most socially responsible gig I ever had. Still, it had its moments (like every other week when my checking account actually filled with some dollars). Besides, I'm of the belief that many of the people who complain most loudly about the inequities and environmental impact of private aviation are the same people who'd be the first out of the TSA line to hitch a ride in the leather and burl-mahogany cabin of a 12-passenger Mach .92 Cessna Citation X. As no less an authority than Oprah put it in her commencement address at Duke University in May, "It's great to have a private jet. Anyone that tells you that having your own private jet isn't great is lying to you."
There's also this matter of the jobs that have been lost. And not just any jobs either. Mine, sure, but also thousands of highly skilled, well-paying manufacturing jobs in one of the few heavy industries where we haven't had our lunch handed to us by the Chinese.
After several passes through my address book, I gave up and called Molly McMillin, the longtime aviation reporter for The Wichita Eagle. McMillin, who also writes the Air Capital Insider blog, is a Wichita native and has seen her share of general aviation busts, but none quite like this. "Everyone knows people who have been affected," she said. "I talked to one woman who had four people in her family lose their jobs. The city is actually a little more diversified than it was, say, in 1980s, but, on the other hand, these jobs have been lost so suddenly, I think we're just starting to experience the ripple effects. Already the number of people showing up at the Lord's Diner, the main free meals service in town, is way up, and the other social services are all starting to feel the strain."
The layoffs, she says, have been almost as trying on the managers carrying them out. Cessna CEO Jack Pelton is well known in the industry as a common touch, an avid pilot who's a frequent fixture at the pancake breakfast fly-ins, air shows and other aviation-related activities that mark civic life in and around the Air Capital. "I've talked to him about it and it really bothers him," said McMillin. "And it could have been worse. I remember being on conference calls last year with analysts who were frustrated with the backlog of orders. They kept saying, 'Well, why can't you just add capacity and produce more?' His response was, 'We will when we know we can sustain it.'"
As McMillin talked, I, too, remembered discussions with industry people last year. There was a feeling at the time that the sector had moved beyond its feast-or-famine culture. Commercial airline service had deteriorated to such an extent that it was hard to imagine businesses and wealthy individuals ever going back. If ever the domestic market ebbed, it was thought the enormous expansion of wealth in places like Russia and China would cushion the blow to U.S. manufacturers. Surely, the whole world would never fall apart at once.
When the financial markets crashed last fall, most of those arguments turned out to be wishful thinking. Even so, the industry might have escaped with just one of its typical downdrafts if the heads of the Big Three automakers hadn't had the bright idea to fly their corporate jets to their Congressional bailout hearings. As if Detroit hadn't done enough to foul its own nest, in that one November nightmare PR scenario, it crapped all over Wichita, too. Flying privately was no longer a luxury or corporate time-saver subject to the usual business cycles -- in the eyes of many Americans, it became something almost more akin to dog fighting or driving a Hummer.
Eventually, the economy will heal, and the very rich (as the figures released last week by University of California professor Emmanuel Saez suggest) will soon be back to spending more of their vast fortunes and corporations will start looking for ways to extend the reach of key earners. How long it takes for the private jet stigma to wear off, though, is anyone's guess.
"Let's just say no one is willing to call bottom yet," said McMillin. "Most of the analysts I talk to are saying that deliveries will probably be worse in 2010 than '09 and that things will probably start to improve in 2011. What are people who lost their jobs going to do in the meantime? That's a good question. A lot of these people have very special skills. They're sheet metal mechanics or plant supervisors who have been doing this for the past 10 or 15 years. I'm not sure what they do now." Sounds like some other people I know.