Hawker Beechcraft Corp., the private- aircraft manufacturer owned by Goldman Sachs Group Inc. (GS) and Onex Corp. (OCX), said it’s in negotiations about a joint venture that could lead to the production of planes in China.
The U.S. company has been in talks since January over a deal that may ultimately see it transfer technology to win a bigger slice of sales in the fastest growing major economy, Chief Executive Officer Bill Boisture said in an interview.
“I’ve been there three times since the first of the year and there are serious discussions about potential joint ventures,” Boisture said. While there are “real possibilities,” talks are at an early stage and a deal may initially focus on joint sales, followed by production of parts and then final assembly “over the next 10 years,” the executive said in London.
China probably has more than 400 dollar billionaires and 55,000 individuals worth at least $15 million, according to the Hurun Rich List. That wealth is likely to stimulate demand for 600 corporate jets in the country through 2019, according to Bombardier Inc. (BBD/B), the world’s biggest maker of business aircraft.
Hawker Beechcraft’s planned move into China could involve the Wichita, Kansas-based company ceding intellectual property to a local partner, most likely via Aviation Industry Corp. of China, the country’s biggest aerospace company, Boisture said.
There is “always” going to be lots of discussion on exactly what technology can be given up, the executive said, especially since the company is more used to expertise flowing its way.
“We’ve imported the Hawker product from England to a large North American market and we imported the Mitsubishi product from Japan that became the Hawker 400,” he said. “So we’ve done the process in reverse and have that learning behind us.”
China could contribute 20 percent of Hawker Beechcraft’s sales within two decades as the economy grows and the state funds more airports with business-aircraft facilities after previously focusing on accommodating larger commercial planes.
A venture is most likely to focus on the company’s jet models, such as the twin-engine Hawker 900XP, an 11-seater which cruises at more than 500 miles (805 kilometers) per hour and recorded 28 sales last year. Its most popular plane is the 360- mph Beechcraft King Air turboprop, with 114 sales in 2010.
About 40 percent of group sales are to public and private businesses, Boisture said, with upwards of 35 percent to wealthy individuals and the rest to governments.
Hawker Beechcraft, bought by Goldman and Onex for $3.3 billion in 2006, with each owning 49 percent stakes, also aims to spur sales in China, India, Russia, the Middle East and Africa by adapting models to local fashion, Boisture said.
Interiors will be crafted to feature grays, blues and burnished aluminum rather than the heavy woods, thick carpet and gold trimmings favored by North American customers, he said.
The next step will be to make its aircraft easier to fly, reflecting a lack of highly trained pilots in emerging markets. Work on simplified avionics is under way with Rockwell Collins Inc. (COL), Honeywell International Inc. (HON) and Garmin Ltd. (GRMN), he said.
“We have to pay attention to design and simplification of the product,” he said. “You’re going to see flat-screen displays and intuitive icons to get across the language barrier.”
Hawker Beechcraft’s management holds a 2 percent stake in the company, which has sites in Little Rock, Arkansas, Chihuahua in Mexico and Chester in the U.K., as well as Wichita and Salina in Kansas, with the latter facility earmarked for closure.
Low prices for used aircraft are continuing to hurt sales of the latest models, Boisture said, with planes less than five years old selling for 25 percent below the cost of new ones.
“We’re looking for a return to a positive pricing environment in 2012,” he said. “Once we see firmness in pricing we’ll see some scarcity and we can improve volumes. It will take most of 2012, if the forecasters are right.”
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