Cirrus and China, a Good News Story
The deal—being called a merger—that gives control of Cirrus to the big China Aviation Industry General Aircraft (CAIGA) company is now closed. And that’s the best news Cirrus and Cirrus airplane owners have had in some time
I know that it grates on many to see an industry—airplane manufacturing—that the U.S. has dominated for more than 60 years be sold to investors in another country. And China is particularly worrisome because its manufacturing base is growing so fast while ours is shrinking. But this is the best possible outcome available for Cirrus which was out of options.
Since the late 1970s it has been very difficult to sustain a business building piston airplanes. Sales volume is a fraction of what it was 30 years ago, and despite the high sticker prices, operating margins are thin.
Since 1980 Piper has passed through several changes in ownership. Mooney has been in and out of more financial restructurings that I can remember. The Commander piston twins and singles are out of production, as are the old American Aviation line of Yankees, Tigers and such. Beech pulled the plug on all of its many piston models except the A36 Bonanza and Baron 58 in the 1980s. Cessna abandoned piston airplane production for many years and only returned to building a few models after the laws changed to help reduce product liability. And does anybody remember the Bellanca Viking? Or the Aerostar? Or other out of production piston airplanes?
Clearly manufacturing piston airplanes, even for long established makers, is a tough business. But I think it is an essential business for the future of all of personal and business aviation. We need an entry point for new pilots and new airplane owners that is less costly and complex than the turbine airplanes that are doing relatively well, even in this lingering recession.
Cirrus has done a good job of attracting people to personal flying with stylish design, good marketing, innovations such as the whole airplane parachute, and being among the first to offer advanced glass cockpits. But as a single product company with no higher margin turbine airplanes in the lineup, Cirrus was in a difficult position after the global market collapse in 2008. Without an infusion of new capital the company could not continue to develop the new versions of its existing airplanes, or new models such as its single-engine jet, that it must have to survive.
The Chinese were the only ones to take the investment risk with Cirrus. Yes, I’m sure that CAIGA has plans to adopt some or all of Cirrus design and manufacturing experience to build airplanes in China. So what? I want as many Chinese people to be able to fly as possible. This is not a zero sum game. Cirrus and U.S.-based airplane owners and pilots benefit from investment made in Cirrus no matter where the money comes from.
The manufacturing of turbine powered personal and business airplanes has long been spread around the world. The enduring Hawker 125 series of business jet airframes has been built in England since the 1960s, and still is. Falcons come from France. Challengers and Globals come from Canada, with major components being built in a variety of countries, including Northern Ireland. Westwinds, Astras, and now Gulfstream 150 and 200 airframes are built in Israel. The fast turboprop Avanti is built in Italy. The turboprop singles TBM 850 come from France and the Pilatus PC-12 from Switzerland. And Embraer from Brazil is growing a very competitive line of business jets built in Brazil.
Even though the airframes I mention, and some I left out, are built in other countries, all of them have huge amounts of U.S. made content. Many models trace more than half of their total bill of materials to U.S. companies because the avionics and often engines are made here. And Falcons, PC-12s and others are completed here, and Hawker Beech takes the basic airframe of the 800 series from England and builds it into a complete jet in Wichita. There is no turbine airplane that I know of with all components and labor coming from a single country.
Now it’s time to understand and accept that piston airplane manufacturing also needs to be part of a worldwide effort. The U.S. can no longer be the sole source for airplanes, or the engines and major components required. And the U.S. clearly can no longer be the only source of investment needed to fund airplane development and manufacturing.
The ownership change at Cirrus is another step in the evolution of a global economy. I join many others in remembering the “good old days” fondly when the U.S. dominated the world—particularly in all things aviation—but change is unavoidable. So I view the new investment at Cirrus as an exciting opportunity, not a loss. The loss would have come if no investor had been willing to take a risk in piston airplane business.