Plane Conversations

This past week I had the privilege of taking a tour of the Hawker Beechcraft factory and corporate headquarters in Wichita Kansas.

The tour started at our home base in Tennessee with a flight to Wichita on a new Hawker 4000. The aircraft is impressive and I will post soon with video and more information on this new generation, state of the art, mid size business jet.

Our company has operated Beechcraft King Airs for over 25 years, and much of my flying time is logged in various Barons and Bonanzas, so I have been a fan of Beechcraft for a long time.

The King Air series aircraft are without argument the most successful turboprop ever built with a production run spanning 5 decades.

The King Air C90GTX / B200GT / 350I series aircraft are still in production for civilian and military applications. All are evolved from the original King Air that first rolled of the line in 1965.   

Hawker Beech’s jet aircraft in production include the Hawker 4000, Hawker 900XP,  Hawker 750, Hawker 400XP and the Premier 1A/II. The Hawker 750 and 900 series aircraft are evolutions of the original Hawker jets manufactured in the UK and are the best selling series of business jets in the world.   

Hawker Beech also manufacturers variations of the military T-6 trainer, which is the primary trainer for both the navy and air force pilot programs.

The Beech Baron G58 twin engine and Bonanza G36 single engine piston aircraft round out the line of aircraft in production.     

Arriving to the factory at Hawker Beech’s airport in Wichita, our first stop was the delivery hangar, where new aircraft were in the final stage of delivery to the new owners.  There is a large American flag on one wall, prominently displayed as reminder that these aircraft going all over the world are made in America.

Wichita is the number one city for growing exports and Hawker Beech plays a big part. The percentage of aircraft exported now exceeds the percentage staying in the US and this will continue to increase as the demand for business aircraft worldwide grows faster than in the US.

One of the things that interests me most is innovation in our business and Hawker Beechcraft has done that with their new Hawker 4000. The Hawker 4000 has a   composite fuselage and uses composites in combination with traditional metal structures in other areas of the airframe. Composites are lighter but stronger than metal structure allowing savings in weight and increases in fuel efficiency and performance, as well as reduced maintenance costs.

Use of composites in aircraft sturctures is here to stay as evidenced by the Boeing 787 having a composite fuselage.

What impressed me most from the whole tour is the sense of pride emanating from the employees, from the senior management to the people on the floor. These people are proud of what they make and should rightly be proud of the 75 plus year legacy of excellence in aircraft manufacturing.

A lot has been said about the competitiveness of the US aircraft manufacturing industry in the global market.

A current issue that Hawker Beech has to deal with is to what degree they move production out of the US to save costs. The unions in Wichita are fighting for the jobs to remain US and the decisions will be difficult. Hawker Beech must remain price competitive and at the same time they cannot afford to lose the skill and aggregated knowledge of the workforce in Wichita. 

There is a positive and determined corporate culture that I admire with the leadership and employees at Hawker Beech. That will keep them in the competitive game of aircraft manufacturing well into the future.

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As I’ve mentioned before, my father is a forester and he has always said that there are no better conservationists than his colleagues.  If they don’t take care to preserve the natural resources, foresters work themselves right out of a job.  If you harvest a tree, you plant one in its place, keeping the supply renewed and the resource in balance.  Compared with this “if you use it, you replace it” philosophy, buying carbon credits has the feel of hiring a penitent.  In theory, environmental or moral transgressions are atoned.  And, while I suppose hiring someone to offset one’s carbon footprint is better than doing nothing, that emperor still appears naked to me. 

The transportation industry, in general, and the aviation industry, in particular, has an enormous carbon footprint.  For years, the industry has sought to reduce costs by increasing fuel efficiency, enjoying reduced emissions more as a happy by-product than an actual goal.  Recently, however, there has been something of an ideology shift.  I don’t know that anyone is willing to increase costs to decrease emissions, but certainly, more players in the industry are willing to see cleaner burning, sustainable fuel as a goal in itself.  The shift from “wouldn’t it be nice if” to “how can we do this” can be seen in the developing partnerships.  These aren’t mad scientists cooking up fuels in their garages.  These are Boeing, British Airways, Rolls-Royce developing fuels or partnering with visionary companies like Solena, Solazyme and Honeywell’s UOP.  Big money and big aviation experience are teaming up with big innovation to do something good for both our industry and our planet.  We use  fuel resources and air; and, we are nearing a time when we can renew the one resource while lowering pollutants in the other.  It’s no wonder excitement is growing. 

Flightglobal reports that at the recent air show in Farnborough, England, Richard Altman, executive director of the Commercial Aviation Alternative Fuels Initiative went so far as to say that current technologies “can contribute on a significant level to achieving carbon neutral growth – it’s happening and it’s happening now.”  And it’s happening from different sources.  On March 25, 2010, a United States Air Force A-10 flew its first flight using a blend of conventional JP-8 jet fuel and biomass fuel derived from the camelina plant, like those fuels produced by Alt-Air and Sustainable Oils.  As we discussed on 26 May, Brazil has a dynamic bio-fuels industry currently based on ethanol production from sugar cane. Darpa and others are closing in on an economical process to produce jet fuel from algae.  And Honeywell’s Green Jet Fuel (a blend of fuels from algae and used cooking oil) was used in the first biofuel-powered helicopter flight by the Royal Netherlands Air Force in June. 

The majority of news reports in the United States for the past three months have been stories on the catastrophic oil rig explosion and subsequent spill in the Gulf of Mexico.  China saw a Yellow Sea oil spill of nearly 28 million gallons around the same time.  As I watched those reports, I kept thinking of the progress in bio-fuel production.  Imagine how algal fuel production would eliminate the possibility of such a disaster – how months of clean-up and decontamination could be replaced by a flock of ducks.  Now, you’re really talking carbon neutral and that emperor’s new clothes look good.

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Expected is what has always been and is.

Unexpected is what has never been, but if done, changes the entire market.

Our industry tends to operate in the realm of the expected. We expect business aviation to be expensive relative to other forms of air travel, and so it is. Have you ever heard the saying “if you have to ask about the price you can’t afford it”? When you get to a certain level in business aviation that saying applies in some mindsets.  

We assume that the market is limited by serving the upper echelon of business travelers and the elite celebrities who place the highest value on their time and privacy.

We project demand based on expected models of utilization of business aviation that are tied to the current expected demographic of the user.

Aircraft manufacturers spend billions developing aircraft and then set production levels for that “expected” demand, and seemingly don’t spend much time or money on disruptive innovation models of how their product might be used.

Introduce a recession like we have just experienced and throw the demand models out the window with the expectation that maybe it will get better in a few years.   

So how do we create the unexpected with disruptive innovation that changes the market.

It is done every day in other industries and it has even been done in the airline industry, which is not well known for positive innovation these days.

Almost 40 years ago a little airline in Texas called Southwest took on the legacy carriers with a new model that profitably delivered the seat at a cost to consumers that no one else could emulate for a long time. By doing so they changed the way people travel. They didn’t just take customers from their airline competition. They created a whole new market of air travelers who had been driving or taking the bus. And they did it, and still do it, with the same Boeing 737 that other airlines were using?  

In the 1980’s a guy running an aviation company in Ohio came up with a new idea about selling fractions of jet aircraft to increase the market of jet owners. He succeeded to the point that Warren Buffett bought his business. And in doing so he brought literally thousands of new users into the world of business aviation. 

In both cases it was the same hardware (aircraft) everyone was using but the innovative business model that made the difference. 

Who would have ever expected that Apple would sell 100 million iPhones or millions of a new computing devise called an iPad in a matter of months? Apple doesn’t follow, they lead, and they do so with disruptive innovation. Everyone else follows.

So if we want to continue in an industry with little or no growth, we can keep up with the expected models of business. Or we can do the unexpected and come up with innovation that disrupts the way travel is done with business and private aircraft and create a whole new market.

Is it worth thinking about?

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In 1907, Dr. Heinrich Koppers built the first ovens to recover byproducts from coke used in steel production.  In 1930, the Koppers Company began treating wood with the byproduct creosote and their forest products division was born.  My father worked for that company; so, I was fascinated that telephone pole and railroad cross-tie production got their starts from the steel industry.  Nearly 75 years later, Jason Fried and David Heinemeier Hansson of the Chicago-based software company 37signals have just published Rework, a book outlining how that same concept  has made their business an international success.

In their book, the authors assert that every business creates some kind of byproduct - that it’s impossible to make just one thing.  They encourage businesses to look for those byproducts and to see them as new opportunities.  Their first byproduct was a software program built for internal use which became a popular commercial product.  For private aircraft charters, our largest byproducts are empty legs and empty seats. 

How do we take those and turn them into commercial products?

There are any number of services out there that will list a carrier’s empty legs and offer them up for public sale; however, as most charter operators will tell you, matching an available empty leg to a flight request is quite a trick.  Because the percentage of matches is so low, for many years, operators simply ignored the byproduct altogether.  The emergence of the charter broker changed that.  Brokers saw the potential of empty legs and worked hard to find ones that matched their clients’ requests, sometimes to the frustration of charter operators.  Many operators resisted the trend and, to this day, many view it unfavorably; however, the fact is, that because brokers aggressively sold this byproduct long ignored by operators, the market base for private aircraft charter has grown.

While many charter “purists” would like to put the genie back into the bottle, I don’t really see that happening.  What we have to do now is harness the genie’s potential.

Sure, we list our available empty legs on sites like CharterX and Avinode.  I even have a growing group of travelers who have asked to receive twice-weekly emails from me, outlining what we have available.  And, from time to time, one of those travelers is able to take advantage of an empty leg.  I love it when it works out, but the reality is that it infrequently does.  All of these postings, lists, emails, etc., sound like a really great idea; so, why don’t they work better?  Are we not listing in the best places?  Are there too few participants?  Or, is the problem that the whole system is driven from the supply side?

What if the answer to successfully selling our byproducts is to revolutionize our thinking and let it be driven from the market side?  What if we turned our byproducts into our products?

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