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Wednesday, July 1, 2009

Bill Brown, President, Global Customer Service and Support, Hawker Beechcraft Corp.

AM: The economic downturn has reduced new aircraft sales. How has it affected Hawker Beechcraft’s support business?

Brown: The customer support segments have done well. First quarter 2009 compared to 2008, we actually sold probably two to three percent more hours. What’s really changed is the mix sold — not a lot of upgrades. It has been pure maintenance, keeping the aircraft up and serviceable and safe. The average MRO is probably down 20 to 40 percent on hours, so to be up two or three percent is significant.

AM: What unique benefits do you offer?

Brown: In a down economy, with aircraft losing value, having an OEM signature in a logbook creates more value. In addition, we’ve started MxPro, where we work with FlightSafety to give our employees advanced training [See story, page 8.] We’ve focused on turn time and asked our technicians to do things that probably aren’t fun, like work day shift one week and afternoons the next, to give us flow.

AM: Have you improved pricing?

Brown: We spent a great deal of time over the last two years, looking at the cost of everything we sell in RAPID [Rapid Aircraft Parts Inventory and Distribution]. In some cases, we changed our suppliers to get a lower cost. We’re doing things to entice the customer to come to our network and to RAPID for one-stop shopping, and we’re doing that through bundling.

AM: Do you see continued growth in your business?

Brown: I think the future will continue to be difficult. The marketplace has turned incredibly competitive. There’s pricing out there that’s borderline ridiculous. We’ve heard of $35/hour rates. You can’t cover your direct costs at $35. We haven’t had to price that way to get our work.

AM: Have you had layoffs?

Brown: Unfortunately, we’ve had some workers laid off, but we’ve also hired some. Tampa has been hiring this year. Here in Wichita [Kan.], we’ve hired about 10 mechanics. One area that got hit was Fulton County [Ga.] because NetJets is there, and NetJets’ flying is down. Our goal is to grow employment back up, and we’re seeing Fulton County bringing folks back.

AM: Tell us about your arrangement to support the Eclipse 500.

Brown: Eclipse customers called us and wanted to know if we’re interested in providing support. I’m talking about 260 owners who need modifications, avionics upgrades and to get their airplanes to the highest level of the current standard. Our network would be perfect; we’re coast to coast, north to south, and there are quite a few Eclipse 500s in the UK, so our Chester facility is a great location. For us it’s a huge win because we have 260 aircraft owners who will now use our service centers.

AM: You only plan to support the Eclipse 500?

Brown: We’re not interested in building [Eclipse] aircraft at Hawker Beechcraft. There’s an owner’s group that is, but we’re joined with the group that’s interested in maintaining the fielded aircraft. They will make an offer to buy the type certificate, which they will manage, and then they will license it to us to ensure that all the service bulletins get to the aircraft. Most of the service bulletins are already written. It’s just a matter of getting the material ordered and to the network for installation. It will take just a few months to get ready. We’ll probably hire mechanics [but] it won’t be a lot of people. We want to figure out the best place where the jobs can be done repetitively, so we don’t do one-offs. We’d like to pick a couple of strategically located centers, and we’ve asked for the Eclipse owners’ input as to where they will be located.

AM: How will this effort affect your bottom line?

Brown: It’s millions of dollars of total modifications out there. We’ll be the sole source for that. We’ve already worked out how we’ll price and sell it. We’re treating [Eclipse 500 operators] exactly the way we would treat our own customers.

AM: You have eight service centers in the U.S., one in Toluca, Mexico, and one in Chester, UK. Do you plan to expand your network?

Brown: Prior to the economic downturn, we had a couple of facilities that we were ready to launch. When the economy returns, we’ll probably go back to those. South America has great opportunity and maybe another one in Eastern Europe. Those are a couple of years away.

AM: What’s the status of your new Indianapolis facility?

Brown: It’s on track for a June opening. It’s a beautiful hangar — not one center support — and it’s about 70,000 square feet. Our mechanics, supervisors and general managers designed the facility. ‘Indy’ was our first prototype [hangar], and we’ve taken a lot of our expertise there and moved it to the Mesa facility.

AM: Will the Mesa, Ariz., facility be just like Indianapolis one?

Brown: Mesa is a different story. There was an empty hangar there that we’re adding on to. There will be two hangars, a smaller one for pistons and turboprops and a larger hangar focused on jets, and in the middle will be the back shops and office space. We have customers in the Mesa facility now. We’re shooting at having Phase 2 [the additions] completed in the January/February 2010 timeframe.

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