China vs. the American Dream
When Leland Snow died a couple of weeks ago a chapter of a great American aviation and business story closed. What makes it so great is that it isn't the final chapter. The story continues and, with any luck, the theme will remain the same.
Snow was the founder of Air Tractor. He built his first purpose-built cropduster when he was just 23 and when he died at the age of 80, while jogging, on Feb. 20 he was still the much-loved president of the vigorous company he founded almost 40 years ago. Two years before his death, he essentially turned the company over to its employees through an employee stock ownership program that will keep the company in Olney, Texas for longer than most of us will have to worry about.
By all accounts, Snow was the American Dream personified and I think it's the image we have in our minds when we think of the term Made in the U.S.A. I also think it's that romantic notion (why does that adjective always come up in relation to aviation?) that is responsible for the vacant feeling that has settled over the industry now that the long-suspected sale of Cirrus to a government-owned aviation company in China has been confirmed. The hometown newspaper, the Duluth News-Tribune, called it "a sinking feeling of impending loss." Assuming the Chinese do any of the things they're promising, the sale is probably the best thing that could happen, under the circumstances. So, why the emptiness?
For one thing, Cirrus embodied that American Dream in its early days. The Klapmeiers were brash, brilliant and, although it took some time for people to realize it, right about most of the things they did and said. The truth is, however, that Cirrus has not really been an American company for most of its life. The Klapmeiers realized early that they needed big money to create the aviation renaissance they believed was possible and I'm sure they would have liked nothing more than to find home-grown financing for their dream. In the end, they found the money in Bahrain and as long as times were good it was a mostly amicable partnership from what I could see. It's worth noting that while Cirrus was at its peak, it was also for sale. and for a time, one of its main competitors, an American company, was seriously considering buying it and didn't. Whether that company will regret that decision might make interesting dinner conversation at some point in the future.
There's no need to go through the uncomfortable events of the last few years at Cirrus. Although the sale of the company may be sad in some respects, it pales in comparison to the effect the events preceding it had on families and life-long friends. That's the real tragedy here. But business is business and after we fold up the flags and wipe away the tears, we're left with trying to figure out just what the Chinese are up to here. So far Aviation Industry Corporation of China (AVIC) or its subsidiary China Aviation Industry General Aircraft Co. (CAIGA) has bought Cirrus. Continental Motors, Epic Aircraft, is reportedly in talks with bankrupt Emivest (formerly Sino Swearingen) and is even rumored to be talking to Mooney.
At first blush, it seems like a tidy assortment of companies covering piston, turboprop and jet products that look like the basis of a GA aircraft industry. But while Cirrus and Continental are as solid as aviation companies can be in these economic times, the others seem a little less attractive.
Emivest's SJ30 is a fast and generally well regarded little jet but it would be right in the middle of an eye-gouging, groin-kicking battle for market share with Embraer, Cessna and Hawker Beechcraft in the segment of the industry that is having the most trouble selling airplanes. Even if CAIGA spends next to nothing for Emivest, the odds of it becoming a player in the bottom end of the bizjet market seem remote. CAIGA picked up Epic for a song at $4.3 million but, thanks to a court-ordered shotgun marriage with kit owners who were sitting on unfinished airplanes when Epic went down, CAIGA doesn't call the tune in North America, at least. Also, there's a long road to certification for all the products covered by the Epic deal (homebuilts haven't really caught on in China) and the money waiting to be spent is enormous. Much as everyone loves Mooney, the company has been pushed to the brink by the latest troubles and its products are direct competition for Cirrus. It doesn't seem to make sense to spend money trying to revive the iconic brand for the Nth time when it will go head to head with the flagship airplanes.
Rather than a cohesive and well structured set of acquisitions, this looks like a Lego set. It's interesting, colorful and the pieces all sort of fit together but the result doesn't look quite real. In my mind, it leaves a few possible explanations.
The first is the much-vaunted "master plan" theory in which the Chinese quest for world domination will be accomplished economically and it's coming after our most coveted assets. In that scenario each of these purchases fills a particular need for China to build a world-beating GA industry that will eventually snuff out all other forms of aviation life. There are some serious issues with that theory, however. For one, to take advantage of the purchases, China has some serious spending to do on runways, airways and all the other stuff that keep an aviation industry running. Why build airplanes when there are few places they can be used at home? True, the rules are relaxing and an embryonic GA industry exists but buying up foreign factories seems to me like putting the cart before the horse.
Another is that ancient Chinese wisdom doesn't apply here; that when it comes to airplanes, Chinese brains turn to mush just like those in the rest of the world and with all their money they just couldn't resist. Although it's widely assumed that because the Chinese are loaded they are inscrutable business people, our limited research reveals they've bought into their share of clinkers. Is Cirrus just the latest shiny object to provoke an impulse buy?
A third possibility is that this is the natural order of things. For all its wealth, China is an emerging economy and it flat out needs indigenous industries that it doesn't now have to catch up to the West, which may or may not be the goal. Something that seems likely is that the government of China has decided it needs a small airplane industry. It could build that industry on its own but when companies like Cirrus and the others are going for pennies on the dollar why would it bother?
We who are smitten by the magic of flight are used to thinking of it as cutting edge but it isn't really. There isn't much we don't know about how to make aircraft that can do whatever we want them to do within certain physical boundaries and we can do it without pilots for the most part. In the meantime, social benefits notwithstanding, there's big money to be made curing cancer or Alzheimer Disease, saving the planet and growing hair on bald heads. Investors look for return and return comes from discovery and innovation. All we're really doing in aviation these days is tweaking it and most of the innovation is on the tech side. In the meantime, the U.S. is at the forefront of medical research, technology and even transportation innovations that have nothing to do with small airplanes that owners fly themselves. Time moves on.
Chinese participation in the aviation industry isn't necessarily a bad thing and the folks in Duluth and Grand Forks could have suffered a worse fate. In the absence of a sale, bankruptcy was a real possibility for Cirrus and it might have been hard for a trustee to justify operating the business with the numbers it was showing. As for where it leaves current Cirrus owners and those thinking of buying one, the sale is probably a positive thing. As seems to be the norm with airplane factory sales, the new owners will likely put some money into the company, maybe finish the jet, maybe develop some new models. Product support for the existing and future fleet seems likely.
This doesn't signal the beginning of the end of the U.S. general aviation industry by any stretch. General aviation is forecast to grow in importance and activity. But the actual physical construction of airframes may happen anywhere in the world, using technology and innovation developed in the good old U.S.A. and seeding development in countries that are looking for productive futures for their people.The sale of these companies to other countries isn't the end of the world. For some places, maybe it's just the beginning.