The aviation manufacturing industry in Kansas has been hit by the recession. But so far, employment in the idustry hasn’t fallen to the levels it reached after the 2001 terrorist attacks.
Overall, aviation manufacturing employment is down about 20 percent since November 2008. In 2001, aviation employment dropped 35 percent over the next three years.
Whether current employment will slip that much is uncertain, mostly because the downturn is still in its early stages.
“I’ll be surprised if we see that much,” said Stan Longhofer, director of the Center for Real Estate at Wichita State University . “But anything’s possible.”
The aviation industry is crucial in Wichita , where it employs one out of eight people. A downturn in aviation ripples out into the community.
Cuts in aircraft production hurt the scores of suppliers in the area, “companies that will now be laying people off,” said Keith Lawing, director of the Workforce Alliance.
It also affects non-aviation businesses, including retailers and restaurants, because there is less aviation payroll money in the community.
In the days after the terrorist attack, Boeing ( BA – news – people ) announced it was cutting 5,000 jobs in Wichita . In that downturn, the commercial airline market felt the pain first. Eventually, the slowing economy took its toll on the city’s general aviation planemakers, which followed with layoffs of their own.
In March 2001, 46,000 people were employed by aviation manufacturing; that fell to 30,000 by June 2004, a drop of 35 percent, before employment began to turn upward. About 4,000 of those jobs never came back.
Aviation manufacturing employment peaked in November 2008 at about 42,000 jobs. Since then, 8,212 jobs have been confirmed lost, according to the Workforce Alliance for South Central Kansas.
That includes 1,300 people at Cessna Aircraft, who were given 60-day layoff notices on Wednesday. Cessna said last week it would issue 60-day layoff notices to another 700 workers by mid-June, most of them in Wichita.
And Hawker Beechcraft is planning a third round of cuts, but hasn’t yet said how many jobs will be lost. Of the city’s largest manufacturers, Spirit AeroSystems is the only one not to announce layoffs.
A major Boeing supplier, Spirit has diversified its product base. Still, 80 percent of its work is tied to Boeing.
Analysts expect Boeing to reduce production of its popular 737 model and that could affect Spirit, which does major work on the program.
One analyst, however, says this economic downturn affecting the aviation industry is worse than the one after 9/11 because it is global in nature. In 2002 and 2003, India China, , and the Middle East were doing well economically.
“We were going to globalize our way out of the problem,” Teal Group analyst Richard Aboulafia said of the strategy following 9/11.
This time, it’s a global crisis, he said, and economies worldwide are suffering, closing off potential markets.
Of the aviation segments, the business jet market, which grew 17 percent each year over the past five years, has been hardest hit because it was the most vulnerable.
“Unfortunately, that kind of fast growth speaks to high volatility, which means a faster drop,” Aboulafia said.
In contrast, the jetliner market grew about 7 percent a year from 2003 to 2008.
“It was good, solid growth,” Aboulafia said. “That means you don’t have to worry about too quick a fall.”
http://www.forbes.com/feeds/ap/2009/05/03/ap6370875.html
Source: FORBES (ASSOCIATED PRESS)
Date: 2009-05-03