Raytheon Aircraft Holdings Inc. History

Address:

9079 East Central
Wichita, Kansas 67206
U.S.A.

Telephone: (316) 676-7111
Fax: (316) 676-8867

Wholly-Owned Subsidiary of Raytheon Company
Incorporated: 1994 as Raytheon Aircraft Co.
Employees: 18,000
Sales: $3.22 billion (2000)
NAIC: 336411 Aircraft Manufacturing; 54171 Research and Development in the Physical, Engineering, and Life Sciences

Company Perspectives:

Any time, any place. That's the philosophy of Raytheon Aircraft. We offer a complete line of aviation solutions. If it deals with business aircraft, we provide it.

Key Dates:

1980:: Beech becomes a subsidiary of Raytheon.
1986:: Beech enters jet business through purchase of Mitsubishi Aircraft International.
1990:: U.S. Air Force chooses Beechjets to train tanker pilots.
1993:: Raytheon buys BAe's line of Hawker business jets.
1994:: Beech and Raytheon Corporate Jets merged into Raytheon Aircraft Company.
1996:: Raytheon Aircraft posts record sales.
2000:: Raytheon Aircraft again posts record sales as divestment rumors abound.
2001:: Nearly 1700 jobs are cut as economy slows.

Company History:

Raytheon Aircraft Holdings Inc. owns the Raytheon Aircraft Company and related enterprises. Raytheon Aircraft includes Beech Aircraft and Hawker corporate jets. Beech is known for its popular King Air series of business turboprops and the piston-powered A36 Bonzanza, of which more than 3,000 examples have been built. Beech also produces a small jet transport for civil and military use, and the 1900 series of regional turboprop airliners. Hawker's well regarded jets include the Horizon, 800XP, and Premier I. Raytheon Aircraft aims to shift more of its production to jets in the coming years. It has led the industry in switching from aluminum to composite construction. Its Starship, though a commercial flop, was the first all-composite business aircraft certified by the FAA. Based in Wichita, Kansas, Raytheon Aircraft has plants in eleven US states.

Buying Beech in 1980

Beech Aircraft Corporation, one the best known producers of propeller-driven aircraft in the United States, became a subsidiary of Raytheon Company in February 1980. Raytheon traded about $800 million worth of stock for Beech, whose line of market-leading planes included the twin-engine Baron, the King Air turboprop, and the single-engine Bonanza.

Beech brought nearly 11,000 workers into the company, which employed 78,000 around the world. It had earned $43 million on 1979 sales of $626 million, compared to Raytheon's $197 million profit on sales of $3.7 billion.

Raytheon's takeover of Beech was mirrored elsewhere in the industry. By 1985, when General Dynamics Corp. bought Cessna Aircraft Co. and Chrysler Corp. bought Gulfstream Aerospace Corp., all U.S. business aircraft manufacturers were owned by larger, stronger corporations. The rising cost of developing new aircraft was one reason why, new Beech CEO James Walsh told Industry Week in 1986.

Sales for both Raytheon and its new Beech Aircraft unit slid in the next few years. In 1984, Beech laid off 500 workers at plants in Kansas, Alabama, and Colorado. The entire business jet industry would only sell 239 new planes in 1985 as older planes were remaining in service for decades. Sales of Beech's propeller-driven offerings were also suffering due to rising product liability premiums and impending tax reforms, noted Industry Week.

These last two conditions proved so troubling for the aircraft manufacturers that Cessna had all but stopped producing the piston-engine planes that had made it famous. Beech, which was spending $20 million a year to insure against product liability claims, diversified into jet aircraft after acquiring Mitsubishi Aircraft International. Its Beechjet had formerly been named the Misubishi Diamond II.

Unfortunately, the lower end of the business jet market was becoming overcrowded. Besides segment leaders Cessna and Learjet, Beech faced competition from a number of overseas firms such as British Aerospace and France's Dassault.

Beech had already dominated the turboprop market with its King Air series. These planes used a jet engine to turn a propeller, allowing them to outperform piston engine planes while using considerably less fuel than pure jet aircraft. While weathering new competition from Piper Aircraft, which was plugging its new $2.8 million Cheyenne 400LS with ads featuring famed test pilot Chuck Yeager, Beech was developing a radical new composite design featuring a canard wing and pusher propellers that would sell (or not sell) for more than $3 million a plane. Beech eventually spent $500 million to develop the Starship.

After three years of dismal sales for both Beech and its parent, 1988 brought something of a turnaround. Raytheon reported record sales ($8.2 billion) and earnings ($489.6 million) while Beech's sales rose 35 percent to $948.3 million. In 1989, profits for the Aircraft Products segment rose more than 40 percent to $44 million on sales approaching $900 million.

Beech Aircraft had produced primarily commercial aircraft until it teamed with McDonnell Douglas and Quintron to win an Air Force contract for a tanker transport pilot trainer in February 1990. Beech's share of the contract, for delivery of up to 211 Beechjets, had a potential to be worth $1 billion over six years. In addition, noted Barron's, the military contract spurred additional commercial sales of the Beechjet, as well as military sales to other nations. As a result of the contract, Beech planned to double the size of its Kansas facilities.

The first Starship turboprops were not delivered until March 1990. In spite of the advanced avionics, stable design, and smooth ride, they did not sell well.

Buying British in 1993

Along with rival Dassault, Raytheon made a bid for Cessna after it went up for sale in October 1991. Raytheon was considering whether to enter the medium to heavy corporate jet business. It did so not through the August 1993 purchase of Cessna, but by acquiring Corporate Jets, Inc., a unit of British Aerospace PLC with operations in Wales (U.K.) and Arkansas, for $273 million (£250 million). The company, which manufactured the Hawker 800 and Hawker 1000 business jets (also known by the names BAe 800 and BAe 1000)--the best-selling mid-sized jets in history--was renamed Raytheon Corporate Jets.

The sale of these operations and the subsequent closure of the UK plants drew protests. After the eventual removal of Hawker production to Wichita, Kansas, there would be no business jet manufacturers left in England. Yet Hawker Siddeley was one of the most beloved names in British aviation; its famed Hurricanes had defended the country during the Battle of Britain, and the original company had been founded by no less an aerospace icon than Tommy Sopwith.

Raytheon Aircraft Products Group, which comprised Beech and Raytheon Corporate Jets, announced sales of $1.47 billion for 1993, producing segment income of $182 million. The two units were merged in September 1994 to form Raytheon Aircraft Company. The restructuring trimmed 940 workers in the U.S. and UK from the payroll. Former United Technologies Corp. executive Arthur E. Wegner, who had succeeded Max E. Bleck as Beech Aircraft CEO in July 1993, was picked to lead the newly merged entity.

With the power of strong brands like Beech and Hawker, Raytheon Aircraft was accustomed to leading the market segments in which it participated. Yet the market was toughening, noted Britain's Financial Times, as executive jets came to be widely perceived as a high-dollar perk rather than an essential corporate tool.

On account of poor sales, Raytheon Aircraft cancelled the Starship turboprop program in December 1994 after building 50 of the planes. In 1995, Raytheon Aircraft implemented a $30 million modernization program at its Wichita facilities as it relocated Hawker production there. In the middle of the year, Beech won a $7 billion contract to build trainers for the U.S. military in collaboration with Pilatus Aircraft Ltd., a Swiss company specializing in high-performance turboprops. The JPATS (Joint Primary Aircraft Training System) contract called for Beech to build 711 PC-9 MKII planes in the next 20 years as the Air Force and Navy began training student pilots together. Later in the year, Raytheon Aircraft won a contract to supply the Pentagon with 103 drones (very small unmanned aircraft) and spares worth $30 million for use in air defense training.

By 1996, Raytheon was marketing an improved version of the Hawker 800. The company had taken the BAe 1000/Hawker 1000 out of production as it redesigned that model. The slightly larger plane that would replace it, the Hawker Horizon, bore only a superficial resemblance and would not begin deliveries until 2001, later pushed back to 2003. Raytheon was able to price the Horizon at $14.5 million fully equipped (later raised to $17 million), relatively low for its category, due to the implementation of low-cost manufacturing techniques and composite materials, which allowed for a reduced number of parts. Raytheon contracted out the wing construction to Japan's Fuji Heavy Industries.

The year 1996 turned out to be a banner year. Raytheon Aircraft sales increased 15 percent to $2.3 billion; income showed a similar increase to $284 million (later reported as $181 million). Deliveries in most categories were up, though the company began to wind down production of its 19-seat Beech 1900D regional airliner, essentially a larger version of the King Air turboprop, as U.S. airlines replaced them with regional jets. Sales to foreign airlines later revived this program, however.

The company sold 480 civilian planes and another 51 military trainer derivatives of its Beechjet in 1996. The company's comprehensive restructuring continued with the aim of reducing the seven to ten years it took to bring new planes into production by 25 percent.

Raytheon Aircraft entered the fractional ownership business in 1997 with the creation of Raytheon Travel Air. The concept, pioneered by companies such as Executive Jet, Inc. (EJI), sold timeshares in business jets, complete with pilots and maintenance and, in Raytheon's case, even catering. (EJI was also a very important customer, placing a $2 billion order for Horizons in June 1999.)

The Beech Bonanza celebrated its fiftieth anniversary in 1997. The twin-engine Baron, derived from the Bonanza, remained a very popular plane. Results for Raytheon Aircraft continued to improve in 1997, with sales of $2.45 billion and income of $239 million. Its backlog grew to levels not seen in a dozen years. By mid-1998, the company had 100 orders for its new $4.2 million Premier mid-size business jet, which had not yet begun deliveries. The stunning results even prompted the company's Massachusetts parent to hold its annual shareholder meeting in Wichita.

Raytheon Aircraft announced a unique joint marketing agreement with Jaguar Cars in early 1998. The deal produced a series of Special Edition aircraft, including a $2.65 million King Air C90B with a Jaguar-inspired luxury interior. Raytheon also began offering an active noise suppression system on its King Air 350 model.

Sales Peak in 2000

Business aircraft manufacturers had one of their best years in 1999. In September of the year, Raytheon Aircraft appointed Hansel Tookes II, a former Navy and airline pilot and head of a Pratt & Whitney engines group, as president and chief operating officer. He was named chairman and CEO after Wegner retired a year later. Raytheon Aircraft had another year of record sales in 2000.

Rumors of an impending divestiture of Raytheon Aircraft abounded around the turn of the century. Its parent company reportedly would use the $4 billion it expected from the sale to reduce its total corporate debt of $10 billion, a legacy of its 1990s buying spree. General Dynamics Corp., which bought Gulfstream Aerospace in 1999, was named as a likely buyer since Raytheon Aircraft would fill in the lower end of its product line. Dassault Aviation, a French manufacturer of business jets, also expressed interest, largely due to the Beech piston-engine and turboprop lines.

In April 2001, Raytheon Co. announced the sale of 70 percent of Raytheon Aerospace Co., Raytheon Aircraft's support services subsidiary, to New York investing firm Veritas Capital for $153 million. Raytheon Aerospace had 5,300 employees and revenues of about $400 million a year.

Also in April, Raytheon Aircraft announced it was cutting 450 white-collar jobs as a preemptive move in the context of a weak stock market. Two months later, 470 hourly employees in Kansas were let go as the company lowered its production estimates. Yet another 750 jobs were cut in October 2001; the company cited a slowing economy exacerbated by the September 11 terrorist attacks as reasons for reducing production. Jim Schuster had become CEO of Raytheon Aircraft in June 2001 after Tookes left to head Raytheon's international operations.

The $5.3 million Premier I entry-level business jet did not begin deliveries until the end of 2001; at the time, the company had 300 customers lined up for it. In fact, the company's total backlog, most of it for Raytheon's newest jets, was worth $4 billion.

Principal Subsidiaries: Raytheon Aircraft Company; Raytheon Aircraft Charter and Management Company; Raytheon Travel Air Company; Raytheon Aircraft Services, Inc.

Principal Competitors: Cessna Aircraft Company; Gulfstream Aerospace; Israeli Aircraft Industries; Northrop Grumman Corporation; Rockwell International Corporation.

Raytheon Aircraft Holdings Inc. History

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Company History:

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