Aviation Markets from U.S. to China

Recently Chinese investors have been in the market to buy out U.S. general aviation companies. In 2012 Hawker Beechcraft Inc. of Wichita, Kan was offered a 1.79 billion dollar offer by Superior Aviation Beijing Company, Limited (Arkansas, 2013). In their article Arkansas Business states that Hawker Beechcraft abandoned the deal when they weren’t able to come to an agreement and will emerge as a standalone company changing their name to Beechcraft Corporation. Although Beech aircraft is making an attempt to bounce back without financing from Chinese investors what about other general aviation companies facing financial difficulties?

In 2011 Cirrus officials announced Cirrus Aircraft would be sold to China Aviation Industry General Aircraft Co. (CAIGA)(Hirschman 2011). CEO Brent Wouters explained the negotiation process took 20 months and that “it will allow Cirrus to expand its product line and grow throughout what he expects to be a period of consolidation within the aviation industry.”(Hirschman 2011). Although the recent purchase will allow them to expand their product base into a new market and Wouters assured that CAIGA plans on supporting the facilities in the U.S and that “this is were they will add jobs when the market rebounds”. CAIGA may find it to be more cost affective in time to pack up and move locations. Shortly before this purchase was approved for Cirrus Aircraft, Teledyne – Continental a producer of the jet engine in the Cirrus SR22 and SR29, was purchased by Technify Motors a subsidiary of AVIC International (Aviation Industry Corporation of China), a Chinese government owned holding company (Avweb Staff 2010). Wouters said that the two transactions and the companies making them aren’t related. If you take a look at CAIGA’s website under the tab about CAIGA company profile you will also see that the company are subsidiaries of f AVIC which one would think two aviation related companies, both subsidized by the Chinese government, with components that are directly complementary, may have something to do with one another. Although both agreements these companies came up with keep the jobs in the U.S. how long will the agreements last? Brian Foley, with Foley Associations mentioned this in an interview with the Wichita Eagle

In buying up established companies, China gets the management know-how, brand, distribution, and technology in days, not decades. (Mcmillin 2013)

When purchasing U.S. companies Chinese investors will be able to dissect these companies and modify them to fit the growing industry in China.

The middle class has grown tremendously in China and in return so has the market for travel. Chinas middle class accounts for 300 million people, that’s already about as many people who live in the United States (Luby 2012). As a result “Air travel is closely tied with economic growth” and “The number of passengers flying domestic airlines has almost quadrupled in the past decade from 67.2 million in 2000 to 267.6 million in 2010” in Chinese Aviation markets (Parker 2012). Although there was an existing market in China prior to the expansion of its middle class, as the economy begins to grow at exceptional rate so will the need for travel.

As Asian markets continue to grow and expand their aviation industry, these developing countries will take time to catch up with already established industries like the U.S. These growing global markets open up the opportunity for future business partnership with Asian markets like China and the U.S While China is playing catch up; the time gap gives skilled and knowledgeable U.S. workers the to find jobs across the globe and established companies in the U.S. opportunity to venture into foreign markets. If Chinese companies continue to buyout U.S. companies and they decide to move their headquarters and not produce in the U.S. it could lead to job loss and less cease job growth.