Aerospace weathers ups, downs: first list of state's largest companies finds 5,000 workers.

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THE TOP 22 AEROSPACE companies employ about 5,000 Arkansans, but the employment number is likely much larger.

Arkansas Business received about 30 responses after surveying 97 companies associated with the aerospace industry for the first-ever list of largest aerospace companies in Arkansas, ranked by total employees in the state. Companies ranged from small repair stations to two private jet manufacturers with operations in the Natural State.

Many companies that would likely add to the employment total declined to participate in the inaugural list, including Raytheon Missile Systems at Camden.

Recruiting and developing aerospace companies in the state has been a focus of the Arkansas Economic Development Commission under Executive Director Maria Haley. And while the aerospace industry has grown with time, sectors in the industry have struggled under current economic conditions.

Hawker Beechcraft Corp. of Wichita, Kan., announced Tuesday that it would further cut its work force, its third such announcement since the beginning of the year. The company did not detail how layoffs would affect the Little Rock operation.

Many of the companies working on government contracts believe business will remain constant, with many executives reporting that revenue totals for the coming year are expected to match fiscal 2008.

Not Losing Is Winning

Many in the aerospace business agreed that a mediocre year in fiscal 2009 would be a good year.

"I'm pretty optimistic about the upcoming year," said Raymond Bennett, general manager of AAR Aircraft Services of Hot Springs. "I think that it'll probably be flat for the coming year."

AAR Aircraft's Hot Springs location primarily performs maintenance on planes operated by regional air carriers like Mesa Airlines and earned the No. 7 ranking with about 200 Arkansas employees.

Bennett expects fiscal 2009 sales to be about 13 percent higher than the previous year when the company's fiscal year ends May 31. The year after, he's not expecting growth, though he doesn't think his company will lose any ground.

While many of the larger manufacturers like Hawker and Dassault Falcon Jet Corp. have seen backlogs dwindle since last fall, companies specializing in maintenance and repair have seen steady business. Both Hawker and Dassault had record backlogs last summer. Many companies and individuals have decided to cancel orders since the economy went south.

While production of jets might have slowed, the increased number of private and commercial planes being used has meant more business for Federal Aviation Administration-certified mechanics, said Bob East, vice chairman of the Little Rock National Airport Commission and head of the Arkansas Aerospace Task Force.

"Hawker and Dassault have still delivered hundreds of planes, and they still have to repair those planes," said East, who is CEO of the Little Rock construction company East-Harding Inc.

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Triumph Airborne Structures of Hot Springs, which performs maintenance on many models of planes, ranked 10th on the list and reported revenue jumping from $39.7 million for the fiscal year ending March 31, 2008, to $47.6 million for the year ending March 31.

Creating Connections

The Arkansas Aerospace Alliance plans to assist many of the smaller suppliers in Arkansas that are struggling because companies they have worked with are delaying orders.

The alliance is working with the Arkansas World Trade Center in Rogers to organize an international trade forum. The forum would connect companies in Arkansas that build aerospace components with companies from across the globe, said Robin Pelton, who leads the alliance for the AEDC.

The alliance has not set a date for the event, but it should take place before year's end, Pelton said. Pelton said she hopes to attract representatives of a Brazilian aerospace trade association. Brazil is home to private jet manufacturer Embraer SA of Sao Paulo, as well as several other aerospace companies.

The forum came about after an Arkansas vendor to a private jet manufacturer wrote Pelton asking for help because the manufacturer had reduced its orders.

"I got an e-mail from a small company that had done outsource work, machining parts for" the manufacturer, Pelton said. "The company was asking for assistance and needed more customers."

Many companies will shift vendors during downtimes, said Tony Johnson, president of Triumph Fabrications-Hot Springs.

"I think what is going to happen is that in a downtime, work starts moving around.

They'll put it on an open market," he said. "There's risk to us on that as well: When the economy is down, our customers push their orders out."

The company ranks fifth on the list of largest aerospace companies, employing about 380 and netting $59 million in 2008 revenue at the Hot Springs facility.

While some companies might delay orders, companies also look to outsource work previously done in-house in order to cut costs.

"If we can be cheaper than what it would cost in-house, it can be advantageous to the company to outsource the work," Johnson said. "We probably have more opportunity to take work from our customers than our competitors."

The forum that Pelton is organizing will help Arkansas' aerospace companies meet manufacturers searching for new vendors and understand the red tape involved in working with many of the larger aircraft manufacturers.

"The bureaucracy and requirements can be difficult for a smaller company to understand," Pelton said, noting that resources for companies are online at www.arkansasaerospace.com.

Government Business

Despite the bureaucracy, many companies in Arkansas get quite a bit of business through government contracts. Many of the companies report that the consistency of defense and other government contracts means revenue will at least remain stable in the coming year.

"With Air Force contracts and NASA contracts and Navy contracts, we are running a backlog of about 18 months," Chuck Chalfant, president and CEO of Space Photonics Inc. of Fayetteville, said. The 20-employee company, No. 14 on the list, expects fiscal 2009 revenue to mirror 2008's total of $3.1 million. The company produces fiber optics and laser communications products.

Space Photonics plans to deliver in the next couple of months a product to the U.S. Air Force that uses a laser to transmit data between satellites, Chalfant said. The company will produce a similar commercial laser transmitter in the next 18 months that can transfer data between buildings, Chalfant. The laser could be used in place of fiber optic cables, he said. Unrolling the technology in the current economy does not frighten Chalfant.

"It may be affected by the economy, but we know there is a market out there," he said.

Similarly, Mundo-Tech Inc. of Rogers expects fiscal 2009 revenue to return to just more than $3 million after a slight dip to $2.5 million during fiscal 2008, Mundo Harbough, vice president of sales, said. The company ranked 11 on the list with 40 employees.

Mundo-Tech builds tubing for commercial aircraft manufacturers and also has contracts through the government. The company has created tubing--used in hydraulic and oxygen ventilation systems--for a project to upgrade P-3 Orions, which are transport planes used by the military. The company also creates tubing for the Army's MRAP--mine resistant ambush protected--vehicles, Harbough said.

The company will also remain busy outfitting Boeing 757s for FedEx, he said.

"One of the big programs we've been working on is the largest passenger-to-freighter conversion ever," Harbough said. The company is building and installing tubing in the passenger planes FedEx is converting to freight carriers. "We started the program a little more than a year ago, and it will continue through 2010--probably a little longer."

Ups and Downs 

A common theme running across several interviews is that the aerospace industry has always been cyclical, and the current tightening follows an established pattern.

"We've gone through a six-year up cycle, which is longer than most," Johnson of Triumph Fabrications-Hot Springs, said. "They usually last only four or five years. Sept. 11, 2001, was the last downswing, and it lasted about two years. Since then, the industry had been doing well."

East, of the Arkansas Aerospace Task Force, said that both Dassault and Hawker could not find enough qualified employees to staff their operations at the Little Rock National Airport. The picture has drastically changed, but the aerospace industry will once again return, he said.

"We believe it will come back; it always has," East said.

By Mark Hengel

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