Cirrus Works To Up Demand For Private Planes

BOSTON (TheStreet) -- Cirrus Aircraft is known to many as making private airplanes equipped with a built-in parachute to guide the cabin down in the event of a mishap.

Unfortunately, that safety feature could do little for a freefalling economy.

"It has been a massive change for us as a company and for the industry as a whole," says Cirrus CEO Brent Wouters of current economic realities. "I see the lower unit volumes that we are all experiencing, the reticence of consumers or businesses to buy airplanes, and isn't about to switch back. This is a long-term problem. Even in my five-year projection, I don't see the business returning to the level that it was in 2007."

It won't be for lack of trying. The company's newest product, the SR22-T, is said to be its quietest, among the fastest and a leader in alternative fuel capabilities and GPS equipment that makes it easier and safer to fly.

Earlier this month, the General Aviation Manufacturers Association released the industry's second-quarter shipment and billings figures. In the first half of this year, total general aviation airplane shipments fell 9.8%, from 1,039 units last year. By comparison, during the first half of last year, shipments fell 45.9%.

Private Aircraft
As it recovers from the lessened demand for private aircraft, Cirrus Aircraft is looking to generate industry buzz with the recent debut of the Cirrus SR22-T.

In the first quarter of this year, Cirrus -- which has a 36% market share among single-engine, piston-powered aircraft -- shipped 53 planes, a 36% increase over the same period last year. Total billings for the first quarter were up by more than $6.7 million, a 22% increase.

Projections by Cessna Aircraft Co., a Cirrus competitor owned by Textron Inc. ( TXT), put it on pace to deliver 22% fewer jets this year, 225 units compared with 289 last year. Revenue projections call for a 10% drop this year, good news for a company that suffered nearly a 43% drop between 2008 and last year.

Piper Aircraft shipped 30 planes in the first quarter of this year, for total billings of about $18.5 million compared with 22 planes and $20.8 million in revenues for Q1 of 2009.

Although sales are slowly improving, Wouters says there is a long way to go to recapture the volume and revenues that existed before the recession. The downturn presented his company with the challenge of evaluating its practices -- running the full gamut of production, sales, marketing adverting, labor and R&D -- and addressing those that were inefficient.

"I don't care if I deliver three airplanes a week, or five or seven," he says. "I want to do it at a level that is sustainable and at good solid gross margins. It is about breaking down every process, so we know who is doing what every second of the day and taking out the garbage that doesn't add value to the product. That way you lower your labor costs, you lower your materials costs and you drive up your margins."

Cirrus is tracking this year at approximately the same volume and same revenue as it did last year, but is $55 million better at the bottom line.

"If you compare us now to 2008, when the world started coming apart and we had twice the volume, we are $90 million dollars better at the bottom line," Wouters says. "The trajectory of the business is terrific at the bottom line, but the revenue line stinks. Even today, with a better bottom line than last year, we are still bouncing around break-even, which tells you how much money we've lost."

Wouters is confident that his focus on cost-cutting will not take away from the company's reputation for innovation.

The SR22-T is cited as evidence.

Wouters claims it is the quietest plane Cirrus has produced and one of its fastest, and that the new twin-turbocharged engine offers alternative fuel capabilities. Pricing for the four-seat aircraft starts at $475,000.

"If push comes to shove and they pull lead out of aviation fuels, it will burn completely unleaded fuel today," he says. "Unleaded fuel is coming whether we want it to happen now or not. For the past 20 years or so you could just shrug it off. There is no more shrugging it off. We are going to be the first to market to make sure our business and our customers are protected."

A partnership with Garmin ( GRMN) allows for the integration of cutting-edge technology.

A GPS system designed for aircraft, Garmin offers a wealth of weather data, route information, charts about airports and the different approaches into airports and terrain heights.

Perspective ESP, a safety and flight stability augmentation system by Garmin, will be available on new orders scheduled for delivery this fall. With the system, which operates while hand-flying with the autopilot disengaged, if the pilot becomes incapacitated, disoriented or distracted, the system corrects unsafe flight conditions such as slowing speed or dropping altitude. Similar systems have been available only in the world's most advanced (and expensive) business and military jets.

"The amount of information that you have in an easy to consume and manipulate fashion is tremendous," Wouters says. "I have to hand it to Garmin, I think they have done a beautiful job. We have a lot of customers who fly for the airlines, and what they have in their Cirrus far exceeds what they have in a commercial airplane. Aviation people are blown away by what you can do."

--Written by Joe Mont in Boston.

>To contact the writer of this article, click here: Joe Mont.

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