What Led To The Current State Of Their Media Relations?

Analysis/Opinion By Rich Belzer

ANN E-I-C Note: Our recent stories concerning our experiences in attempting to cover the issues involved with Cirrus Aircraft have produced quite a bit of information... as well as shaking loose a number of persons who, heretofore, were unwilling to speak out. The amount of info that has resulted has been illuminating as well as disappointing in that we have learned that things were even worse than we believed. Regardless; we have also received some interesting insights and reports as to not only what happened to Cirrus... but what its future might hold. In particular, Rich Belzer's analysis is intriguing... and while we do not necessarily agree with each of his conclusions or the associated analysis, his is an educated viewpoint that deserves airing... let us know what you think. -- Jim Campbell -- ANN E-I-C

So... Who Drove this Airplane Company Into The Ditch?

I have read with interest Jim Campbell's recent articles on his current difficulties with Cirrus Aircraft. Having competed head-to-head with Cirrus for years while at Columbia Aircraft, I grew to learn a great deal about this company and, without question, to envy their success.

In addition, given my rather lengthy business career of 43 years, much of it in senior executive positions outside of aviation, I have followed with great interest the successes and failures within the general aviation (GA) business.

Over the first decade of the 21st century, no company has had a greater impact on GA than Cirrus. Yes, both Cirrus and Columbia created a new market segment, bringing out high-performance composite (fiberglass) aircraft which achieved speeds in excess of 200 knots and did so with their gear fixed.

But, although the products from each company were quite similar, it was Cirrus that drove the market as the following delivery numbers from GAMA demonstrate:

Over these 11 years, Cirrus dominated its competition with Columbia (and now Cessna) by a resounding 85% to 15%. (From 2008 on, the Columbia 350 and 400 were manufactured and sold by Cessna as the Corvalis line.)

So were the SR22 and SR22T that much better aircraft than their counterparts from Columbia or were there other factors at work that produced such lopsided results?

During my years at Columbia Aircraft, I put in quite a bit of effort attempting to answer the above question. I flew the SR22 and, of course, have many hours in the Columbia 350 and 400; I spoke with owners of both aircraft; I got to know people in the Cirrus management team.

From my perspective, the aircraft each had their unique advantages. The Cirrus aircraft had parachutes; the Columbia's had a high-level of structural integrity which allowed them to be certified in Utility Category (and permitted Sean D. Tucker to fly aerobatic routines in a Columbia 400). While the parachute does provide some peace of mind, most owners will never use it; the solidity of the Columbia's was there for the pilot every time he flew. High-hour pilots who had experience flying both company's aircraft almost always preferred the Columbia's handling characteristics. The Cirrus airplanes have more room in the back seat - both legroom and headroom; the Columbia's sacrificed some interior room for a slicker design and less drag. In a fuel-burn analysis based upon POH numbers for the SR22 and Columbia 350 (both equipped with the Continental IO-550), at any given cruise speed and at any altitude, the 350 always burned less fuel (by 10% to 20%) than the SR22. The bottom line is that while the Cirrus aircraft do have features of value to many customers (the parachute and more interior room), the Columbia's had sufficient offsetting capabilities to make this competition closer than the results.

So... why was Cirrus so dominant?

The answer to that question is a name you have probably never heard before - John Bingham. When Crescent Capital (now Arcapita), became the primary investor in Cirrus, they left Alan Klapmeier in place as CEO but brought in other senior executives to strengthen the company's management team. Bingham, a former Rolls Royce executive, joined Cirrus in 2002 to run sales and marketing; in 2001, the company had delivered 210 airplanes; largely through his expertise, Cirrus grew to over 700 aircraft per year prior to the recent recession. Following his departure to head up Piaggio America, Cirrus never upgraded its talent in sales/marketing management to Bingham's level and it shows.

John Bingham

I should add that Columbia Aircraft, by contrast, placed little emphasis on strong sales and marketing management. When I joined the company early in 2004, it had the most dysfunctional distribution organization I had ever encountered in my 35 years in sales/marketing and the executive running this group had never before held a position in either sales or marketing. Even when the company went outside to bring in a sales and marketing vice president, the individual they hired had never run a distribution organization. To be blunt, John Bingham killed us and made that 85%/15% market split happen; by the time I was granted control of worldwide sales at Columbia in late 2006, the company was broke and would file for bankruptcy within 12 months.

Cirrus always had a great relationship with the media. Alan Klapmeier was a natural at dealing with the press and John Bingham was skilled and experienced as well. So how did this company end up so crosswise with one of the most influential members of the aviation media - Jim Campbell of Aero-News Network (ANN)?

Obviously, the absence of Alan Klapmeier hurt but was compounded by the fact that Bingham had departed as well. Why was Klapmeier tossed out of the company he had founded? My sense is that his reaction to the recession lacked the urgency that the company's board of directors (essentially Arcapita) was looking for.

I doubt that Klapmeier had ever before run a company where sales dropped as quickly as what occurred over a three year period at Cirrus:

That is a 62% drop in just two years! As a CEO, how do you cope with such a precipitous decline, especially at an airplane company where overhead runs high? First you put a stop to any non-essential programs - at Cirrus, this meant that Klapmeier's pet project, the Jet, needed to be put on hold. Secondly, you lay off any personnel that you don't absolutely have to have to keep the company operating. For Klapmeier, actions such as these had to look like the destruction of his company and, I am sure, many who needed to depart were like family to him.

Chief Financial Officer (CFO) Brent Wouters, like Bingham brought in by Arcapita, had to be pushing for rapid austerity measures and must have had the ear of the board. Under these circumstances, any resistance by Klapmeier would have put him at odds with Arcapita and probably led to his departure. Rather than bring in a new CEO, Arcapita awarded the job to Wouters, a highly experienced CFO but with no prior experience running an airplane company. While Wouters understood the financial necessities of getting the company as close to a break-even cash flow as possible, he had little of the interdisciplinary background needed to effectively lead the company. In addition, he lacked experience in dealing with the media and was not a known aviation enthusiast like Alan Klapmeier. If Bingham had still been around, this might not have been a big problem; with both Klapmeier and Bingham gone, the company was left sorely lacking in the public relations (PR) area.

So here was a company struggling to stay afloat and taking many of the actions that companies are forced into in troubled times. Personnel were laid off, development of the Jet ceased, payables to vendors were delayed and negotiations were initiated with potential investors who might buy out Arcapita and bring additional cash to the company. Under such circumstances, maintaining an excellent relationship with the media is critical in order to minimize public damage to the brand. In aviation, there are only a few key magazines and Web sites to deal with but they have enormous influence within the pilot community and among potential aircraft buyers.

In business, being an amateur in a specific discipline is only a problem when you don't know enough to understand you need help. Brent Wouters perhaps figured he could save money by handling the press on his own; how tough could that be? You don't have to read ANN for long to figure out how well that strategy worked.

So Wouters is now gone; my information is that it was his own decision based upon differences with the company's Chinese owners, CAIGA, a division of AVIC, itself a wholly-owned subsidiary of the Chinese government. But who really cares why he departed? Wouters is gone and the company is now being directly run by its Chinese masters with Dale Klapmeier on hand as a figurehead. Is this a good thing?

Personally, I believe that things are about to get worse. I have dealt with government-owned Chinese companies in the past and they have great skills in certain areas - production, for instance. From a sales-marketing-PR perspective, especially outside their own country, they know next to nothing. So don't expect Cirrus to ever again be the sales/marketing force they were when John Bingham was around.

Cirrus will be an interesting company to watch, though. My prediction is that, over time, all of their composite parts will be manufactured in China. In addition, it would not surprise me if, within five years, they are making more aircraft in China than in the U.S. And what about the Jet? Personally, it never made sense to me (and neither does the D-Jet). One could easily design a composite 6-seat turboprop which would sell for the same price, cruise at the same speed and burn one-half the fuel. The simple fact is that small jet engines are inefficient and CAIGA knows this. After all, they are already fooling around with the Epic LT experimental turboprop for which they acquired the intellectual property rights. AVIC may know little about sales and marketing but they are not stupid when it comes to airplanes; they are, after all, the world's largest aviation company with revenue in the vicinity of $1 trillion.

As for ANN, I hope they are able to finally squeeze out the money owed them by Cirrus. I wouldn't hold my breath but a lawsuit might eventually produce the desired effect.

About Rich Belzer: Rich has been a pilot for 25 years as well as an aircraft owner, holding a commercial license with an instrument rating. Following 35 years in the computer industry, ten in senior executive positions, he joined Columbia Aircraft in 2004 as national sales manager. While at Columbia, he established all of the company's international distribution and eventually was granted full responsibility for worldwide distribution as the company's sales vice president. He has been interviewed numerous times by written and broadcast media on aviation business issues and written a number of articles for Aero-News Network.

FMI: A 'Few' Stories From The Decline Of The Cirrus Empire:

• No Good Deed Ever Goes Unpunished: Taking On The Cirrus Fiasco, Part 2
• No Good Deed Ever Goes Unpunished: Taking On The Cirrus Fiasco, Part 1
• Cirrus Is Again Behind On Its Rent In Grand Forks
• The Other Shoe Drops At Cirrus: Wouters Gone, Dale Klapmeier Now CEO
• Cirrus Owner's Group Continues To Bow, In Part, To Cirrus/China's Demands
• Bizarre: Chinese-Owned Cirrus Attempts To Dictate Media Coverage of Cirrus Event
• Cirrus Chinese Connection Draws Attention
• CAIGA Assures Duluth (In Writing) That Cirrus Will Be Staying Put
• Alan Klapmeier Will Design Kestrel In Duluth
• It's Done! Cirrus Merger With CAIGA Closed
• Rise and Fall: The Fortunes/Misfortunes Of The Cirrus Dream (Part 3 Of A Series)
• Rise and Fall: The Fortunes/Misfortunes Of The Cirrus Dream (Part 2 Of A Series)
• Rise and Fall: The Fortunes/Misfortunes Of The Cirrus Dream (Part 1 Of A Series)
• It's Time To Choose: If You Stand For Nothing, You'll Fall For Anything…
• Cirrus Lease Arrears In Grand Forks, ND Reported To Top $1.7 Million
• Investors Waiting On Cirrus Counter-Offer
• Congressman Cravaack Urges Caution In Cirrus Deal With China
• American Effort Underway to Head Off Chinese Sale of Cirrus
• Cirrus/CAIGA Merger Deal Reportedly Valued At '$210 Million' -- Maybe
• What Is Behind China's Recent GA Buying Spree?
• Wouters Says Cirrus Jobs Will Stay In Duluth, Grand Forks
• Updated: Concerns Grow Over Much-Delayed/Hyped Cirrus Jet Program
• As Predicted... Cirrus 'Merges' With China's CAIGA
• Cirrus Denies Reports of Sale To China
• Aero-TV: Something Old, Something New -- The Launch of Kestrel Aircraft
• Kestrel Turboprop Program Back On Track... With Alan Klapmeier As CEO!
• Cirrus Drops L-3 Lawsuit
• Cirrus Fights Rumors
• Cirrus Looks For Tax Break From St. Louis County, MN
• Cirrus Hopes To Restructure Lease In Grand Forks, ND
• Alan Klapmeier Clears Out Office At Cirrus Aircraft
• Cirrus Jet Sale At An Impasse?
• Cirrus Notifying SRS Deposit Holders Of Temporary Program Suspension
• Another Round Of Layoffs At Cirrus Aircraft
• Cirrus Says Production Cutbacks Imminent