Cirrus Aircraft: An Economic Overview

The beginnings of the Cirrus Aircraft company are humble.  Two brothers, Alan and Dale Klapmeier founded the Cirrus Design Corporation in 1984 with goals to become an industry leader in safe and state of the art aircraft.

The first well known aircraft designed and produced by the company is the Cirrus VK-30 homebuilt.  While attending school in Wisconsin, the Klapmeier brothers and Jeff Viken came together to design and build their first aircraft.  The VK-30 was designed as a laminar airflow wing with a pusher prop.  The aircraft could comfortably seat the pilot and four passengers, making it unusually large for a homebuilt aircraft.  The laminar flow wing enabled the plane to fly at higher airspeeds with lower drag, therefore giving it a greater fuel efficiency.  While only 13 airframes were sold and constructed, the VK-30 played an important part in the Cirrus Aircraft Company’s history.  Every detail and facet of the project was researched as to what could be made better or removed.  The homebuilders aircraft laid the framework for future Cirrus Aircraft, the SR-20 and SR-22.

Shortly after the VK-30 was designed and built as an experimental aircraft, the company broke ground on its world headquarters in Duluth, MN.  One year later, in 1994, the Cirrus SR-20 was introduced to the industry at EAA’s Airventure in Oshkosh WI.  The new airframe took the best parts of the VK-30 and combined them with newer technology to produce a more conventional, and luxurious aircraft.  Like its predecessor, the SR-20 maintained the laminar airflow aerodynamics, however, the pusher prop was moved to the front of the aircraft and became a more conventional aircraft that more pilots could appreciate.  The airframe was also completely composite material, stronger than the aluminum used in other company’s aircraft.

One of the most revolutionary technology systems was introduced with the SR-20, the Cirrus Airframe Parachute System (CAPS).  This novel concept took a parachute and packed it into the fuselage of the aircraft for emergency purposes.  In addition to the CAP system, the interior of the aircraft was designed to provide ultimate comfort and ease of use for the pilot and passengers.  The flight controls were actuated using a side stick which gave the pilot extra room for any charts or other equipment needed while flying.  In the year 1998, the Federal Aviation Administration officially certified the SR-20 and the airframe went on sale to the general public.

Two and a half years later, on November 30, 2000, the Cirrus SR-22 was approved as flight worthy by the FAA.  The SR-22 took everything the SR-20 had to offer and improved it.  With a bigger wingspan, more powerful engine and a higher fuel capacity, it has become the more popular of the two airframes Cirrus currently produces.  See the below chart for a comparison in performance characteristics between the two aircraft.

Figure 1: The Cirrus SR-20 and SR-22 are fairly similar in characteristics except for the larger engine on the SR-22.

Cirrus Aircraft has done remarkably well since the first appearance of its SR-20 aircraft on the public market. In its first year of production in 1999, 325 total aircraft were ordered.  The very first customer airplane was delivered to Walt and Marianne Conley of Minnesota.  In October of the same year, the company achieved international recognition as the first SR-20 was delivered to Europe.  As a response to the high demand of SR-20′s, engineers began research on a more powerful aircraft to maintain its relevance in the General Aviation market in the United States and Abroad.

Two years after the SR-20 hit the markets, the SR-22 was released.  This is one of the fastest turnaround times of new aircraft done by a company.  The Cessna-Textron company, for example, first released the Cessna 170 in 1948 and its more powerful version the C172 in 1956.  Cirrus Aircraft was able to design and produce the equivalent result in two years as opposed to the eight years it took Cessna.  As demand rapidly increased for the SR-20 and its new variant, the SR-22, Cirrus established sales centers around the world.

As orders were reaching record heights for a relatively new company, the number of employees also increased as a direct result of a good economy and large demand. In the year 2000, orders for aircraft reached 550+ and employee level was recorded as 450.  A year later, the company continued its expansion to meet demand and increased its employee level to 600 total people. Through the early 2000′s demand and employment skyrocketed as the economy thrived and people had additional income to be able to afford the luxurious personal transportation that was a Cirrus aircraft.  At the start of the economic downturn in 2008, Cirrus had 1,330 total employees.  It was from this point forward that the company experienced its first round of layoffs and furloughs.  The graph below shows the employee count from the year 2000, the year after the first delivery of the SR-20 to the end of 2009 when the most recent job loss ended.

Figure 2: A plot of total employment over the years of Cirrus Aircraft Company. The blue line represents total employees while the black line shows the average number of   workers from one year to the next.

As the graph above shows, Cirrus experienced a large gain in employees due to a high demand of its product.  The abnormal decline and rise in employment between the middle of 2008 and the beginning of 2009 is a result of a temporary furlough of 500 employees.  When production began to out match demand, the company gave a chunk of its workers an extended holiday vacation without pay.  After the holiday season, every worker let go, returned to work.  Even with this long gap of reduced employment, demand still lacked requiring Cirrus Aircraft to permanently lay off 208 people.

Since its foundation, Cirrus Aircraft Company has only slowed production.  No loss has been reported due to a lack of demand.  A more scientific measurement is difficult to compile because the company is not publically traded on the New York Stock Exchange.  A news article that was just released in Duluth, MN, where Cirrus is headquartered, describes the current business environment.  At this point in the year, the company is set to match 2009′s low production total.  From January ’09 – September ’09, 189 aircraft were produced and shipped.  During the same time period of 2010, only one less aircraft was shipped.  This is quite abnormal compared to the rest of the general aviation industry suffering a significant slump in sales.  Cessna Aircraft, for example, was force to lay off half of its work force in the past two years.  In Wichita, KS, Cessna’s headquarters, eight thousand jobs were lost.  In the first quarter of 2010, Cessna reported a loss of $8 million and sales decline of 44%.

It is a surprise that Cirrus has been able to maintain its momentum even though the recession has struck its primary competitors production capacity severely.  The popularity of their aircraft can be attributed to a few different factors that set them apart from other companies aircraft. Differences in product include state of the art avionics in the cockpit and the standard safety system included on all aircraft.         When a customer orders an aircraft, features such as large flight displays come standard.  These displays are able to help the pilot fly safely with moving maps, approach plates, airport diagrams and a new concept, infrared vision.  The screens provide a greater ease of use for instrument pilots who always have to carry around books of charts and procedures.

The main difference, however, is the standard safety feature included on every aircraft Cirrus builds and ships.  The CAP system was designed for pilots to use as a last ditch effort to save their lives in the event of an emergency.  To date, there have been 22 cases of the parachute being deployed and saving 44 total lives from its first use in October 2002.  This remarkable statistic has not been lost on pilots looking for an aircraft to purchase. In the United States alone, there are 3,774 Cirrus airframes registered with the FAA.  This total will certainly grow in the future and does not include aircraft shipped overseas to other continents such as Europe and Australia. As illustrated by the pie chart below, the SR-22 has been in the most demand out of all the airframes.  The company predicts, the SR-22T will only increase in popularity as it was just recently released in June 2010, in the midst of a recession.  The chart does not take into account the generation of the aircraft, only totals with a currently registered tail number.

Figure 3: The distribution of Cirrus types registered with the FAA.

Even with the current recession slowing sales and causing job loss, future goals of the company remain strong.  The Cirrus Vision Jet is continuing in the design and production process but at a less active pace than if the economy was more stable.  Cirrus has been able to remain stable in the volatile economy by using a variety of methods which has helped the company in the long run.  Three day weeks, temporary furloughs and intentional production slowdowns have helped the company maintain gains while its competitors reported millions in losses.

Cirrus Aircraft have found a niche in the General Aviation industry with those who are affluent and have disposable income to spend on such a luxurious aircraft.  From fixed based operators at airports across the country, to Perdue University, Cirrus Aircraft has been used as a primary training aircraft to teach the next generation of pilots.  The added safety also helps students feel safer while learning to fly.

In the future, the Cirrus Aircraft Company will become much better known and plans to create a light sport aircraft called the Cirrus SRS.  The plane was originally planned to be released by now, but due to the economic recession, the project was indefinitely postponed.  Cirrus hopes to bring back the project as soon as financially feasible.

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