China Airborne

by James Fallows

  American officials limited themselves to saying that the moves seemed to make good sense and would enhance the promise of China’s aviation future, rather than spelling out how closely the plans followed the recommendations of the ACP report.

  The airspace seemed to be opening. The next step was to prepare Chinese companies to take advantage of this opportunity.

  * Just to give a flavor, here is a sample ad I saw on a Western aviation site in 2011:

  Sichuan Airlines—A320 Captains

  (UPGRADED Package!)—Now the BEST OPPORTUNITY in China!

  Domiciles: Chengdu, China

  Requires: 600 hrs PIC [Pilot in Command] in type, 5,000 hours total time, Age under 55 years old

  Compensation: $13,500 USD/month + $162.50 USD/hour for hours over 80

  45 days paid personal leave per year

  Approximately $162,000 USD/year

  $18,000/USD bonus at the end of the first two years

  $24,000/USD bonus at the end of the next two years

  Contract Term: 2 years (renewable)

  6 * An American Dream, Turned Chinese

  Cirrus comes to China

  I watched the effort to open China’s skies from the perspective of the foreign flight instructors, the Chinese visionaries, and the veteran China-America hands like Joe T and Francis Chao who coordinated developments between the countries. But I saw it with particular interest and poignance through the course of the three-stage drama of the Cirrus Design Corporation and its ambitions in China. Compared with Boeing and Airbus, Pratt & Whitney, or GE, Cirrus is a niche player in the world’s aerospace industry. But it has unexpectedly been at the center of important decisions about China’s aviation future.

  In the mid-1990s, while still in the United States, I began noticing in the aviation press increasingly excited reports concerning the young Klapmeier brothers, then of Baraboo, Wisconsin. In the inward-looking world of aerospace, they were inescapably likened to the Wright brothers a century before. Indeed, there were parallels: Like the Wrights they were Midwestern inventors and tinkerers, who could not be dissuaded from pursuing what seemed an impossible dream. Alan and Dale Klapmeier were born into an entrepreneurial family in small-town Illinois in the early 1960s, whose operations ranged from fiberglass-boat making to nursing homes. “Ours was not the kind of family where you ever assumed that you’d finish college and then just get a job,” Dale Klapmeier told me when I first met him, in the late 1990s. “The idea was always that you’d start a business of your own.” As teenagers both Alan and Dale had learned to fly and become airplane-design enthusiasts. While Alan was in college and Dale was still in high school, they would spend the summers building mock-ups of planes with spaceship shapes and futuristic propulsion systems.

  In 1984, the brothers began working together full time on their airplane designs. By 1987 they had incorporated their grandly named Cirrus Design Corporation, based in a barn in rural Baraboo. Its first product, which was a technical success but a market failure, was the VK-30, an odd-looking but very fast plane that used a “pusher” propulsion system, with its engine and propellers at the rear. It was sold as an experimental aircraft, one that didn’t have to go through rigorous FAA certification and that customers would fly at their own risk; also, it was a kit plane. Cirrus would ship off a huge crate containing the engine, major airframe parts, and all the internal controls and instrumentation, and then a customer would spend hundreds of hours of skilled labor assembling and testing the craft before it would fly. Not many of them sold. “We were looking for people who had hundreds of thousands of dollars to spend on the airplane, and the skill and time to put years of work into it,” Dale Klapmeier told me in the late 1990s, long after market reality had set in. “Those people were not there.”

  The brothers borrowed money from parents and friends. They persevered in developing other models, all with a radically more streamlined, modern shape than had ever been seen on small-airport tarmacs accustomed to Cessnas and Pipers. Their ST50, another very high-speed “pusher” airplane, went into production as a joint venture with Israviation, an Israeli government-sponsored aerospace firm. Then Israeli politics turned against Israviation and its funding, and the project died after only two of the ST50s had been built.

  Nearing the end of their spouses’ and their family’s patience (Alan got divorced around this time), nearing the end of their ability to borrow, nearing despair about their Jetsons-style dream of producing a plane that was safe, inexpensive, and convenient enough to make flying mainstream, the Klapmeiers and their team gave it one more try, with the airplane that was known as the SR20 and became the most famous small airplane in half a century. It was sleek-looking inside and out, like a leather-appointed Mercedes or BMW rather than a Jeep. It was intended to be a huge step forward in safety, with its built-in parachute for the whole plane and with computer-age graphics and navigation tools that were far more informative, intuitive, and advanced than what was available in the cockpits of most airliners. At least initially it was inexpensive, by aerospace standards. It was, in its way, the Macintosh of the small-airplane world; Cirrus, in its new headquarters along Lake Superior in Duluth, was the Apple. In 2001, I wrote a book about the Klapmeier brothers and other modern aerospace innovators, Free Flight. I also bought an early model Cirrus SR20 and flew it frequently, before selling it when we moved to China.

  When the Cirrus SR20 came onto the market in 1999 it was an immediate hit. It was followed late in 2000 by a faster, more powerful model called the SR22. By 2003, the SR22 overtook various well-established Cessna models to become the best-selling small propeller aircraft in the world, a title it has held ever since. By the mid-2000s, Cirrus had silenced most marketing, business, and technology doubters and was extending its sales network worldwide.

  Developing and certifying airplanes, especially new models from a brand-new company, takes an almost limitless amount of up-front capital. The kinds of well-heeled clients who might consider being early customers are notably demanding and fickle. The business was terribly vulnerable to any surprising bad news—surprises in this field usually coming in the form of a fatal airplane crash. Cirrus’s entire existence was called into question by a crash in 1999, just before the first SR20 customers were due to receive their planes. That crash killed Scott Anderson, a local hero from Duluth who had gone to Stanford and then returned as an Air National Guard fighter pilot and early member of the Cirrus team. Anderson had flown most of the tests in the southwestern desert that led to development of the famous Cirrus whole-airplane parachute. But for this final test flight before the SR20 went out to customers, he was in an airplane that had not yet had its parachute installed. Because of an aileron problem, he could not control the plane. He attempted to guide it back to the main Duluth airport but instead crashed into a federal prison facility less than a mile from the airport and Cirrus’s headquarters. The company, in mourning, survived commercially only by reminding customers and the press that every Cirrus delivered to a customer would come equipped with a parachute—the parachute that Anderson had helped develop and that could presumably have saved him.

  The Klapmeiers never had quite enough money for the next round of production equipment, the next increase in sales staff, the next set of computers to design the next generation of airplanes. So in 2001, just before the shock to business in general and the aviation business in particular that followed the 9/11 attacks, they sold a controlling interest in the company—58 percent of a firm their family had tightly controlled—for $100 million, to Crescent Capital. Crescent was based in Atlanta and staffed by Americans, but it was the business arm of First Islamic Investment Bank of Bahrain, that country’s sovereign investment fund. After the sale there was a flurry of concern and criticism in the aviation world about the significance of selling this gem of American innovation to an “Islamic interest.” The real significance, as would become clear a few years later in China, was the Klapmeiers’ loss of control to a company that, as they knew fr
om the start, hoped to get its money back out within six or seven years.

  Stage one of the Cirrus drama, then, was the company’s debut as the innovative darling of the industry. Like other start-ups it was always looking for money—but it managed to keep finding it. As it was introduced into each new market—Brazil, France, England, Australia—its planes soon became best-sellers there as they had been elsewhere.

  From a Chinese point of view, in 2006, when I saw Peter Claeys undertake his sales attempts from his office in Shanghai, a small airplane was purely a conspicuous-consumption luxury good. Almost no one in China who was qualified to fly an airplane could afford to buy one. Almost no part of Chinese airspace was open to legal flight by anything other than airliners or military planes. So Claeys was in the business of trying to ride China’s early luxury boom. I saw him propose to coal millionaires from Inner Mongolia the advantages of having an airplane (even though there was no place to fly it), in addition to the yachts they had bought (that they had no place to sail). At an aviation conference that I attended with Claeys, I chatted with a potential Cirrus customer from southern China who had no intention of flying the plane but thought it would be impressive if parked in front of the company’s headquarters. In the end, he didn’t buy.

  Claeys spent his days in endless frustration with the realities of trying to fly a plane inside China—where to get fuel, how to get flight-plan clearance, how to train mechanics to serve the demo planes he operated inside the country. Cirrus’s market position was unique. Less expensive airplanes, from Cessna or Piper, were far less glamorous and therefore had little value as status symbols. More capable airplanes, like Gulfstreams or Falcons, cost from ten to one hundred times as much as a Cirrus and were too expensive for mere display.

  Cirrus tries “reform from within”

  At this time, Cirrus’s prospects in China were always promising but never actually profitable. Claeys would court a rich customer, close a deal to sell a plane—only to have delivery held up for months by Chinese customs inspectors, at which point the Chinese multimillionaire might lose interest and think of buying a villa or a vineyard instead. Sometimes a purchaser would back out when a shift in exchange rates made this luxury seem too expensive, or when the tumultuous changes in the Chinese economy meant that a thriving business had suddenly failed. As of early 2008, a total of five Cirrus SR22s had reached customers within mainland China.

  Rather than working strictly within the constraints of a boutique Chinese market, Cirrus decided to place more emphasis on trying to remove those constraints. In cooperation with other foreign aerospace firms, it attempted to speed China’s transformation into a society where more people could legally fly small airplanes, and thus in which more people and companies would have a rational incentive to buy them. Around the time of the Beijing Olympics the company’s public face in China changed from Peter Claeys—fluent Mandarin speaker, European cosmopolite, expert in Asian cultures, and scholar of Buddhism who happened to work for an airplane company—to Paul Fiduccia, a lifelong aviation buff from America whose new assignment happened to be China.

  Peter Claeys had been based in Shanghai and had concentrated mainly on the Chinese nouveau riche in the southern half of the country. Paul Fiduccia commuted between Cirrus’s headquarters in Duluth and Beijing, where for days on end he met with the bureaucrats and administrators who would eventually decide whether to open Chinese airspace to civilian small-airplane flight.

  Fiduccia, in his late fifties, was a longtime friend of the Klapmeier brothers and, like them, he had been in and around airplanes since he was a teenager. Through the 1980s he was a consultant on projects for the FAA and NASA, mainly for changing their regulations to reflect technical advances in navigation systems, weather forecasting, and safety devices. He spent his days in China talking to government officials about why they should change their policies, and providing specific suggestions of how the new policies should look.

  When he was in Beijing, Fiduccia explained to CAAC officials how they might coordinate their safety or inspection practices with international standards. When he visited Zhuhai or Xi’an or Badaling, he spoke with local airport authorities about the practicalities of setting up a flight school, or how airspace could be more efficiently configured, or how to develop an emergency-rescue service to airlift accident victims to hospitals. Cirrus was paying him for the same reason Ford or General Motors might have sent road-safety experts on tour in the 1920s to give advice on engineering better highways.

  I often had dinner with Fiduccia during his stays in Beijing. “I like you fine, Jim,” he told me one time, “but no offense, the main reason I look forward to seeing you is to hear some English.” The rest of his days and weeks in China were spent inside Chinese organizations, working through interpreters. At each of our meetings, he was disgruntled and frustrated, like most foreigners—and for that matter like most Chinese people—trying to pick their way through the country’s modern bureaucracy. “I figure the only reason we use the word ‘Byzantine’ is that at the time Western people didn’t have enough experience with Chinese bureaucracy,” he told me after one particularly frustrating siege. “If they had, we’d use ‘Chinese.’ ”

  There were signs of change, particularly the three new “general aviation test zones.” The reliance on test zones was entirely consistent with the pattern of Chinese liberalization through the previous thirty years. Rules were lifted in a variety of ways at a variety of test sites. If all went well, the government would extend the new approach to another set of provinces or towns. That is how economic liberalization had spread from the original “Special Economic Zones” like Zhuhai and Xiamen to most of the country, and Fiduccia and his allies within the CAAC assumed it could work in similar fashion in aviation.

  By the end of 2009, when CAAC officially promulgated its “Notice of Issuance of Relevant Measures for Accelerating the Development of General Aviation,” Fiduccia and other foreigners who had been working to transform China’s approach to airspace and aviation thought that their work was at last paying off. The deceptively dull-sounding “Relevant Measures” document contained a number of statements with potential. The ingredients were all there: An emphasis on taking a scientific approach to the development of general aviation, “scientific approach” being shorthand in Chinese communist officialese for “doing it the right way.” A promise of government funding of $25 million per year to build and maintain new airports. An emergency emphasis on new small airports that could be used to support disaster-relief efforts. The establishment of test zones with relaxed flight rules. A profession of belief in the importance of private aviation to China’s emergence as a fully modern business culture and economy. A reminder that aerospace technology would be the arena for China’s next breakthroughs and successes.

  Fiduccia was cheerier than normal at our dinner at a Thai restaurant in the Sanlitun district of Beijing just before the report came out, because he sensed the direction it was heading. “So far, everyone is saying the right thing,” he said. He reeled off a list of cities where officials seemed interested in Weinan-type projects. “There are lots of wealthy people all around,” he said. “With just a few of them, you can make this work.” The global aircraft industry was in another slump just then, because of the global financial crash of 2008, and Cirrus was confronting the worst sales downturn in its history. “It’s never easy here,” Fiduccia said, “but China can be what keeps our production lines open.”

  From Zhuhai to Duluth

  He turned out to be right. Cirrus became more fully integrated into China’s aerospace ambitions in a way few would have foreseen when the optimistic young Klapmeier brothers were first bringing their revolutionary new designs to the market. As markets plunged and trillons of dollars’ worth of paper wealth disappeared in the economic collapse, orders for Cirrus airplanes “dropped off a cliff,” as one company official told me at the time. The company had produced 721 airplanes in 2007; by 2010, its output had fallen to 264.
Something similar, though milder, had happened in the aftermath of the 2001 terror attacks. But back then Cirrus was still a small, very low-overhead, start-up-phase company with only a few hundred of its planes in service around the world. Its relative handful of employees were accustomed to belt-tightening. The small size of the delivered fleet meant that it did not need an extensive network to stock spare parts or answer questions and complaints from customers.