Learjet Inc. History
Wichita, Kansas 67277-7707
Telephone: (316) 946-2000
Toll Free: 800-289-5327
Fax: (316) 946-2220
Incorporated: 1964 as Lear Jet Corporation
Sales: $551 million (1998 est.)
SICs: 3721 Aircraft; 3769 Guided Missile & Space Vehicle Parts & Auxiliary Equipment
Learjet currently designs, develops and manufactures the high-performance Learjet 31A light business jet, the transcontinental Learjet 60 business jet and the all-new Learjet 45.
An innovator in aircraft technology, Learjet Inc. is one of many legacies of the 20th-century inventor and industrialist William Powell Lear. Best known for his bold effort to build the world's first private jet, Lear had a distinguished history of other inventions that are seldom acknowledged; it was the fortune from these earlier ventures that provided Lear with the capital to establish the Learjet company. Currently part of Bombardier Inc., a Canadian conglomerate which also owns several other aviation manufacturers, the company has been forced to change its independent ways and adapt to a new horizontally-integrated structure. Nevertheless, Learjet continues be a market leader in several categories of small and mid-size corporate jets.
William Powell Lear: Inventor
William Powell Lear was born in 1902 into a poor family in Hannibal, Missouri. When he was six, after his parents divorced, Lear moved to a Chicago tenement with his mother. Completing his education through the eighth grade, Lear befriended a young junk dealer and began spending much of his time tinkering with discarded electronic devices. At age 16, Lear began work as a mechanic at Chicago's Grant Park Airport. There he gained technical knowledge and skills relating to aircraft, while he acquired exposure to the business world and proper social comportment during his brief tenure as an assistant in the office of a prominent businessman.
By the age of 20, Lear was an experienced self-taught radio technician. He established a small shop in Quincy, Illinois, and set out to improve home radio sets. He succeeded in miniaturizing radio coils, eliminated the need for storage batteries, and made other modifications that are still in use today. His business became profitable, and his work soon brought him to the attention of such major manufacturers as Majestic and Motorola.
Still fascinated with flying, Lear bought a small airplane, learned to fly, and began work on an aircraft navigation radio. In 1931 he began a sales tour, demonstrating his Lear Radioaire. However, few pilots had the money to purchase such a radio during the economic hardships of the Great Depression, and fewer still saw the need for such a communication device since it was common at that time for pilots to navigate simply by following railroad lines between cities.
By 1934, Lear had exhausted his small radio fortune and was bankrupt. Depressed, but determined, he returned to his workshop and began mapping out yet another invention. This next product was the "Magic Brain," a common electronic chassis that could be used in a variety of radio set models. Lear assembled, demonstrated, and sold the idea in only two weeks, receiving a contract for $250,000 from RCA.
Next Lear returned his attention to aircraft navigation, using his second fortune to develop the Learscope Direction Finder, a radio triangulation device. These advances earned Lear an honored place in the development of aviation and won him the friendship of such prominent aviation pioneers as Amelia Earhart. More importantly, with access to the nation's leading manufacturers, Lear was able to easily market other advances, including an improved omnidirectional navigation device that could home in on any ground station, regardless of frequency.
During World War II, Lear concentrated the efforts of his company on electromechanical devices for military aircraft, including cowl controllers and auto pilot devices. After the war, Lear Incorporated pioneered all-weather flying instruments that won Lear a commendation from President Truman and an honorary degree from the University of Michigan.
1950s Venture into Business Aviation
By 1959 several airplane manufacturers began to exploit the new market for business aircraft. During this time, however, these predominantly piston-powered business airplanes were relatively slow, and Lear began to envision a smaller, quicker jet-powered craft with superior flying characteristics. He was especially impressed with a jet-powered Swiss fighter-bomber called the P-16 and began laying plans to model a passenger jet after the Swiss airplane. But with no outright demand for such a craft, Lear encountered adamant opposition from his own board of directors. If a market existed, they reasoned, some other major manufacturer would be working on it.
Determined to build the jet, Lear sold his controlling interest in his $100 million company to the Siegler Corporation (which later became Lear-Siegler). He then moved to St. Gallen, Switzerland, where he began to design a factory using Swiss machine tools, which he considered the finest in the world. During this time, Lear also worked with the French aircraft manufacturer Sud-Aviation (now Aerospatiale), AirFrance, and Lear-Siegler to develop a "blind landing" device for the French Caravelle jetliner.
Returning to the United States, Lear decided to locate his new company in Wichita, Kansas, home of competitors Cessna, Beech, and a major Boeing facility. There, he reasoned, he could draw upon an experienced work force and deal with banks that were familiar with aircraft manufacturing. With $10 million of his own money, plus an additional $8 million borrowed from Wichita banks, he set up a factory at Wichita Municipal Airport in January, 1963, employing a work force of 75 people.
In a bold move, Lear decided to skip the normal step of hand-building a prototype for flight testing, instead moving directly into production. Without a prototype, he risked the possibility that his designs might fail, forcing him into a costly redesign and retooling process that would surely sink his company. However, Lear reasoned that in the two years it might take to perfect a prototype, competitors would have ample time to develop similar models, and he was unwilling to invite competition. As a result, Lear had to be absolutely sure of every aspect of the Learjet's design. He considered the aircraft's P-16 heritage to be a good basis for refining the design and handling characteristics.
Exactly nine months later, on October 7, 1963, the first Learjet Model 23 rolled out of the 96,000-square foot facility for its maiden flight. Despite a later nonfatal crash of the first model, others flew exactly as Lear envisioned they would, and sailed through FAA certification in a near record nine months. When the first Learjet was delivered on October 14, 1964, Lear had collected 72 firm orders for the new jet. This sent other companies scrambling into the market. However, it was five years before Cessna produced a jet, and even longer before companies such as Dassault could make a dent in the market. Thus, Lear's bold gamble paid off. He had, for the time being, a monopoly on the business jet market. "In a situation like this," he remarked, "you're either very right or very wrong."
Because of its jet-fighter progenitor and a good marriage of air frame and General Electric engines, the rugged Learjet exhibited astonishing climb performance and high cruise speeds. It could transport up to six passengers in spacious comfort at up to 540 miles per hour and climb to 40,000 feet in only seven minutes. The Learjet-23 also was highly economical to operate, costing an average of only 50 cents per mile to fly.
Despite an impressive backlog of orders for the jet, the Lear Jet Corporation lacked the capital necessary to proceed with production. Having exhausted his investment--and that of the banks--Lear decided to take his company public. On November 30, 1964, Lear sold a 38 percent interest in his company to the public for $5 million. During the following year Learjet shares fluctuated between a low of $8 and a high of $89.
Other Lear Ventures of the Mid-1960s
Meanwhile, Lear continued work on several other projects, including the briefly popular 8-track audio tape system, which offered listeners the convenience of being able to play an entire tape of music without interruptions for rewinding or turning the tape over. With this invention he founded a stereo division of Learjet, based in Detroit, in 1965. Later that year he established an avionics division at Grand Rapids, where Learjet engineers designed and built aircraft electronics systems. In September 1966, to reflect its diversification, the company changed its name to Lear Jet Industries.
In the meantime, Bill Lear grew bored with his administrative duties. He pursued a variety of personal projects, including the development of a costly steam-powered bus and several profitable real estate transactions. He could, at any time, be found on the production line, in the drafting rooms, out flying or, by one account, cooking himself a hamburger in the company cafeteria.
Lear's diversity of interests and disinclination to be tied down to a desk sometimes caused him to make hasty or ill-conceived decisions. He purchased a small helicopter manufacturer that produced little more than losses, and his stereo division continued to lose millions of dollars as the 8-track tape declined in popularity.
However, the greatest weakness in Learjet Industries was the sales network. Eager to get orders for the jets, Lear hastily assembled a list of dealerships throughout the country. Many of these dealers ignored their sales boundaries and few had ever sold an airplane in the Learjet's price range. As a result, the front line sales force was fragmented, disorganized, and unprofessional. Without an effective marketing program, even the profitable Learjet could no longer stem the wider losses. That year, the company lost $12 million on sales of only $27.5 million.
1967: Lear Partners with Gates
Once again starved for capital, Lear sought an able, deep-pocketed partner. Early in 1967 he began negotiations with Charles C. Gates, president of the Denver-based Gates Rubber Company. At the time, Gates was attempting to diversify into aircraft properties. He had just acquired two large retail aircraft service companies, Combs Aircraft in Denver and the Roscoe Turner Aeronautical Corporation in Indianapolis, renaming them the Gates Aviation Corporation.
Meanwhile, Lear had upgraded the Model 23 to include a stronger windshield and engine fire suppression and a new pressurization system. The Model 24, as it was called, also allowed 500 additional pounds of take off weight. However, the cost of developing and certifying these improvements were costly, and Learjet continued to experience financial difficulties. Fortunately, Gates agreed to purchase Lear's 62 percent share of the company on April 10, 1967, only a few weeks before a potentially disastrous annual meeting.
Lear remained as chairperson of the newly formed Gates Learjet company until April 2, 1969. During that time, Gates Rubber pumped $16 million into the failing subsidiary, helping to launch a new eight-passenger Model 25. Gates Learjet lost $4.6 million on $34.6 million in sales in 1968, but a year later turned a $2 million profit on $58 million in sales. Gates's vision of a synergistic manufacturing and service organization began to take shape. In 1969 Gates merged his Gates Aviation Corporation services companies with Learjet to form a single operation that included manufacturing, sales, and maintenance. With the addition of another service facility in Palm Springs, California, and four more sales offices, Gates established an effective sales organization to replace the earlier hodgepodge dealer network.
The 1970s: Streamlining The Company
In October 1970, unable to properly manage both Gates Rubber and Learjet, Gates asked G.H.B. Gould, head of Learjet's marketing department, to lead the aircraft company. Gould was killed in a car crash only six months later and was succeeded by Harry Combs, who had joined Gates Rubber after his own company, Combs Aircraft, was acquired by Gates.
In May 1971, Combs oversaw the reorganization earlier proposed by Gould of the Learjet properties. The troubled stereo division was absorbed by Gates Rubber, leaving three aircraft properties: Learjet manufacturing, Combs-Gates sales and service, and the Jet Electronics and Technology (JET) avionics operation. In addition, the Lear helicopter business was closed, and a training agreement was established with Flight Safety International--the pioneer simulator-training firm&mdashø help pilots avoid errors that had resulted in a number of crashes in early-model Learjets.
Under Combs's leadership, Gates Learjet became even more viable, marking a $6.9 million profit on $115.4 million in sales in 1975. Profit nearly doubled the following year, but fell to $9.3 million in 1977. This dip was mainly attributable to development costs for a new "Longhorn" series of Learjets featuring a new wing design and construction of a $3 million, 75,000-square foot manufacturing facility at Tucson, Arizona.
Like Wichita, Tucson had become an aircraft Mecca during World War II, when manufacturing operations were expanded to meet the demand of local air force bases. The location offered its own pool of experienced aerospace workers, and provided Gates Learjet with a specialized facility. The Wichita factory produced a number of unpainted Learjets that were flown to Tucson where they were painted and their interiors were finished. This eliminated a troublesome bottleneck in Wichita that slowed output.
During those years, Gates Learjet developed several new aircraft, including the fanjet-powered Models 35 and 36, and Century III series, which featured improved "Softflite" wing leading edges. In April, 1977 the Models 24 and 25 were certified to fly at 51,000 feet, well above weather and all but military air traffic. The Longhorn Models 28 and 29 featured longer wings and vertical wingtip fences known as winglets that improved lift and maneuverability. These new models were the first Learjets without wing tanks.
Bill Lear, who founded two large companies, received 150 patents, and was instrumental in the development of modern avionics and business jets, died of leukemia in a Reno, Nevada, hospital on May 14, 1978. Although no longer associated with Lear-Siegler or Gates Learjet, his name remained with both companies, and his innovations continued to be in wide use in the aviation industry. Bill Lear's last business aircraft venture continued after his death. The all-composite Lear Fan, which he had conceived several years earlier, flew in 1980.
After Harry Combs was promoted into Learjet's parent company, Gates appointed Bermar "Bib" Stillwell to head the aircraft company. In the months that followed, Gates Learjet added five new service facilities overseas and purchased the Connecticut-based Air-Kaman service company.
Stillwell retired in 1985 and was succeeded by James B. Taylor, who took the helm of Gates Learjet at a time when "bizjet" sales had fallen so much that Learjet had to temporarily halt production. To reduce costs, Taylor laid off employees, and to raise cash, he sold the company's Jet Electronics & Technology division to BF Goodrich.
1987: Purchase by Integrated Acquisition
In August 1987 Gates received an offer for its 64.8 percent share of Learjet from Integrated Acquisition, a New York-based financial group. Eager to cut its losses, Gates agreed to part with its Learjet shares for nearly $57 million.
Integrated Acquisition initially retained Taylor as head of the company. However, in January 1988, after buying up all outstanding shares in Learjet, the partners fired Taylor in favor of Beverly (Bev) Lancaster, head of the company's growing aerospace division. The company subsequently dropped Gates from its name and sold its Combs Gates service operations to AMR, the parent of American Airlines.
During the 1980s, Learjet had been named as a major subcontractor to numerous defense, aerospace, and commercial aviation projects headed by Boeing, Martin Marietta, LTV, Textron, General Dynamics, and McDonnell Douglas. These projects included work on F-5, F-111, F-15 and F-16 fighter jets, B-1B bombers, KC-135 tankers, and later the Space Shuttle. All of this work was conducted in Wichita, which was a significant factor in much of the Learjet production being transferred to Tucson.
The company also discovered an important new market in military sales. Special versions of the Learjet 35 and 36 were built for the Brazilian, Thai, Japanese, Finnish, and Mexican military forces. The largest military order for Learjets came from the United States Air Force, which ordered more than 80 Model 35s, designated C-2lAs. Learjet also won a contract to service this fleet and created the Gates Learjet Aircraft Services Corporation (Glasco) for that purpose.
Despite a recovery in jet sales, Integrated Resources was saddled with repayment obligations on $2 billion in debt that it could no longer meet. Learjet was profitable but unable to secure loans because of its parent company's poor condition. Nevertheless, in 1989 Learjet succeeded in acquiring the thrust reverser business of the Aeronea company, which it transferred from Middletown, Ohio, to Wichita. The addition of these devices to Learjet aircraft substantially reduced landing distances, enabling it the use of shorter runways.
1990: Bombardier Steps In
By 1990 Integrated had fallen under Chapter 11 bankruptcy protection. Several new acquisitors expressed interest in purchasing Learjet, including Chrysler's Gulfstream Aerospace unit, British Aerospace, and Toyota Motor Sales. During this crisis, Brian Barents, a former marketing vice-president at Cessna and Toyota, was appointed president of Learjet. Within months he had negotiated Learjet's rescue by the Canadian manufacturing conglomerate Bombardier.
Bombardier gained fame during the 1960s as the manufacturer of Ski-Doo snowmobiles. With the passing of the snowmobile fad, the company expanded into the mass-transit railcar industry, buying out troubled manufacturers such as Pullman-Peabody, Budd, and UTDC. In 1986 Bombardier took over the loss-ridden aircraft company Canadair (at the time owned by the Canadian government) and expanded its presence in the aerospace market in 1989 by acquiring Belfast-based Short Brothers Aviation. The company bid for Learjet only one year later and in early 1992 purchased DeHavilland Canada from Boeing.
Bombardier took control of Learjet on April 9, 1990, paying $75 million and assuming $38 million of debt. The acquisition was favorably received. Learjet, with great manufacturing capacity and a strong customer base, could benefit from the stability provided by a financially strong parent company and manufacturing and marketing synergies with other Bombardier aerospace companies. Bombardier had assembled a product line ranging from light business jets to large commuter aircraft.
Like other Bombardier subsidiaries, Learjet remained an autonomous, independently managed unit. It occupied an important position in the company's product line, manufacturing jets for markets independent of those of its sister companies. Learjet's smaller models of aircraft provided a strong complement to the larger Canadair Challenger--which Bill Lear had also helped to develop. Within the first three years of its purchase by Bombardier, Learjet experienced dramatic growth, doubling its number of employees and expanding its manufacturing capacity. Bombardier also moved the testing of all its subsidiaries' jets to Wichita. In late 1992 the Model 60, an eight to ten passenger mid-size jet with a range of nearly 2,500 miles, was introduced. Sales were good, and 1993 was the company's best year ever, with delivery of over 40 airplanes.
However, Learjet's corporate culture was undergoing changes during this time, which caused problems. The company had been so vertically integrated that, as a former executive told Business and Commercial Aviation magazine, "Learjet [was] used to pushing in aluminum at one end [of the plant] and pulling airplanes out the other." As competition heated up, and the cost of development and manufacturing increased, plane building became a cooperative venture involving different subsidiaries of Bombardier. Within several years Learjet fuselages were being manufactured by Short Brothers in Ireland, wings were assembled by DeHavilland in Canada, and only final assembly occurred in Wichita. Morale among both workers and top management began to slip as these changes took place.
In September 1992 the company announced plans for its first plane in 30 years to be a "clean sheet" design--one which was not a variation on an existing aircraft. The new plane was expected to offer mid-size comfort and features in a lighter jet, one that carried six to eight passengers. The new Model 45, like the original Model 23, was slated to make it to market in an astoundingly short period of time, in this case about three-and-a-half years from the inception of the design process. However, a number of technical problems and a much-delayed FAA flight certification (partially caused by new, more rigorous standards adopted by that agency) resulted in a delay of over two years. During this time Learjet was still selling its other models of aircraft and doing relatively well, but the delay in launching the Model 45 further damaged morale, creating a "pressure cooker" environment for designers and executives at the company. Between 1996 and 1999 the company was overseen by four different presidents.
When the Model 45 was finally ready, its price had risen to nearly $8 million from the announced ceiling of $6 million. Delivery of initial orders was delayed by problems with early production aircraft, which required modifications to several systems, including the de-icing equipment. Despite the long, frustrating development process, the end result received rave reviews for its design and performance, and orders for nearly 150 aircraft came in. As Learjet struggled to adapt to its new identity as a part of Bombardier, it appeared that it would be a significantly different kind of company from that which William Powell Lear had founded in 1964, but one which could still create jet airplanes that stood out from the pack.
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William Powell Lear, Sr., company document, Wichita, Kan.: Learjet Inc.
Source: International Directory of Company Histories, Vol. 27. St. James Press, 1999.