Spirit layoffs a tough hit to Wichita, but there’s ‘light at the end of the tunnel’

Was Friday a tough day in Wichita? No question.

Will Spirit AeroSystems’ 2,800 layoffs cause significant ripple effects for the entire community and beyond? Also no question.

Multipliers show that almost 5,800 jobs will be impacted in this market, and there will be a $220 million payroll impact from the Spirit workers alone if they’re not re-hired until 2021.

Due to lost retail sales tax collections, there could be a $1.25 million fiscal impact in Wichita, $617,000 in Sedgwick County and almost $13 million in the state.

However, because these layoffs are the result of uncertainty surrounding the production of the troubled Boeing 737 Max, the situation is different than layoffs caused by a recession or a downturn in aviation.

There “is a light at the end of the tunnel that we did not even see in 2009 and 2010,” said Keith Lawing, president and CEO of the Workforce Alliance of South Central Kansas.

“It does not mean it is not critical . . . but it is different in the sense that it’s not going to be as widespread, certainly at this point,” Lawing said.

Jeremy Hill also said there’s reason not to despair.

“I’m still going to be optimistic about Spirit’s longer-term forecast and their role in the economy and helping this economy grow,” said the director of the Center for Economic Development and Business Research at Wichita State University.

Economic diversification

For the immediate future, though, Wichita Democrat Rep. John Carmichael said, “It is a very serious circumstance when the largest employer in the city announces layoffs.”

The 2,800 workers represent more than a fifth of Spirit’s approximately 13,000 workers.

Carmichael said Wichita’s status as the Air Capital of the World means the city is heavily dependent on aircraft production and doesn’t have the diversification in the local economy to absorb a layoff of this size without consequences to the city’s overall economic health.

“It’s a two-edged sword,” Carmichael said. “When we say we make the best airplanes in the world, we also have the circumstance that without diversification of the economy . . . it will have an impact.”

City Manager Robert Layton said plans are in the works to create something of a diversification czar to coordinate efforts to expand Wichita’s employment opportunities.

The position won’t be funded by the city but “in the next 30 days, we’ll be bringing people to the table who are willing to fund that.”

Hill said the idea of diversifying Wichita’s workforce “is not a useful notion in this context.”

“I don’t think diversification is the right answer, which is the one that most people quote.”

He said the demand for commercial aerospace is strong, and Spirit is a critical part of it.

“We have a great investment in Spirit, and that partnership should not be undervalued in this situation.”

Like everyone else, Hill still has concerns.

“These very talented people will need jobs, and if our market can’t provide that . . . they’ll be forced to migrate out to other opportunities,” he said. “That’s the worst loss that we could have.”

What’s next for Wichita

Brandon Whipple won’t officially be Wichita’s mayor until Monday, but he already spent much of the past week meeting with local, regional and state officials to plan for the fallout from Spirit’s expected layoffs. When they happened Friday, he immediately cleared his schedule.

“Right now we are formulating a short-term plan that focuses on the workers and a long-term plan that will stabilize the aviation sector.”

Because other sectors are doing well, he said, there are opportunities for some of the laid-off workers.

“I’m positive that as a community, we’ll get through these tough times.”

The “tough times” already include local aviation suppliers who are, or shortly will be, laying off or furloughing workers because of the 737 Max issues.

For instance, Cox Machine does 30% of its business on the 737 and last week furloughed employees — the first time it has done so since 2008.

COO Don Harris called the furloughs “more of a right-sizing for what our current demand is.”

Harris won’t say how many of the company’s 325 employees were furloughed.

He said Cox Machine grew significantly in the past year.

“Our biggest concern has been getting good talent.”

Harris said that will remain a concern as the company continues to work with WSU Tech and the Workforce Alliance for future needs.

“That’s where our biggest challenge is going to be.”

As aviation companies and their suppliers try to balance their workforce needs with production demands, city officials and community leaders have to balance an economic hit such as this round of layoffs with some of the projects that are attempting to move Wichita forward.

“You’ve just got to keep planning and thinking long term,” said Jon Rolph, co-chair of the Greater Wichita Partnership.

Rolph is a member of the Riverfront Legacy Master Plan coalition, which on Tuesday will present a proposal for redevelopment of the east bank of the Arkansas River downtown.

He said it will be months before a plan is adopted, and even then, it doesn’t mean it will be implemented at that time.

“When you’re doing a long-range strategic plan, you’re looking at what’s possible and what fits,” Rolph said.

If it’s not the right time to take action — for whatever reason — “then you hold on to the plan.”

“The community needs to have an idea of what its priorities are and where and how it wants to invest,” Rolph said, adding that rallying around workers and helping families has to be the No. 1 priority right now.

A deeper dive

Projected impact numbers following the Friday layoffs may be alarming, but they’re also likely to be mitigated by various factors, experts said.

To start, said Lawing of the Workforce Alliance, workers will have two months of pay.

Aerospace workers make an average of $81,000 a year, but some of those affected make less than that and may be able to transition more easily into other jobs.

“They can find jobs at comparable wages,” Lawing said.

“There are a lot of jobs open in this community right now. Companies are still hiring.”

The Workforce Alliance has what Lawing calls a rapid response program for situations like this to help laid-off workers navigate unemployment and insurance issues. He said there are also training funds available to help people who want to start a new career.

For others, there are jobs that may not offer as much as they were making but could be good interim solutions until — not if — they’re hired back, Lawing said.

“We do believe it will be a ‘when.’ ”

Hill, the WSU economist, concurs.

Also, he said, it’s clear that Spirit is “trying to hold onto labor as best they can.”

“The amount of layoffs is much smaller compared to the share of revenue that’s coming from Boeing.”

He said a strong workforce “is so critical for their long-term growth.”

Along with immediate hits to the supply chain, Hill said there will be an impact for retailers and other businesses that depend on discretionary spending.

“If you’re on the retail side, you’re going to feel the impact of this,” he said.

In turn, “We will feel it as a city and as a state.”

Hill said he believes a cut in spending already started in anticipation of layoffs.

“In aerospace, there’s been a lot of nervousness.”

Wichita is unlike a lot of aviation towns that had their lowest aerospace employment around 2010.

Hill said Wichita lost aviation jobs from the most recent peak of 43,290 in 2008 all the way to 2017 when it had 29,795 jobs.

In 2018, the industry bounced back here with 31,438 jobs and grew by more than 1,000 in 2019.

“The 2,800 jobs will probably really revert us back to that 2017 number,” Hill said. “This event could also affect our longer-term trajectory.”

Lawing said it’s concerning that no one in Wichita has any control over what’s happening. Only the FAA and Boeing do.

He said it’s still a better alternative than a recession or a widespread downturn in aviation, which would have larger implications for the community.

“We’re not in the same kind of situation at all.”

Contributing: Dion Lefler and Jonathan Shorman.

Carrie Rengers has been a reporter for almost three decades, including 16 years at The Wichita Eagle. Her Have You Heard? column of business scoops runs five days a week in The Eagle. If you have a tip, please e-mail or tweet her or call 316-268-6340.