Duncan Aviation has delayed its plans to build a $58 million aircraft repair hangar in Provo and add 650 new jobs to the area, as part of a series of cutbacks it is implementing for the first time in its 53-year history, according to the state Governor's Office of Economic Development.

On Tuesday, the Lincoln, Neb., company announced plans to cut some production employees' hours and implement pay cuts in all other positions in response to a drop-off in corporate aviation business as the global economic downturn worsens. The cutbacks affect all 2,200 workers companywide.

"We know they have opted to delay their groundbreaking because of the economy, but they're still committed to the project," said Jason Perry, executive director of the Governor's Office of Economic Development. "As the economic cycle becomes more clear to them, they will resume expansion."

Construction of a 320,000-square-foot aircraft maintenance center at Provo municipal airport was supposed to start in spring 2009, and be completed by August 2010. It is now unclear when construction of the company's third full-service center nationwide will begin.

"We're still planning to have a presence in Provo in the next two years, although timing and construction plans will most likely be changing," said Lori Johnson, Duncan's marketing communications manager.

"We are still working on a contingency plan for this project. I don't know what it'll look like at this point for Provo, but we have made a commitment and will evaluate it as we go forward. We do not have more details beyond this point," she said.

Duncan, which services business and government aircraft operators worldwide, announced in October plans to expand its operations on the West Coast by establishing its first aircraft maintenance center in the region in Provo.

"They haven't canceled the project. It will still be a good thing for Provo, it just might take a little longer," said Helen Anderson, spokeswoman for Provo City.

Todd Duncan, chairman of Duncan Aviation, said in Tuesday's prepared statement that the global economic downturn has drastically affected spending on business aviation.

"Flight hours appear to be down 20 percent on a year-on-year comparison, and manufacturers throughout our industry are seeing new aircraft orders being cancelled on a daily basis," he said.

In recent months, the use of corporate jets has fallen as people cut back on charter flights, and more companies either sold their planes or scaled back their flight departments to save costs.

According to data from Aviation Research Group/U.S., a business aviation research company, there were 22.8 percent fewer departures from domestic airports of corporate aircraft in December compared with the same period a year ago.

Image issues

But it's not just a bad economy that's hurting the business aviation industry.

Corporate jets have become a hot-button topic amid the ongoing credit crisis as the cost of owning and operating them has come into question, especially for companies receiving financial support from the government. Public outrage was evident last November when executives of Detroit's Big Three automakers flew in their private jets to Washington to ask for federal bailouts.

Citigroup, which received $45 billion in bailout monies, on Tuesday grounded plans to take delivery of a new corporate jet it had planned to buy before the financial crisis erupted, under pressure from the new Obama administration that's trying to bring more oversight and accountability to the taxpayer-funded rescue.

Duncan said the company hopes Tuesday's cutbacks will enable the company to avoid laying off its workers.

Aaron Hilkemann, president of Duncan Aviation, described the cutbacks as "difficult decisions" the company has had to make, and that many of Duncan's competitors have reduced their work forces in the past several weeks.

"In light of reduced flight hours, corporate flight department closings and reduced discretionary spending by businesses, we need to respond quickly with reductions in prices, wages and hours to remain strong and competitive," he said in Tuesday's statement. "It is also our belief that team members would rather all work reduced hours and keep benefits than have some with no job at all."

Tax credit

The Provo-Duncan deal is the result of more than two years of negotiations and tax and other incentives offered by state and local government, education and economic development groups.

That includes a $6.6 million refundable economic development tax credit that Duncan will receive if it adds the 650 jobs and generates $336 million in new state wages including $22 million in new corporate income tax revenues over the next 15 years.

Johnson could not immediately specify how the cutbacks will affect the amount of tax incentives Duncan is supposed to receive. "It will depend on how we change the plan and without knowing how the plan will change, I can't comment on that either," she said.

GOED's Perry said the state has not given Duncan any money because the company hasn't hired anyone yet. "But the incentive will be in place when they start to hire," he said.

Duncan remains upbeat about the company's prospects, saying it has weathered economic downturns including one in the aftermath of the Sept. 11 terrorist attacks.

As air travel slumped after the attacks, he said the company "froze wages, controlled discretionary spending and used normal employee turnover and attrition to gradually reduce [its] work force."

"Within a relatively short period of 12-18 months, we started to see the economy recover slowly, and we were in an excellent position to capitalize on the impact to our industry," he said.