July 19, 2012
By Alton K. Marsh
Cessna Aircraft turned in a great second quarter, with revenues increasing $111 million and delivery of Citation jets up to 49, compared to 38 for the second quarter of last year. Textron Chairman and CEO Scott Donnelly said in the last half of the year there could be a “deceleration” as customers face economic uncertainties and hold on to their cash.
Those uncertainties include a Jan. 2 budget cut of $109 billion, the first installment of $1 trillion in cuts over 10 years, that Congress thought was a good idea last year. It cuts across all areas of the government. Cessna customers must face the possibility of lower profits that won’t support business jet purchases. There is also a presidential election adding to the uncertainties, along with debt ceilings and tax changes. It could lead, Donnelly said, to “…too many people sitting on the sidelines.” He added that he anticipates “…a tough back half.”
That said, Textron officials have seen a steady, slow recovery of the market as indicated by second quarter results. In Europe, orders once frozen in place due to economic uncertainties have started to thaw.
Bell Helicopter revenues increased $184 million over the second quarter a year ago, and delivered 47 commercial helicopters compared to 22 in the second quarter of 2011.
Donnelly said negotiations for Hawker Beechcraft assets “are not closed to anyone,” noting that current exclusive negotiations between Superior Aviation Beijing and Hawker Beechcraft are subject to approvals and a public auction. Officially, Superior Aviation is a “stalking horse” and is referred to as such in court documents. “We’ll see how it plays out,” Donnelly said. He called the asking price of $1.79 billion a “pretty high number” and added that if assets “in which we have an interest” are reasonably priced, “…we’re interested.” There are several assets that are “…a good fit for our company,” he said.
In answer to a question from Morgan Stanley Managing Director Heidi Wood, Donnelly said cost-cutting efforts at Cessna by Scott Ernest in the year Ernest has headed the company are paying off. Ernest appointed cost watchdogs for every program, taking a holistic approach of how each program affects the future of Cessna. That approach will continue to reap benefits, Donnelly said, but warned research and development costs will rise as newly announced jet programs head for the manufacturing lines.
The new programs include the Citation Longitude announced at the European Business Aviation and Exhibition (EBACE) in Switzerland in May. The $26 million, 4,000-nautical-mile jet does much of the job that the now-canceled Cessna Columbus was supposed to do. Other new jets coming toward the market are the Cessna M2 and Latitude. The Latitude uses a down-sized copy of the cabin door intended for the Columbus.
Sales at Cessna are 60 percent domestic and 40 percent international, Donnelly said. The used market has ceased being a serious threat to the purchase of new aircraft coming from the factory. Aircraft usage is up and customers are coming to Cessna service centers, he added.
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