April 17, 2013
By Alton K. Marsh
Cessna Aircraft Co. will pause its entry-level jet production lines to await a stronger demand, a move that has caused parent company Textron to reduce its forecast for earnings per share in 2013. Aircraft already in production will be built to a point where they can be quickly completed when demand for the jets increases.
Cessna lost $8 million in the first quarter, compared to a $6-million loss in the first quarter of 2012. The company delivered 32 jets in the quarter, down from 38 jets in the first three months of 2012. Textron and Cessna officials had expected a better year than 2012, but a delay in purchase decisions by customers for the Citation CJ2, -3, and -4 plus the Mustang had created an unacceptable demand for lower prices. Those are the aircraft that will be paused. One of the reasons for delays in purchases, said Textron Chairman and CEO Scott C. Donnelly, is the threat of user fees. Donnelly said that despite his opinion that user fees won’t be passed by Congress, there is still concern among buyers of “…getting whacked by fees of $100 per flight.”
The last of the older Sovereign models have been sold, but upgraded ones will not be available for delivery until the third quarter. For that reason, Donnelly predicted Cessna will be in the red for the second quarter as well. Revenues at Cessna increased by $39 million, primarily due to sales of used aircraft. There was still an $8-million loss overall. The Cessna backlog at the end of the first quarter was $1.03 billion, down $28 million from the end of 2012.
Textron officials based their lower earning prediction solely on the soft demand for business jets. On April 2 Cessna offered a voluntary workforce reduction program which will also keep profits low.
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