Industry Perspective: Gulfstream Aerospace

 - September 20, 2007, 10:56 AM

Joe Lombardo took over as president of Gulfstream Aerospace last April, inheriting the reins to a company in the midst of an unprecedented sales boom and an exploding global market for business jets.

As the hand-picked successor to Bryan Moss, who remains with the company in the role of president emeritus, Lombardo has served as a key member of the inner management team that can claim much of the credit for the company’s success in the last decade. As a result, little will change as Gulfstream prepares to tackle a record order backlog and roll out new products.

Before being promoted, Lombardo served as chief operating officer at Gulfstream, where he’s been since 1996. He started his aerospace career in 1975 at Douglas Aircraft, holding leadership positions in production, planning and manufacturing. He spoke with NBAA Convention News about his new job.

Now that you’ve moved into this new leadership role at Gulfstream, are there changes that you’d like to see made or, since things have been going so well, will you simply continue moving forward as you have been?
One benefit of my being with Gulfstream for 11 years is that the individuals who have been at my side on the leadership team know me and they know each other very well. Quite frankly, the collaborative nature of that group has led us all down a fairly successful strategic path that we all have ownership to. If I were going to change something, then I’d be changing things that I’ve already agreed to do. I think if you were to talk to people not only who work here at Gulfstream but also to our customers, they would agree that how we are positioning ourselves is very encouraging, with the expansion of our facilities, the emphasis on new product development and research and development–the investment here in Savannah alone is over $400 million. So we’re moving forward and changing the way we operate, all for the future good of this company.

Is the current market climate the strongest you’ve seen since you’ve been at Gulfstream, or even since you’ve been in the industry?
Yes, it is, and it is for a couple of reasons. One is, the order intake is certainly greater than at any level we’ve ever experienced. We had a record quarter, and it’s hard to believe that we could have quarter after quarter with more sales than the previous quarter, but we did in the second quarter. The other thing that’s very compelling is the fact that the distribution of that order intake has been changing. Whereas we have relied primarily on North American sales for all but 20 to 30 percent of our orders, last year that began to change fairly dramatically, to the point that 42 percent of our sales were international. In the second quarter, our order intake on the international side was 51 percent, with 49 percent domestic. We have never seen anything like that before. That’s a very significant change in the dimensions of the market. It’s helping us on our order backlog, obviously, but it’s also easing the pressure on the cyclical nature of this business–or what some would think would be cyclical–because now we are not dependent on one economy or one specific region, but instead we’re seeing a lot more variety and diversity in the marketplace.

Apart from North America, which markets do you view as particularly important?
We have what we refer to as emerging markets, and that includes Europe–and when I say Europe, I include Russia–Asia, the Middle East, Africa to some extent and South America. Those markets have begun growing in most cases, maybe with the exception of Africa, at a faster rate than the market in North America. And that’s comparing statistics from 2005 and 2006. The market in China is maturing. There are still some infrastructure and airspace obstacles there that we’re working through, but we’re so positive about that market that we’ve just assigned two brand-new sales directors into China–both of whom speak Chinese–who are helping us expand that market, and we’re starting to see more sales as a result. This has been a long, hard road for us, gaining exposure in that market, but we’re starting to see some traction now.

How many Gulfstream business jets are operating in China?
Including the ones operated by Metrojet in Hong Kong and Air China, there are nine.

What’s the attitude toward the use of business jets from the government, from the general population and from the media in China?
It’s hard to answer that question. I think a lot of it depends on who you talk to. There have been some modest changes in the government. The airspace is pretty much controlled by the military in China. One of the things you hear from general aviation operators is the fact that scheduling a trip into China is a bit problematic. You have to make arrangements well in advance, and so the flexibility that you would like to have sometimes becomes an issue. But then you’ll talk to individuals in the industry who say the government is becoming more accepting of general aviation and that things will change over time. I suppose your guess
is as good as mine whether that’s going to happen quickly or not.

As far as the worldwide market for business jets, what would you point to as being some of the real growth drivers?
If you look at those emerging markets that I referred to, there’s more wealth being generated, not only private wealth but also corporate wealth, and that’s clearly one major factor. We’ve also benefited from the dollar imbalance with the euro. Compared with what you would pay for an airplane with the dollar down compared with what you would if it wasn’t, there’s a significant savings. Another factor, as you’re well aware, the markets have become so global now that companies and individuals are finding the need to expand beyond their own geographic regions, and so that’s one reason why we’re seeing our ultra-long-range G550 basically dominate sales over the other models that we produce. And when I say dominate, we’re selling more G550s than G450s, but then clearly more than the midsize models because of the demand to fly farther.

How long do you foresee your double-digit growth numbers continuing? The market has to cool down at some point, even with markets outside North America picking up some of the slack.
If you look at the published forecasts for general aviation growth over the next 10 or 15 years, they all say the trend is going to continue upward. That trend has certainly existed in the past, but there have been cycles where order intake has dropped dramatically, and we’ve seen that a few times over the last 10 years. So, I can tell you that over the years, long-term, we should continue to see a general increase in sales. But somewhere along the way there is going to be a down tick in the order intake. I just can’t tell you when that’s going to happen.