Jim Schuster charts stable course for Raytheon Aircraft

 - October 30, 2006, 8:55 AM

How has the past year been for Raytheon Aircraft?

It’s been a great year for Raytheon Aircraft. Four years ago we set out to provide the highest quality and best support in the industry. We’ve really raised the bar, and I believe we’ve completely transformed the business aviation industry because of this.

Financially we’ve gotten better every year. We’ve never missed a financial commitment to Raytheon Corporation. Our financial progress is steady and is tracking ahead of what we predicted. This is an important indicator, and we’ve surprised a lot of people with our progress.

Raytheon has been gaining market share, and we’re taking advantage of the strong market.

How are sales trending? Have oil prices or the pre-owned market affected sales?

The markets are very strong now. We have a healthy jet backlog, and the turboprops are also doing well. Our third-quarter numbers tell the story: we delivered 29 business jets and 27 King Airs in the quarter, bringing turbine airplanes delivered in the first nine months of this year to 145 versus 128 in the same period last year. Based on improved earnings, overall bookings and sales expectations, we’ve increased this year’s delivery forecast from 256 turbine airplanes to 267.

The used aircraft market, which is strong, is maybe the most telling indicator of overall market conditions in the general aviation industry. As pre-owned inventory swells, we see a decrease in sales and thus backlog, and vice versa. Right now the pre-owned inventory of late-model business jets is low.

As far as we can tell, oil prices haven’t been affecting sales. If anything, they’re helping our turboprop line.

Raytheon Aircraft has made great progress in product support. How was this achieved and what is being done to make more gains?

The linchpin of our strategy has remained the same over the past four years–provide great products with matching support. Our customers appreciate what we’re doing in this respect.

Every aircraft will have a problem or break down at some point, but what customers are looking for during this time is how they are treated–whether it comes to parts, field reps, customer-service attitude or senior leadership. We want them to walk away knowing that we did everything we could to get their aircraft back in the air.

Four years ago, people would have laughed if someone said that Raytheon would [be right behind first-place] Gulfstream in the AIN 2005 Product Support Survey [in the category of newer business jets]. But we did it.

When will the Hawker 4000 (née Horizon) receive full FAA certification? What’s next in the product line for Raytheon?

The Hawker 4000 will indeed get full FAA approval by year-end. Additionally, we expect the provisional order for 50 of the super-midsize jets [30 firm, 20 options] from NetJets to be finalized soon. This order will double our current backlog for the airplane.

As for other improvements, we’ve already upgraded the King Air 200 and 350 with the Rockwell [Collins] Pro Line 21 avionics system, and we’ve put the Garmin G1000 in the Bonanza and Baron. We’ve also introduced the King Air C90GT, the 800XPi and Premier IA in the past year. Additionally, there’s the T-6B Texan II, which has a HUD. So we’ve had a lot on our plate recently. And we introduced the Hawker 850–a wingleted Hawker 800XPi with upgraded Pro Line 21 avionics–at last month’s NBAA Convention.

Will Raytheon Aircraft develop a very light jet [VLJ]? Can the King Air C90GT, a souped-up version of the C90 turboprop twin, really compete with the proposed VLJs?

The C90GT will be able to compete with the VLJs. When VLJs finally come to the market with actual performance data and people have the chance to get into them, the King Airs are going to do just fine. The VLJs will be a sacrifice of payload for performance.

I wouldn’t say a Raytheon VLJ is out of the question, but we haven’t seen a design that would make sense from a business perspective, given our current product line. At this point I don’t see a VLJ in our future–it’s a very crowded market segment and I’m not real sure that there’s room for another competitor.

We looked at the Avocet design as an alternative–in fact, we looked at every VLJ out there–and we didn’t see an economic model that worked.

I don’t subscribe to the theory that there will be thousands of VLJs shipped per year. There will be a VLJ market segment, but I think it will be much smaller than most people believe it will be. This end of the market will be extremely price-sensitive and is more difficult to make a profit in. Our opinion is that the VLJ segment isn’t the right place for Raytheon to be.

Since the HondaJet has the same basic construction as the Premier and Horizon (that is, composite fuselage and aluminum wing), would Raytheon consider partnering with the Japanese automaker on this VLJ design?

It’s an interesting airplane design. Honda technologically is a savvy company with limitless resources, so we’re not real sure what its intentions are with the HondaJet.

A partnership between Raytheon and Honda isn’t an impossibility, but nothing is going on right now. We’d have to take a much closer look at the design  before ever going into the project.

What do you think about the supersonic business jet [SSBJ] designs from Aerion and Supersonic Aerospace International? Will Raytheon get involved with either program?

I view SSBJs as a long- or very long-range business strategy. The prospects for having an SSBJ in the general aviation marketplace exceed my ability to see into the future. I suspect they’ll be there at some point, but we’re uncertain about the market.

The guys at Aerion are smart, and they’re good people. I guess it’s possible that Raytheon could be part of a consortium to build an SSBJ, but don’t expect any announcements soon.