Anti-French sentiment doesn’t worry Dassault

 - January 17, 2008, 11:06 AM

Dassault Aviation, which next month will celebrate the 40th anniversary of the first flight of the Mystère/Falcon 20, said it has managed to stay afloat despite the current global aerospace crisis thanks to its Falcon products. But Charles Edelstenne, the group’s chairman, already predicts lower revenues for its business aviation division this year because of the “present climate and the consequences of conflict with Iraq.”

He said that since the end of last year there has been a slowdown in the business aviation market. Orders for eight Falcons placed last year have been canceled, four of them toward the end of the year. “We are at a low point in the cycle and, with the imminence of war, in an uncertain period that does not favor growth. If there is a trend, it is probably downward,” Edelstenne said. He believes that the different political visions of France and the U.S. would “not have a long-term effect on this business.”

Dassault Falcon Jet president John Rosanvallon last month said that in recent weeks only one prospective U.S. customer has questioned the French origins of the Falcon. He stressed that the U.S. content of the Falcon is “high,” at about 50 percent. Rosanvallon expects U.S.-French relations to “return to normal.”

It is scaling back Falcon production from six airplanes a month last year to five a month this year and four a month next year. According to Edelstenne, this could rise if market demand improves. He did not anticipate any major effects on Dassault’s 8,800-strong workforce “at the moment, as long as the crisis in aerospace does not worsen or last much longer.” There would be no layoffs, but the labor force would be thinned by about 500 through attrition.

Dassault reported operating profit last year of €472 million ($519 million)–a 5.8-percent hike from 2001. Net profit amounted to s312 million ($343 million) on sales of €3.43 billion ($3.78 billion), down marginally from €3.47 billion ($3.81 billion) in the previous year. Edelstenne did not think that the company would be able to repeat the performance this year; he expects revenues to fall and profit margins to shrink from the 13.7 percent of consolidated sales recorded last year. But he said there could be a “surprise in the next few months if the Iraq situation is solved and the economy recovers.”

Business jet activity, which last year accounted for 65 percent of its revenues–compared with 76 percent in 2001–and 77 percent of Dassault’s orders, is expected to fall this year. Falcon sales accounted for 37 percent of Dassault’s €10.04 billion ($11.05 billion) order book last year, with export defense orders representing 33 percent of the total and French defense contracts the remaining 30 percent. Falcon deliveries last year fell to 66 from a record 75 in 2001, and Edelstenne estimated that Dassault will deliver 50 to 60 Falcons this year.

The company last year garnered €3.52 billion ($3.87 billion) in consolidated orders for 72 business jets, none of them from NetJets. This is one fewer than in 2001, when NetJets placed an order for 34 Falcons for its fractional-ownership program. The Falcon 7X, Dassault’s new 12- to 19-passenger, 5,700-nm trijet, accounted for 29 of the business jets ordered last year. Edelstenne said the 7X program was “going well,” with first flight expected in the first half of 2005 and first delivery at the end of 2006.

Meanwhile, Dassault’s Falcon 2000EX was due to complete FAA and JAA certification at the end of last month, with first customer deliveries following immediately. Powered by two 7,000-pound-thrust Pratt & Whitney Canada PW308C turbofans, the 8- to 14-passenger 2000EX offers a range of 3,800 nm, 760 nm more than the 2000. At a normal Mach 0.80 cruising speed, the 2000EX allows westbound nonstop flights from Paris or London to the U.S. East Coast even into stiff headwinds, or eastbound flights to Europe from the U.S. Midwest.

The 2000EX, which made its maiden flight on Oct. 25, 2001, has already logged firm orders for more than 50 aircraft. Its test program will have included about 500 hours. Rosanvallon confirmed Dassault has had to adjust upwards the aircraft’s fuel capacity to compensate for the increased specific fuel consumption of the P&WC engines.

The flight-test program took longer than originally anticipated, but delivery schedules remain unaffected. The first 30 Falcon 2000EXs will have the Rockwell Collins avionics suite found on the 2000, after which the new EASy cockpit will be the standard avionics.