Bizav deliveries revert to levels recorded in ’99

 - May 8, 2008, 7:11 AM

Shipments of new turbine business aircraft manufactured throughout the world have taken a nose dive since last year. This year’s deliveries totaled 601 units in the first nine months, down 196 (25 percent), from the same period last year, according to figures compiled by the General Aviation Manufacturers Association (GAMA) and AIN.

Turboprops took the biggest hit, from 226 delivered in the first three quarters of last year to 104 in the same period this year, a decline of 53.9 percent. Only the Piaggio Avanti and the TBM 700 single showed an improvement among turboprops.

Business jet deliveries slipped by 13 percent: 497 jets shipped during the first three quarters this year compared with 571 in that period last year. Cessna and Embraer were the only manufacturers that shipped more jets in the first nine months compared with a year earlier.

“These numbers reflect the reality of a weak economy in the U.S. and around the world,” said GAMA president and CEO Ed Bolen.

Interesting Anomalies

Some interesting anomalies emerged in the third quarter. For instance, Raytheon Aircraft delivered 36 percent fewer business turbine airplanes (94 King Airs and jets in the first nine months vs 147 a year ago), but the company reported sales of $451 million in the third quarter, compared with $449 million a year ago. “Sales [revenue] was up 11 percent due to a mix of higher priced aircraft and higher volume of used aircraft,” Raytheon Aircraft said. The company reported it had operating income (typically synonymous with operating profit) of $1 million in the third quarter vs an operating loss of $758 million a year ago. Raytheon claimed a backlog of $4.4 billion at the end of the quarter.

Over the last couple of years, Raytheon Aircraft has lost hundreds of millions of dollars and laid off about 2,000 employees (including another 220 by the end of the year). But the company has a “plan to break even next year,” said Frank Caine, chief financial officer of parent Raytheon Company. Details of that plan were not forthcoming, but it is expected to include sharper cost management and productivity improvements, since the company projects it will deliver even fewer aircraft next year (339 recip and turbine compared with a projected 356 this year).

Wichita’s other business aviation manufacturers, Bombardier Aerospace, Boeing and Cessna, have also cut employment recently in the face of fewer sales and cancellations. Although Cessna delivered 13 more (6 percent) Citations than last year, it delivered significantly fewer piston airplanes. Nevertheless, billings for the two periods were similar: $1.9 billion in this year’s first nine months compared with $1.8 billion in the same period last year.

Cessna’s revenues increased $43 million in the third quarter, primarily due to higher Caravan sales, higher used aircraft sales volume, and higher spare parts and service sales and pricing. These were partially offset by lower sales volume of single-engine piston aircraft–negatively affected by the weak economy. Profit decreased $4 million as the benefits of higher sales and richer product mix were more than offset by the $31 million in cost related to a Lycoming engine recall and customer-care program at Lycoming (This year, for accounting purposes, Lycoming is linked with Cessna), a write-down for used aircraft valuations, and start-up costs related to the new Sovereign business jet. Backlog at Cessna was $4.6 billion at the end of the quarter, excluding the orders for more than 200 of the recently launched Citation Mustang.

Cessna’s parent company, Textron, recently did away with a two-year-old corporate structure as part of a new “strategic effort to improve operating efficiencies” (see story on page 1).

Dassault, which delivered 10 fewer Falcons in the first three quarters than the same period last year, foresees reducing production and delivering 60 to 70 airplanes this year, compared with 75 last year. The French manufacturer expects to deliver about 60 Falcons next year (AIN, November, page 6).

Better Times Ahead?

New-airplane deliveries by General Dynamics’ Gulfstream Aerospace were off by eight units in the respective nine-month periods, but the Savannah manufacturer expects better results by year-end. Net sales for Gulfstream in the third quarter fell nearly 12 percent, from $838 million last year to $739 million this year, but were up nearly 3 percent in the first nine months, from $2.3 billion last year to $2.4 billion this year. According to third-quarter filings by General Dynamics, operating income for Gulfstream was also off this year, declining nearly 15 percent from $462 million in the first nine months of last year to $394 million this year.

Gulfstream To Change Reporting

A Gulfstream spokesman said that beginning in the fourth quarter, the company will no longer provide separate delivery figures of each of its models, but only a total for the family. This is a critical change in public disclosure of information that some industry analysts believe might spread to other business jet companies that make more than one model. However, a spokesman for Dassault said his company doesn’t foresee any need to change its sales or shipment disclosures to the public.

Piaggio, which delivered one Avanti more in the first nine months vs the corresponding period last year, said it is “expecting a much better fourth quarter.” In all of last year, Piaggio shipped 12 Avantis, double the tally in 2000.

Boeing Business Jet deliveries in the first nine months plunged by more than 50 percent over the same period last year (six deliveries vs 13), but the BBJ continues to significantly outpace its most direct competitor, the Airbus Corporate Jetliner (ACJ). To date, there are more than 57 BBJs in service, with nearly 20 more in various stages of completion. Orders and commitments totaled 83 at press time, according to Boeing. So far, the BBJ program has been spared layoffs and other serious measures that have significantly affected the airline side of Boeing.

While most manufacturers are adjusting to fewer sales by reducing production rates and employment levels, Bombardier has taken the severe step of suspending production of several of its business jet models and ending production of
its Learjet 31A (AIN, November, page 1). Bombardier Group president and CEO Robert Brown said that “persistent weakness” in the U.S. economy has continued to soften demand for business aircraft.

Meanwhile, business aviation trade groups are disappointed that little federal legislation has been introduced or passed to help alleviate the continued financial suffering by manufacturers, their suppliers, FBOs and others. “Most of the general aviation world has truly been the forgotten child in the aviation family,” said National Air Transportation Association president James Coyne. “I marvel at how the airlines are crying foul once again while many general aviation businesses have not received one iota of financial assistance.”