Dassault Falcon anticipates a substantial increase in aircraft deliveries this year, but production will be cut and, according to CEO John Rosanvallon, there will be “adjustments” in the coming months in terms of cost-cutting measures.
On March 19, Dassault Aviation chairman and CEO Charles Edelstenne announced the French OEM’s sales results for 2008 and reported that during the period the company recorded “a net total of 115 firm orders worldwide for Falcon business jets.”
Sales of business jets in 2008 totaled $3.18 billion, 62 percent of total company revenue. While deliveries this year are expected to total 90 aircraft–18 more than last year–“production of green aircraft will be reduced as market conditions demand,” the CEO said.
According to Rosanvallon, Dassault Falcon had taken steps earlier this year to reduce green aircraft production to eight airplanes a month, and based on the current economic environment, the company is considering further reduction.
In the last quarter of 2008 and the first quarter of this year, Dassault Falcon had about 40 order cancellations, a number Rosanvallon described as “significant.” He pointed out, however, that this represents less than 10 percent of the total backlog.
The unprecedented level of the used aircraft on the market is also a problem. Rosanvallon said the sale of new aircraft is often connected to the resale of the customer’s present airplane, as well as whether or not there is a trade-in commitment.
The good news for Dassault Falcon is that while the total used inventory of in-production Falcons as of late March was 88, almost triple that of a year before, there were only four new aircraft positions on the market. “That’s a lot better than some of the other OEMs,” noted one industry analyst.
On the other hand, there’s more bad news than good.
Rosanvallon noted that this year’s first quarter was the second quarter in a row in which the company posted negative net results, “meaning that [order] cancellations exceed new orders.”
And there may be additional “adjustments” with regard to cutting costs, and the possibility of layoffs, said Rosanvallon, who added that the Dassault Falcon is in the middle of studying adjustments at Little Rock and in Teterboro. “We should know more in early April, and while there may be some adjustments, they will not be as severe as we’ve seen at other OEMs.”
Even with the gloomy outlook, Dassault Falcon continues to move ahead with a number of its current programs. “Dassault has always taken the long-term view [and] will continue our ongoing investments in customer support as well as technology and innovation,” said Rosenvallon.
The company’s investment in customer support included the opening of two new factory-owned service centers last year, one in Reno, Nev., and the other in São Paulo, Brazil, in addition to an increase in the capacity of its Le Bourget and Little Rock service centers.
Two major product development efforts remain on track. Certification of the Falcon 900LX upgrade is expected in the first half of next year, and development continues on the EASy Phase II flight deck with the latest synthetic vision technology.
Regarding the Falcon SMS (super-midsize) business jet program, Rosanvallon said, “The SMS is alive and there is no plan to cancel the program.” But he acknowledged that the SMS might take a little more time to develop than originally anticipated. Research and development on a supersonic business jet, however, are not canceled but have been moved to the back burner.