Coming off strong 2010, Gulfstream is prepared for recovery

 - February 28, 2011, 8:30 AM

General Dynamics Aerospace Group ended 2010 with encouraging numbers that Jay Johnson, chairman and CEO of parent company General Dynamics, believes will carry the Savannah-based OEM through 2011.

Speaking at the General Dynamics fourth-quarter 2010 conference call in late January, Johnson described its General Dynamics Aerospace Group, which includes Gulfstream Aerospace and Jet Aviation, as "our primary growth segment." He noted that the group ended 2010 with stronger operating earnings, a strong order book, reduced customer order defaults, backlog growth and a depleted used aircraft inventory.

The last quarter of 2010 was the groupπs best since the third quarter of 2008, with $1.3 billion in revenues, up 7.4 percent compared with the fourth quarter of 2009. And while sales were "down modestly," operating earnings rose from $167 million to $210 million.

For the entire year 2010, the aerospace group's revenues were also up from 2009πs, from $5.171 billion to $5.299 billion, and operating earnings rose substantially, from $707 million to $860 million.

Johnson attributed the growth, in part, to an absence of pre-owned aircraft losses, improved new aircraft-in-service pricing and the continuing rise in aircraft utilization.

The group's service-center network also performed well in the fourth quarter, and business in that sector was up nearly 14 percent in 2010. Johnson emphasized that going forward, service has to grow in lockstep with the international customer base. He added that more than 60 percent of 2010 orders for Gulfstream aircraft were from outside the North American market, reflecting a more diversified customer base. And while buyers were primarily private individuals and privately held companies, he said Gulfstream also saw a return of corporate customers.

Equally good news was that the group ended the year with no pre-owned aircraft in inventory. Johnson said the group realized a modest profit on just over $100 million in sales of seven pre-owned airplanes, an improvement considering that the sale of six aircraft in 2009 resulted in a loss.

In the fourth quarter 2010, orders outpaced deliveries as net orders reached their highest levels since the economic downturn began, and customer order defaults remained at low levels. The end of 2010 saw the value of the backlog increase by $224 million, to $1.8 billion.

With a good 2010 behind it, the General Dynamics Aerospace Group is looking ahead to an equally successful 2011, with deliveries of the redesigned G250 and the Mach 0.995 G650 to begin before year-end. "We expect to deliver 90 large-cabin aircraft–78 G550s and G450s and about a dozen G650s," said Johnson. Gulfstream expects to deliver 15 to 20 medium-cabin business jets, including several G250s.

"We remain flexible and capable of increasing deliveries if and when customer demand warrants," concluded Johnson. He added that aerospace expects to enjoy double-digit growth in 2011, "likely 15 to 16 percent."