Textron Chief: Spot Market Persisting for Bizjets

 - April 21, 2017, 1:01 PM

Textron Aviation's backlog has remained relatively flat as business aircraft customers are able to purchase aircraft on the spot rather than booking further out, said Scott Donnelly, the chairman and CEO of parent company Textron. Asked during the April 19 quarterly analyst call whether the book-to-bill for Textron Aviation’s Cessna unit will move above one, Donnelly responded, “I don’t know that it will. I think that we’re really in a mode now where there’s no reason for people to book aircraft very far in advance.”

Cessna is working with business jet customers now as they are ready for delivery. “There’s no reason, given where the industry is, to be looking at deals that are a year out or even six months out,” he said. “I think that’s just the nature of where we are in the market….It’s different than the industry used to be, for sure. But we’ve been doing this for a lot of years now, so it’s just a bit of the nature of the beast.”

The collective backlog for Textron Aviation, including Cessna and its affiliate Beechcraft, remained at $1 billion at the end of the first quarter, roughly the same as it was at the end of 2016 and down slightly from $1.07 billion at the end of 2015.

Despite the spot market for aircraft sales, Textron Aviation is holding the line on pricing, Donnelly said, noting that the company has “reestablished” what it is willing to do in the marketplace. The company saw incremental improvement across models in the quarter. “We certainly had some customers who said, 'Look…give me a little better price, and I’ll do it this quarter. I’ll go ahead and book it now.' As I said, we can’t do that.”

Customers aren’t always happy with that approach, he said, but they realize “these aircraft are still a heck of a price compared to historicals, and it’s a good deal. And that’s why we still see deals closing.”

Demand remains U.S.-centric, he added. The company is seeing some activity in Europe and a few deals in Latin America, Donnelly said, but expects that the market will continue to weigh toward the U.S. over the next year. In the U.S., buyers are a little guarded as they wait to see what happens around the potential tax reform, but are still positive, Donnelly said. Textron Aviation is positive about the pipeline of potential customers in the U.S., he added.