Textron has no plans for big Cessna jet
Jan. 30, 2012, Providence, R.I. - Cessna Aircraft’s parent company, Textron, put to rest questions of whether Cessna would resurrect a plan to build a big business jet.
“It would be a huge investment to go do that,” Textron chairman and CEO Scott Donnelly said Wednesday about re-entering the large-business-jet market. Donnelly spoke on a conference call about the company’s earnings.
The investment in a big business jet would be at the expense of the small and mid-sized market, he said. During the economic downturn, Cessna shelved a plan to build the Citation Columbus, its largest aircraft ever.
The large-jet market has held up better and recovered more quickly than the small- and medium-jet market, where Wichita business jet manufacturers compete.
“The large market is pretty well served,” Donnelly said. “I don’t think it would be the right use of our capital.”
Despite the continued downturn, profit, revenue and business jet deliveries were up last year at Cessna, although its order backlog fell by $1 billion during 2011. It expects deliveries to rise modestly in 2012 with another increase in 2013.
Cessna delivered 183 jets last year, up from 179 in 2010, company officials said. For the fourth quarter, it delivered 67 Citation business jets, compared with 79 during the same time a year ago. It delivered a higher volume of used jets, single-engine aircraft and Caravans.
Cessna profit for the year totaled $60 million on revenue of $3 billion, up from a loss of $29 million in 2010 on revenue of $2.56 billion.
Robert Stallard, aviation analyst with RBC Capital Markets, said earnings results for Cessna were better than anticipated.
“But we do not see it as a good sign that the backlog was again down in what was expected to be the strongest quarter for sales,” Stallard said.
Cessna’s backlog has continued to contract since the end of 2008, when the company’s orders totaled $14.5 billion. At the end of 2010, the order backlog totaled $2.9 billion. It totaled $1.9 billion at the end of 2011.
Today’s market continues to be a “spot” market, Donnelly said. Rather than have an order book that’s sold out for the year, the company relies on sales throughout the year to make delivery forecasts.
“But we believe market demand should increase throughout the year,” Donnelly said. “It’s all about selling aircraft.”
At the same time, the first quarter has started off stronger than the beginning of 2011, he said.
“Demand is just starting to come back,” Donnelly said.
About 70 percent of last year’s deliveries were shipped to U.S. customers, versus 30 percent to international customers. That trend is expected to continue through 2012.
In the meantime, Textron reported a loss of $19 million for the fourth quarter last year on revenue of $3.25 billion. That compares to a profit of $60 million on $3.13 billion in revenue for the same time a year ago. The report records an adjustment for golf mortgage receivables and a charge for organizational streamlining at Textron Systems.
For the full year, Textron recorded revenue of $11.3 billion, compared to $10.5 billion in 2011. It posted $591 million in profit, up from $553 million in 2010.