By Skies Magazine | April 18, 2013 Estimated reading time 2 minutes, 52 seconds.
Soft demand for business jets in the first quarter of 2013 is causing Cessna parent company Textron to revise its forecast for the year.
In Textron’s first quarter earnings call this week, CEO Scott C. Donnelly said that Cessna delivered only 32 jets in the quarter, down from 38 a year ago, resulting in a segment loss in the quarter of $8 million.
We were hopeful that demand would recover as the impact of last year’s election and fiscal uncertainties were behind us. We also thought the recent strength in U.S. equity markets would have supported improved business confidence and therefore, business jet demand, Donnelly said during the call. However, customers, especially in the light jet segment, who tend to be small business owners, continue to defer purchase decisions, reflecting continued concerns about their financial outlook.
Because of the lack of recovery in the business jet market, Textron is reducing its 2013 business jet delivery outlook and now expect that deliveries will be down this year compared to 2012. This reflects the company’s expectations for lower deliveries in the light category, partially offset by growth in the midsized category. On this basis, Textron is reducing its guidance for earnings per share from continuing operations to a range of $1.90 to $2.10. The company is also lowering projected cash flow from continuing operations of the manufacturing group before pension contributions to about $400 million as a result of the lower expected Citation deliveries.
Accordingly, we’re adjusting our production schedules and implementing other appropriate cost actions at Cessna, said Donnelly. In addition, we’ve initiated a salary workforce reduction program, the largest portion of which is a voluntary separation plan.
Despite these immediate actions, Donnelly said Textron believes the global business market has significant long-term growth potential. He said the company remains committed to its new product plans, which include the introduction of the M2 and the new Sovereign and Citation X models later this year, as well as Latitude in 2015 and the Longitude in 2017.
And by the way, Donnelly added, we’re still out there selling hard. I mean, we’re going to do everything we can do to sell aircraft. . . . But we just have to be open about the fact that, that light market just hasn’t recovered at this point, contrary to our expectations.
