Post by andypspotter on Apr 18, 2018 21:46:54 GMT
Textron Aviation’s sales backlog for new business jets and turboprops swelled suddenly by 33% from the end of December to 1 April, reversing a long-term trend in a stagnant market.
The Wichita-based manufacturer of Cessna and Beechcraft-branded aircraft finished the first quarter with a $1.6 billion backlog, or $400 million higher than on 31 December. It was the largest increase since Cessna acquired Hawker Beechcraft in 2014 and absorbed the latter’s backlog. Since 2015, Textron Aviation’s combined backlog has hovered between $1 and $1.2 billion.
But the chief executive of parent company Textron downplayed the first quarter backlog surprise, which one analyst on an earnings call on April likened to a “dam bursting”.
“I wouldn’t say it’s a dam bursting,” Scott Donnelly replied on the call.
Despite the three-month order windfall, Donnelly remains dissatsified with the profits earned on each aircraft sold, suggesting the business aviation sector is not yet strong enough to afford manufacturers pricing power over customers.
“We’re still at price levels that we’re not very happy about,” Donnelly says. “The amount of capital and the amount of investment you make in this business warrants a better return. We have been walking away from deals that are at price levels that are just not acceptable to the business.”
Overall, Textron Aviation revenues increased by $1 billion during the quarter, a 4% increase over the same period last year. Revenues grew by about $40 million despite delivering only 36 aircraft in the first quarter, or one more than last year. Donnelly attributed $9 million of revenue growth to improved pricing, leaving about $30 million credited to a shift towards more expensive models and options.
Textron Aviation is not considering increasing business aircraft production significantly despite the jump in sales backlog, Donnelly says, adding a few deliveries for certain models is possible.
The company now plans to certificate the first super mid-size Cessna Citation Longitude in the second quarter, a slight delay from the original goal of the fourth quarter last year.
Meanwhile, development of Textron Aviation’s first large cabin jet, the Cessna Citation Hemisphere, remains suspended, Donnelly says. The Hemisphere is designed with the Safran Silvercrest engine, which is struggling to overcome a series of design flaws. Dassault canceled the Silvercrest-powered Falcon 5X in the fourth quarter last year and launched the slightly larger Falcon 6X with Pratt & Whitney Canada engines. Donnelly has said that Textron Aviation would walk away from the large cabin segment if the problems with Silvercrest cannot be resolved.
Textron Aviation is still waiting “to see how the engine plays out”, Donnelly says, without elaborating.
Internally, the company’s focus on research and development has shifted from the Longitude and Hemisphere to smaller aircraft projects, such as developing the Cessna Denali single-engined turboprop and the Cessna SkyCourier twin-engined utility turboprop.
The Wichita-based manufacturer of Cessna and Beechcraft-branded aircraft finished the first quarter with a $1.6 billion backlog, or $400 million higher than on 31 December. It was the largest increase since Cessna acquired Hawker Beechcraft in 2014 and absorbed the latter’s backlog. Since 2015, Textron Aviation’s combined backlog has hovered between $1 and $1.2 billion.
But the chief executive of parent company Textron downplayed the first quarter backlog surprise, which one analyst on an earnings call on April likened to a “dam bursting”.
“I wouldn’t say it’s a dam bursting,” Scott Donnelly replied on the call.
Despite the three-month order windfall, Donnelly remains dissatsified with the profits earned on each aircraft sold, suggesting the business aviation sector is not yet strong enough to afford manufacturers pricing power over customers.
“We’re still at price levels that we’re not very happy about,” Donnelly says. “The amount of capital and the amount of investment you make in this business warrants a better return. We have been walking away from deals that are at price levels that are just not acceptable to the business.”
Overall, Textron Aviation revenues increased by $1 billion during the quarter, a 4% increase over the same period last year. Revenues grew by about $40 million despite delivering only 36 aircraft in the first quarter, or one more than last year. Donnelly attributed $9 million of revenue growth to improved pricing, leaving about $30 million credited to a shift towards more expensive models and options.
Textron Aviation is not considering increasing business aircraft production significantly despite the jump in sales backlog, Donnelly says, adding a few deliveries for certain models is possible.
The company now plans to certificate the first super mid-size Cessna Citation Longitude in the second quarter, a slight delay from the original goal of the fourth quarter last year.
Meanwhile, development of Textron Aviation’s first large cabin jet, the Cessna Citation Hemisphere, remains suspended, Donnelly says. The Hemisphere is designed with the Safran Silvercrest engine, which is struggling to overcome a series of design flaws. Dassault canceled the Silvercrest-powered Falcon 5X in the fourth quarter last year and launched the slightly larger Falcon 6X with Pratt & Whitney Canada engines. Donnelly has said that Textron Aviation would walk away from the large cabin segment if the problems with Silvercrest cannot be resolved.
Textron Aviation is still waiting “to see how the engine plays out”, Donnelly says, without elaborating.
Internally, the company’s focus on research and development has shifted from the Longitude and Hemisphere to smaller aircraft projects, such as developing the Cessna Denali single-engined turboprop and the Cessna SkyCourier twin-engined utility turboprop.