Textron: Deliveries Up at Bell, Down at Cessna
The first quarter proved a mixed bag for Bell and Cessna, according to numbers released last month by parent company Textron.
Bell delivered 40 commercial helicopters in the first quarter, compared with 30 during the same period last year. Sales were also strong, with signing of orders for 50 new commercial helicopters, including an agreement with Air Medical Group to deliver 30 helicopters over the next several years.
But despite strong deliveries and sales, revenues declined by $45 million on decreased V-22 and H-1 deliveries and lower commercial after-market activity. Segment profit dropped $16 million from last year’s first quarter, primarily reflecting the lower overall volumes.
According to Textron chairman and CEO Scott Donnelly, “When the [Bell] 525 program really kicks in…we’ll start to see revenue generation and margin in the 2016 and 2017 time frame. So I think Bell on its own will continue to be…a business that grows.” The swing year, he said, will be 2015 as the company transitions out of the V-22 volumes but is not yet fully into Bell 525 volumes.
Cessna’s numbers were not exactly uplifting for the Wichita-based fixed-wing manufacturer. Customers in the light jet market, who tend to be small business owners, are still deferring purchase decisions, “reflecting continued concerns about their financial outlook,” said Donnelly. As a result, he explained, Cessna delivered 32 new jets in the first quarter, six fewer than in the same quarter last year,” resulting in a segment loss in the quarter of $8 million.
Anticipating no recovery in the markets for its business jets, Cessna is paring its 2013 business jet deliveries outlook and now expects deliveries will be down this year compared with last year. As a result, continued Donnelly, Cessna has adjusted its production schedules and is implementing other appropriate cost actions. In addition, “We’ve initiated a salary workforce reduction program, the largest portion of which is a voluntary separation plan.”
On a more positive note, Cessna continues to see good volume in the used-aircraft market. This led to “a significant increase in used jet sales, which resulted in higher overall Cessna revenue, despite lower new [aircraft] deliveries.”
In the long term, Cessna believes the global business jet market has significant growth potential and the company remains “committed to our new product plans, which include introduction of the M2 and the Sovereign and Citation X upgrades later this year, as well as the Latitude in 2015 and the Longitude in 2017.”
Asked what might give Textron the confidence to say of its aviation segments, “Hey, you know what? Actually things are getting better,” Donnelly’s answer was simple.
“More customers signing the bottom line on the deal.”