You knew this already, but the investor calls by General Dynamics (the owner of Gulfstream) and Cessna’s parent Textron this week confirmed that 2012 was not a great year for business aviation.
To be fair, Gulfstream which delivered six G650s in 2012 had pretty good results especially in comparison with other divisions of General Dynamics, with aerospace sales up 15%. Gulfstream is planning 139 green deliveries (113 large cabin and 26 mid-cabin) in 2013.
General Dynamics’ net loss for 2012 was $332 million mainly due to conservative write-downs. It made a $2.55 billion net profit in 2011. Jet Aviation also wrote down $191 million of maintenance assets citing poor economic conditions and other manufacturers performing maintenance work that was previously done by third-parties like Jet.
Cessna – which acquired two facilities in 2012 – was part of this trend. Speaking this week, Scott Donnelly, Chairman and CEO, of Textron was admirably candid about the market.
He admitted that demand is uncertain across all of the aircraft types that Cessna covers. “I think the market is still a little bit skittish. It really does seem to swing as we go through the year,” said Donnelly. “It’s peculiar that we seem to see spikes in interest in different sizes and different classes of aircraft, but I can’t say that I’ve been able to figure out how to correlate that to anything.”
His remarks are borne out by brokers. January is always a quiet month for business jet sales but several brokers say they are seeing significant numbers of large cabin aircraft – including G550’s, Globals and Falcon 7X’s – come onto the market. It is still clearly a buyer’s market and price is the biggest driver of buyer interest regardless of aircraft size.
Several brokers also criticised certain manufacturers for selling trade-ins too cheaply and depressing other aircraft values.
When asked by an analyst which part of Textron was his biggest worry Donnelly said: “I’m always most concerned about Cessna just because the sensitivity around what’s going on in the market. We don’t have a whole lot of control over what the market is doing.”
He is right, no one controls the market. But manufacturers have the ability to influence it more than most.