Despite the global economy, life is good for Gulfstream. Sales in the fourth quarter of 2011 were up 20% compared to the year before, the G650 and G280 teams are racing to deliver the first aircraft to customers; and US customers are back buying.
Larry Flynn, who became CEO in 2011, is clearly enjoying his role. Having joined Gulfstream 17 years ago – when it was delivering just 20 aircraft a year – he has been through several down-markets and is now feeling optimistic.
Corporate Jet Investor met up with Flynn in Gulfstream’s hometown of Savannah, Georgia.
Are you enjoying being president?
Flynn: “Who wouldn’t want this job? I have had the opportunity to walk around every office and every location and there is incredible energy from our employees.”
Your timing with the G650 has been great. You booked orders in the upturn and they deliver as demand picks up again?
“We have been very fortunate with timing. We are not smart enough to hit timing but we do invest in research and development
– which is basically engineers – through the cycle. We have a campus full of engineers who are always working on new products and General Dynamics let us invest in the downturn.”
How have G650 orders held up?
“The big moment was quarter four last year when all G650 customers were asked for a payment. We were very happy when they came in.”
Are you moving slots around if someone pulls out?
“We have a firm policy that if someone cancels all orders move up. We are not wavering this although there is no lack of asking.”
Is the success of the G650 affecting sales of other aircraft?
“Our salespeople go to customers with the full range of aircraft and make sure that the customer gets the right aircraft for their needs. Other large cabin sales are doing quite well and the G650 also has a significant price difference to other aircraft.”
Where is demand for new aircraft coming from?
“In 2011, 70% of our sales were international, 30% were domestic. In the last quarter of 2011 they were 60% international, 40% domestic. In the first quarter of 2012 they were 40% international and 60% domestic.
“China has been hot but it is very encouraging that US buyers are back. Russia is good, with oil prices holding up. Latin America is a little disappointing. In the Middle East we delivered all of the region’s backlog last year but new orders did not show up. Parts of Africa – particularly West Africa – are very encouraging.”
What sort of US customers are buying?
“The Fortune 500 is back. There is a lot of demand from the mid-west – trucking companies, energy companies, agricultural ones and others. In quarter four, the two coasts woke up.
“These companies had aircraft and understand the benefits. It is fiscally responsible to not buy aircraft when company is not sure about its future. After 9/11, confidence just turned off. The same was true after Lehman went under. It is now returning. They are more confident now.
You were the only manufacturer not to bid to work in a joint venture with AVIC, why was that?
“We have had other opportunities and not just AVIC , we have had provinces asking us to work with them. I tell them all the same answer. We spent $400 million in an expansion programme ending 2010 and launched a $500 million programme in 2011, that is on-going now. This means we have enough manufacturing capacity to meet global demand
until the end of this decade.”
You clearly had to joint venture in Beijing but that is not really Gulfstream’s style. You would rather have owned it out right wouldn’t you?
“Customers want factory service and they have to have it. Given the choice we would have had a 10% owned facility. But it will be named Gulfstream Beijing and be operated by Gulfstream people.
“Customersand operators will not care about the shareholding they will just see it as aGulfstream facility. We take customer support seriously. We have the largest company owned product support business and Jet Aviation adds to that.
“In Europe, we have invested in a very impressive facility in Luton. Seven years ago the facility had around 40 employees now it has 150 employees supporting aircraft in Europe, the Middle East and Russia.
“Some 3,500 out of the company’s 12,000 staff support existing aircraft.”
Is there a danger that Gulfstream will get complacent?
“We are always going to be very humble. We are very focused on customers and that stops us from getting carried away. If you
don’t stay focused you get knocked over.”