Cessna: “No sign of light jet improvement”

Cessna delivered 20 business jets in the second quarter of 2013, down from 43 in the same three months of 2012. It also said the first deliveries of the M2, Citation Ten and new Citation Sovereign will be delayed by a few months.

In April, Cessna announced that it would cut production of lights jets and reduce the size of discounts. Because of this the manufacturer said it sold less aircraft but did achieve higher prices. However, it is still selling at below list price and has unsold aircraft. 

“I don’t want to mislead anybody,” says Scott Donnelly, chairman and CEO of Textron. “We got better pricing in the quarter both sequentially and year-over-year, but we’re hardly taking aircraft back to list pricing. These are still attractive prices for customers versus historical levels, so there is still discounting going on. It’s not like this has snapped back to all of a sudden, people are going to be selling at list price.”

Cessna said that due to minor delays with avionics certification it now expects the first M2 and Sovereign deliveries to happen in the last quarter of the year, with the first deliveries of the Citation Ten due early next year.

Cessna is trying to have one basic certified Garmin software for all three aircraft. “The flight testing and the performance of the avionics equipment and whatnot, for the most part, has been quite good,” said Donnelly. “The aircraft are performing extremely well, making great progress in all their flight testing. But our supplier has struggled going through this first and just getting everything all lined up and getting us a build of the software that will pass through all the final certification testings. We think we’re there, frankly.”

The delays mean that Cessna expects its total sales for the year to be $3 billion, down from $3.1 billion in 2012. Although it will deliver more aircraft in 2014.

Donnelly says that the manufacturer has just started taking orders for the new Sovereign following a US tour and demo flights. “I’d say we have a pretty strong list of customers that are interested in the new Sovereign. It’s always been a very popular aircraft. People that have them, love them. And it’s a very nice refresh to the aircraft.”

“XLS demand has been pretty steady through the quarter and no real change. In terms of the light jet market, as I said, there’s — the market is still very soft. And if you’re not out there doing pretty aggressive discounting and trying to go to customers that are not ready to move yet, you’re not going to see a whole lot of volume,” said Donnelly.

He said that demand for Citation M2s has been strong.

Donnelly said that the cut in production had been an attempt at balancing supply and demand. He says the manufacturer wanted to get away from using discounts to encourage customers to upgrade before they were ready. “When you have customers that say, “Hey, I’m okay where I am probably for another year or two years,” then that’s fine. They’ll keep flying their current aircraft for another period of time,” he says.

Cessna says that it is seeing strongest demand in the US with light interest in Europe and Latin America.

It says that it Chinese joint ventures are going well and it expects to start delivering Caravans assembled in China this year with the first Citation XLS aircraft built in China delivering in 2013.

Revenues also fell at Cessna Finance due to less deliveries.

Quotes taken from Textron earnings call published in full by Seeking Alpha.