Draper’s Dilemma

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Ron Draper, CEO of Textron Aviation, has a difficult task. Demand for his company’s aircraft is strong – in the second quarter of 2021 its backlog rose $689m to $2.7bn. But raising production quickly is a huge challenge and depends on agreements with suppliers that were often signed many years ago.

Draper is personally exposed to this more than the CEOs of any other aircraft manufacturer. This is because he was responsible for Textron Aviation’s supply chain and production before he stepped up in 2018.

Fortunately for Draper, things appear to be going well. Textron Aviation delivered 44 jets in the second quarter of 2021, up from just 23 jets in the same three months of 2020. This is also close to the 46 jets it delivered in the second quarter of 2019.

It delivered 33 King Airs in the second quarter of 2021. This is up from 15 in the same quarter of 2020 and close to the 34 King Airs it delivered in 2019.

Textron Aviation is on track to deliver around 170 jets in 2021. This is closer to the 206 jets and 93 King Airs it built in 2019, than the 132 jets and 62 King Airs it delivered in 2020. However, this year it is not looking to pack deliveries into the fourth quarter as much as usual.

Textron sold more than two aircraft for each one it delivered in the second quarter – pushing waiting times out to nine months for most types. This means it feels less year-end pressure according to Scott Donnelly, CEO of Textron. Donnelly says that they are seeing strong demand from its core market of US entrepreneurs.

You cannot judge production on one quarter. Gulfstream delivered 21 aircraft (18 of which were large jets) in the second quarter of 2021 versus 32 in the second quarter of 2020. But this drop was expected. The fall in deliveries was due to issues with suppliers that it first warned of in April 2020 (this just demonstrates how long it takes to make production changes).

Gulfstream is ramping up production with 71 deliveries planned in the second half of the year. This will take its 2021 deliveries to around 120 aircraft, close to 127 in 2020 but down from 147 in 2021.

Gulfstream also had a book-to-build of more than two-to-one in the second quarter (despite not having fleet orders). More than half of all its orders came from US buyers and the company is seeing strong interest from its core Fortune 500 customers. Gulfstream ended the quarter with a backlog of $13.5bn – compared with $12.1bn in June 2019.

It takes at least six months for manufacturers to significantly speed up production. Neither company is ready to give public delivery guidance for 2021 but you could see both Gulfstream and Textron Aviation beating 2019 deliveries in 2022.

This would be impressive manufacturing, but even if it happens, you can expect backlogs to keep rising.

Above: The Citation Longitude cruises above cloud cover.

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