The best of times and the worst of times for aircraft manufacturers
It is the best of times, it is the worst of times, it is the age of backlogs, it is the age of delays, it is the epoch of belief, it is the epoch of protests. It is the spring of orders. It is the winter of certification.
If you split aircraft manufacturing into people who make or service aircraft and people who sell them, it really is a tale of two cities. Senior managers are shuttling between them.
In December 2020 Gulfstream had an impressive order book of $11.6bn. At the end of September 2023, it was $20.1bn. In July, August and September, it sold 1.5 aircraft for every one it delivered.
This is higher than it would have liked. At the start of this year Gulfstream planned to hand over 145 aircraft. In the first nine months of the year, it shipped 72. It now plans to deliver between 40 and 45 in service aircraft in the next three months. It is also hoping to ship the first 19 of its new G700 to customers (pictured). The manufacturer has 15 G700s parked ready to be delivered as soon as the FAA certificates the aircraft.
But its suppliers (and in many cases its suppliers’ suppliers) cannot keep up. “We’re seeing modest signs throughout the quarter that things are actually getting better. It’s not, as you’d imagine, a straight line to the finish line on this issue, so there will be some bumps in the road and some curves along the way, but things are starting to trend better,” said Jason Aiken, CFO of General Dynamics (and former chief financial officer of Gulfstream) on an analyst call this week.
Aiken also warned that this will continue to affect 2024 deliveries. “What we can’t do yet is declare victory on the supply chain issues and say that by early next year, they’re going to be completely solved. A lot remains to be seen as to the timing of how that ultimately works itself out.”
Gulfstream is watching the conflict in Israel closely. So far it has not affected demand or production of the G280 aircraft (which is produced by IAI in the country). About five or six of the aircraft hit by supply chain issues are G280s but these are already in Gulfstream’s Dallas completion facility.
The Savannah manufacturer’s supply chain headaches are shared across the industry. “We are delivering fewer aircraft than we originally expected and that is as a result of these issues and challenges that we’re still seeing in the supply chain,”said Scott Donnelly, chairman, president and CEO of Textron, on an investor call. “Did we have aircraft that moved from Q3 to Q4 this year? Absolutely. Do I think we’ll have aircraft that will move from Q4 to Q1? Absolutely.”
Textron Aviation delivered 39 jets in the summer, the same amount as in 2022. It managed to deliver 38 King Airs – five more than in the third quarter of last year. Textron Aviation ended the quarter with a $7.4bn backlog. In December 2019 it was $1.7bn.
“We obviously would like to have delivered some more aircraft in the quarter,” says Donnelly. “We have customers that would like to see us to deliver those aircraft in the quarter.”
Textron expects to increase deliveries in 2024. Like Gulfstream, it has not seen a slowdown in demand. “I would say that the price environment continues to be strong. Aircraft that are going into backlog continue to do so at good pricing,” said Donnelly on the results call. “We feel good about where that is in the marketplace.”
Embraer has managed to increase production this year. It delivered 28 business jets in the third quarter compared with 23 in the same three months last year. This means that it has shipped 66 executive jets in the first nine months of the year up from 52 in 2022. But it would like to deliver more.
New aircraft salespeople should spare a thought for their production and services colleagues coming into work knowing their days are going to be spent firefighting. “I think the trend line is improving. But it can still come down to one part. I can’t deliver an aircraft that is missing one part,” says Donnelly. “It is still a problem, but I do think it’s trending in the right way.”
At least one chief commercial officer has been brought into meetings to use their sales skills to convince suppliers that they need to speed up.
Salespeople still have Great Expectations about the market. But their colleagues managing supply chains are still going through Hard Times.
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