October 18, 2013
Cessna Aircraft’s business jet delivery woes continued into the third quarter with shipments dipping to 25 units, down from 41 units last year, resulting in another quarterly loss, Cessna parent Textron reported Oct. 18.
Cessna posted a $23 million loss in the quarter, compared with a $30 million profit a year ago. The third-quarter results follow a $50 million loss in the second quarter, when deliveries plummeted by 50% to 20 business jets.
Textron Chairman and CEO Scott Donnelly, noting slight delays in the M2 and Sovereign program and continued market weakness, warned in July that the third quarter was expected to be down. But speaking to analysts Oct. 18, he called the continued market weakness “disappointing” and said the market has “gone down lower than we would ever have imagined it to go down.”
Textron scaled back its revenue estimates for Cessna, but Donnelly was optimistic there would be better results in the fourth quarter, with certifications and deliveries expected to begin for both the new Cessna Citation Sovereign and M2 jets. He notes that the company has begun to take orders for the new Sovereign since it has actively marketed the aircraft in recent months. M2 sales have already been strong enough that Cessna last summer was considering adding delivery slots in its production plans. But Donnelly declined to detail production ramp-up plans for either quarter.
Backlog increased in the third quarter by $61 million to $1.07 billion, in part due to low levels of Citation production. But it also improved on sales activity with the Sovereign, M2s and Latitude – which is slated to fly next year. Donnelly noted that sales of those programs have gotten better and “certainly better in September.”
While the new product has been generating interest and orders, he concedes that the existing Citation lines are struggling to compete against used copies on the market at depressed prices. Prices continued to soften in the third quarter, making sales of new aircraft difficult. Cessna earlier this year firmed its pricing, saying customers were previously asking for prices that were so low that it wouldn’t make sense to produce the aircraft.