Cessna Aircraft is expecting to produce 225 Citation jets in 2010, down from the 289 produced in 2009 and 407 in 2008. But that number is better than estimates executives had considered six months ago, Scott Donnelly, president and chief executive of Cessna parent Textron, reported last week.

Executives at both Textron and Cessna have long indicated that production would slide further in 2010. Cessna Chairman Jack Pelton predicted in September, and some analysts feared, that Cessna production could have fallen to as low as 200 Citations for 2010. Cessna recently restarted is Citation Sovereign line – the last of the production lines to reopen since they were shuttered last summer – but a company spokesman said that all the lines were running “at greatly reduced rates” (BA, Jan. 11/15).

About 105 of the Citations produced this year will be Cessna’s smallest, least expensive model, the Citation Mustang. The remainder should be fairly evenly spread among the other Citation lines, although Textron executives last week declined to provide specifics.

They did say, however, that the majority of the deliveries would occur later in the year. Frank Connor, executive vice president and chief financial officer, said the company was planning for 30-35 jet deliveries in the first quarter, “which will result in a segment loss for the quarter,” Connor said. “As volumes recover through the balance of the year, we expect margins to follow accordingly.” He predicted that Cessna would turn a slight profit for the year, somewhere in the “low single-digits.”

Cessna also will incur about $30 million in pretax restructuring charges in 2010, Connor said. Those charges are attributed to a shift in work from Columbus, Ga. and some work in Wichita, Kan. to Cessna’s facility in Mexico. Donnelly noted that, “We continue to work on ways to reduce our costs, including consolidation of facilities and moving certain activities to lower-cost countries.”

Analyst Macquarie Research noted that “Cessna wrecks FY10 guidance,” citing the lower deliveries, a product mix that trends heavily to the lower-margin Mustangs and the potential first quarter loss.

Also in more potential bad news, Cessna is delaying SkyCatcher light-sport aircraft deliveries by up to 10 months to give the factory in Shenyang, China time to incorporate changes to improve the spin performance that had plagued early prototypes, Cessna confirmed. The factory in Shenyang is expected to ship the next few SkyCatchers to the U.S. in upcoming days.

But 2010 also will mark a significant increase in research and development spending, Donnelly said. “We are increasing our R&D spending next year considerably as a percentage of sales,” he told analysts, adding that the spending would focus primarily at the core light to midsize aircraft. “We have a number of programs going. They span the gamut of update block-point type changes to even a couple of aircraft that we would envision as new entries into the family of our products at Cessna.”

Market Not Ready For New Aircraft

Cessna is not yet ready to announce these projects, Donnelly said, indicating executives fear the market is not yet ready. “When you announce a new product it usually generates a pretty strong order flow,” he said. “We don’t want to announce a new upgrade, block-point change or new aircraft if we don’t think there’s going to be a reasonable level of commercial interest out the door.”