Orders for business jets fell in the third quarter as the global credit crisis curtailed the availability of financing.
While orders held up at Gulfstream, sales of its mid-size jets are slowing and it may have to cut production. Cessna, meanwhile, booked fewer Citation orders than expected in the quarter.
The sudden absence of credit "has seized up demand," says Nick Chabraja, CEO of Gulfstream´s parent company General Dynamics. The manufacturer had a "good quarter" for orders, but is seeing a slowing in demand for its mid-size aircraft, particularly the smaller G150.
If that softness continues through the fourth quarter, says Chabraja, Gulfstream will cut production of those aircraft, which are built by Israel Aerospace Industries. To compensate, the company would produce additional large aircraft, he says, adding the large-cabin backlog remains strong "and many large aircraft are not financed."
Gulfstream delivered 39 green aircraft in the third quarter, 23 large-cabin and 16 mid-size, two more than in the same quarter of 2007. Deliveries of completed aircraft rose by three year-on-year, to 38. These boosted GD´s net aerospace sales for the quarter by 4.3% to $ 1.37 billion, and operating earnings by 24.3% to $ 281 million.
Cessna has booked 484 Citation orders so far this year, but added only 47 of those in the third quarter. "The order downturn has arrived quicker than we expected," says Lewis Campbell, CEO of Cessna parent company Textron. "The events of the past several weeks have put a big chill on the market."
The company delivered 124 jets in the quarter, up from 103 a year earlier, and as a result its backlog declined $ 400 million from the end of the second quarter. But the backlog still stands at $ 15.6 billion, billion up from the end of 2007, and Cessna plans to deliver around 140 Citations in the fourth quarter.
With more than 1,500 jets still in backlog, Cessna remains comfortable with plans to increase production next year, Campbell says, adding, "Beyond that we will wait and see, but we don´t need a lot of net [new] orders to sustain production in 2010 and 2011."
Cessna revenues for the three months ended Sept. 27 were almost $ 1.42 billion, up 11.8% from a year earlier, and its profit was up 7.2% to $ 238 million.