Gulfstream Orders Suggest Recovery in Business Jets

• October 28, 2010
  
  

  By CHRISTOPHER DREW
  The New York Times
  10/28/2010

  Jay L. Johnson, the General Dynamics chief executive, told analysts that
  one-third of the orders came from Latin America and Asia, and the increase
  reflected demand for two high-speed models being tested.

  General Dynamics, based in Falls Church, Va., does not release quarterly
  order numbers.

  But in another measure of how its business is starting to bounce back, the
  company said it delivered 23 Gulfstream planes in the third quarter, up
  from 17 in the year-earlier period. Its deliveries had peaked at 41 just as
  the economy collapsed in the last three months of 2008.

  Buoyed by the improvement in its aerospace business, General Dynamics,
  which is also a large military contractor, said its overall profit rose by
  13.6 percent in the third quarter.

  It also raised its forecast for full-year earnings. Northrop Grumman,
  another military contractor, also reported a gain in third-quarter profit
  on Wednesday and increased its forecast.

  Analysts watch the sales of business jets as an indicator of how willing
  corporations are to spend money as the economy rises and falls.

  Heidi Wood, an analyst at Morgan Stanley, said in a research note on
  Wednesday that business jet flights had increased since late last year, and
  that a recovery “appears under way.”

  She said earlier this week that there was consistent demand for large
  planes, while the market for midsize and smaller ones remained “painfully
  quiet.”

  She added that the consensus at a trade show last week was that 2012 would
  be the start of a new sales cycle for new planes, after a glut of used jets
  was purchased next year.
  General Dynamics said its deliveries in the third quarter included 17 large
  planes and six midsize ones. Mr. Johnson said Gulfstream now expected to
  deliver 75 large jets and nearly 30 midsize aircraft this year, compared
  with 156 planes in 2008.

  Textron, the owner of the Cessna Aircraft Company, said last week that its
  orders had picked up somewhat in September, though Cessna shipped only 26
  business jets in the third quarter, compared with 68 a year earlier. Cessna
  cut 700 jobs in September and slowed production.

  But Scott C. Donnelly, Textron’s chief executive, told analysts last week
  that Cessna expected a significant increase in deliveries in the fourth
  quarter.

  Cessna also unveiled plans last week for a larger and more advanced version
  of its Citation X plane, which can seat nine passengers. It expects the
  first delivery in 2013.

  Mr. Johnson, the General Dynamics chief executive, said his company’s new
  and faster large jet, the G650, which seats eight people, should be ready
  for delivery in 2012. He said it had already attracted 200 orders.

  Mr. Johnson said orders were also coming in for Gulfstream’s new G250 jet,
  which has a midsize cabin, and should be ready by late next year. “Our
  timing relative to the recovery in the midcabin market looks pretty good,”
  he said.

  And as tighter military budgets slow the company’s growth in combat systems
  and warships, “our aerospace business will be the growth engine through the
  near and intermediate time frames,” Mr. Johnson said.

  General Dynamics said its net income increased to $650 million, or $1.70 a
  share, in the third quarter, from $572 million, or $1.47 a share, a year
  earlier. Revenue rose 3.8 percent, to $8.01 billion.

  The company also increased its earnings forecast for the full year to $6.70
  to $6.75 a share, from $6.60 to $6.65 a share.

  Northrop Grumman, based in Los Angeles, said its net income edged up to
  $497 million, or $1.67 a share, in the third quarter, from $490 million, or
  $1.53 a share, a year earlier. Sales increased 4 percent, to $8.71 billion.

  Northrop raised its full-year earnings guidance to $6.85 to $7 a share,
  from $6.60 to $6.80 a share.

  Northrop is exploring the sale of its $6 billion shipbuilding unit. It also
  might spin off the business to shareholders. Wesley G. Bush, Northrop’s
  chief executive, said the company was focused on improving its profit
  margins.

Comments are closed.