Cessna financial results down in second quarter

Nearly every company in the Textron family of companies is behaving well financially except Cessna Aircraft Co., which can trace its problems mostly to the smallest models of its jet line. As was the case in the first quarter of 2013, results at Cessna were down, with a loss of $50 million, compared to a profit of $35 million a year ago.

Cessna officials must feel jealousy as its sibling in the Textron family, Bell Helicopter, routinely reports financial results that are good, or at least nearly even with past results. Other segments of the Textron empire continuously do well each quarter.

Smaller companies that buy the Mustang and Citation CJ2, -3, and -4 are continuing to suffer in the current economy that was supposed to recover years ago. That means small jet sales remain down, dragging Cessna with them. Textron Chairman, President, and CEO Scott Donnelly said the ending of deep discounts on smaller jet prices caused a reduction in sales. Discounts continue, however, but not at bargain basement levels. Cessna officials lowered light jet production line rates, reduced the worker head count (resulting in $28 million in severance pay), and downsized the “indirect” work force. Cessna delivered 20 jets in the second quarter compared to 49 the previous quarter. Despite a tape-recorded comment to analysts from Donnelly at the end of the first quarter that lighter jets might “stop production,” production continued but at a lower rate.

Adding to Cessna’s woes is a two-month delay in certification of the Garmin G3000 and G5000 glass cockpit systems used by the Citation M2 (G3000) and Citation Sovereign and Citation X models (G5000). That means the Sovereign and M2 models will be delivered in December rather than October, but the 527 KTAS, $22.925 million Citation X (nine seats) is now pushed to the first quarter of 2014 by the same two-month delay. It was in particular the Sovereign model that could change red ink to black in 2013, according to statements made at the end of the first quarter. The new 440 KTAS Latitude ($14.9 million, nine seats) and 490 KTAS Longitude ($25.995 million, eight seats) enter service in 2015 and 2017 respectively.

Cessna is building the turboprop Caravan in China that will be delivered in that country starting at the end of the year, as well as the $12.75 million Citation XLS (441 KTAS, nine seats) that will be delivered in China in 2014.

By comparison, Bell Helicopter delivered 44 aircraft in the second quarter, only slightly off its pace of 47 the year before. Bell made a profit of $135 million, down $17 million from the same period a year earlier. Commercial orders continue to be strong.