Booking a restaurant for next month, let alone a vacation in 2021, seems speculative. So you have to be sympathetic to OEMs trying to plan production for the next few years.
This week Gulfstream parent General Dynamics and Textron issued their third quarter results. Both proved how tough the past few months have been for aircraft manufacturers and how hard forecasting next year is.
Gulfstream made a profit of $283m, down 28% on the same quarter in 2019. Textron Aviation made a loss of $29m in the third quarter, down from $104m of profit last year.
Not surprisingly the results were due to lower deliveries. Textron Aviation delivered 25 jets, down from 45 in the same period last year, and 21 King Airs, down from 39. Textron also saw services figures down $95m due to fewer flights. It now has a $1.8bn backlog, compared with $1.71bn at the start of the year.
Gulfstream delivered 32 aircraft, 25 large (dominated by G650s) and seven mid-sized. It delivered 38 aircraft in the third quarter of 2019.
“From an order perspective, sales activity in the quarter was a quantum leap better than the second quarter,” said Phebe Novakovic, chair and CEO of General Dynamics during an analyst call. “We saw pipeline activity improved week-by-week during the quarter, but demand is still dampened by fears concerning the economy, by an unsettled political climate and by a wide variety of travel restrictions.”
Gulfstream had a 0.9 book-to-build ratio (it sold 0.9 aircraft for each jet it delivered). This is down from 1.68 in the fourth quarter of 2019 (helped by the launch on the G700 at NBAA) and the 1.23 average in 2019 – but close to its 0.91 average in 2018. It started the year with a backlog of $13.3bn and it is still at an impressive $11.9bn.
The analyst calls also gave some guidance on how the two manufacturers are planning for 2021. “While I dislike giving piecemeal guidance when our plan for next year is not final, it is fair to say that we contemplate fewer deliveries,” said Novakovic.
Gulfstream expects to deliver 130 aircraft in 2020 (compared with 147 in 2019 and 121 in 2018). This includes deliveries of the last 13 G550s.
“Pre-pandemic, we had planned to make up the G550 shortfall by delivering more of the other large cabin aircraft. It now appears that the market will not support such an increase. So, the other three large cabin aircraft will not experience much of a change in production rate or delivery,” said Novakovic. “There will also be a modest reduction in mid-sized aircraft. However, we will have the opportunity to revisit this in April of 2021 to see if market demand at that point justifies turning up production.”
Textron delivered 71 jets in the first three quarters of 2020, compared with 135 in the same period of 2019. The company has not given guidance for 2020 total deliveries, but it will probably be close to 125 jets. It delivered 206 jets in 2019 (and 93 King Airs).
“When we think about the production run rates for 2021, it’s targeting delivery that’s going to be sort of somewhere in between where we are this year and where we were in 2019,” said Scott Donnelly, chair, President and CEO of Textron during his analyst call. “So, we are setting production run rates to achieve that. Obviously, run rates increase through the course of the year, so when you think about 2022, you are may be back up to where you were in 2019. But this is just a plan. I don’t think that we have that kind of visibility in this market, just as we haven’t had that kind of visibility in this market in a very, very long time.”
