By Doug Cameron And Chelsey Dulaney
Two of the world's largest makers of business jets said
Wednesday that demand continues to improve, with General Dynamics
Corp. planning to boost output of its high-end Gulfstream planes as
more U.S. companies place orders.
Gulfstream and Textron Inc., maker of Cessna jets, are both
introducing new aircraft, but like rivals had trimmed production of
existing models after global demand halved in the wake of the
financial crisis.
Global business jet orders and deliveries have improved in each
of the past four years, and executives shrugged off any negative
impact from falling oil prices, with demand improving in the Middle
East and Asia, as well as North America, which accounts for more
than half of the global market.
Phebe Novakovic, chief executive of General Dynamics, said
demand was "quite handsome" in the final quarter of last year, and
the company plans to boost production of its midsize jets in 2015,
while leaving output of larger planes at existing levels.
Demand for larger jets costing between $25 million and $65
million has been more resilient than for smaller models. Bombardier
Inc. this month said it was "pausing" development of a new Learjet,
citing weak market conditions. Analysts said Bombardier's decision
reflected the company's desire to save cash rather than weakness in
the market.
Textron CEO Scott Donnelly said the company had yet to boost
Cessna production, though had the capacity to increase output later
in the year. Cessna has built a six- to nine-month waiting list for
some models, in contrast to a year ago when it was building many
planes on spec for customers.
Around 60% of new business-jet sales are replacements for
existing aircraft, and orders have climbed as a glut of used planes
has diminished. The inventory of used Cessna jets has fallen to
5.5% of the global fleet, the lowest level since 2007, according to
analysts at Jefferies.
Ms. Novakovic said Gulfstream had its best sales quarter in
three years, with 60% of its backlog coming from public and private
companies, including a number of Fortune 500 members. The number of
business-jet flights in the U.S. rose 4.5% in the 12 months ended
in November, according to data from the Federal Aviation
Administration.
Gulfstream's performance helped General Dynamics beat analysts'
expectations, with a fourth-quarter profit of $701 million, or
$2.09 a share, up from $495 million, or $1.40 a share, a year
earlier. Revenue increased 3.9% to $8.36 billion. Excluding
discontinued operations, earnings from continuing operations were
$2.19 a share for the latest period.
Analysts polled by Thomson Reuters had expected per-share
earnings of $2.13 on revenue of $8.04 billion.
The company's initial guidance for 2015 is for earnings of $8.05
to $8.10 a share, shy of the estimate among analysts, with sales of
$31.3 billion to $31.5 billion.
General Dynamics' shares closed down 0.6% at $136.40, with
Textron ending 1.5% higher at $41.99.
Corrections & Amplifications
Textron CEO Scott Donnelly said the company had yet to boost
Cessna production, though had the capacity to increase output later
in the year. A headline on a previous version of this article
misstated that Textron plans to increase Cessna production.
Write to Doug Cameron at doug.cameron@wsj.com and Chelsey
Dulaney at chelsey.dulaney@wsj.com
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