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Cessna sees revenue, operating loss climb

  • The Wichita Eagle
  • Published Thursday, April 21, 2011, at 12:07 a.m.

Cessna Aircraft posted higher revenue in the first quarter, but low production and delivery levels led to a rise in operating losses.

"While there are a number of items in the quarter that contributed to the magnitude of the loss, I would say the underlying operational performance at Cessna was disappointing," Scott Donnelly, chairman and CEO of Cessna's parent company, said during a conference call Wednesday after Textron reported its first-quarter results.

Cessna Aircraft recorded revenue of $556 million in the first quarter, which ended April 2, up from $433 million for the same time a year ago. It posted an operating loss of $38 million, up from $24 million a year ago.

Higher losses were due to higher engineering and development costs, inflation and lower forfeitures of deposits because of fewer order cancellations, the company said.

Cessna's increase in revenue was because of a higher mix of light to mid-sized new jet deliveries and higher used jet sales.

Cessna delivered 31 Citation jets during the quarter, a number that is flat compared with a year ago. Its backlog at the end of the quarter was $2.6 billion, down $293 million from the end of 2010.

Cessna still expects deliveries to be slightly up for 2011. And it expects profitability to improve "as volumes recover and the impacts of our continuing cost reduction and productivity programs take effect," Donnelly said.

The market is coming back, Donnelly said, although recovery is slower than the company would like with higher oil prices, economic worries and world conflicts.

Still, it's encouraging that orders "have begun to flow and discussions are happening," Donnelly said.

Bonus tax depreciation has spurred interest from U.S. customers. And interest is coming from Indonesia, Latin America, Eastern Europe, France, Germany.

Prices have stabilized across most of Cessna's aircraft models, although inflation has eroded its margins, the company said.

The ramp-up in production of the company's newest Citation, the CJ4, is going well technically, Donnelly said, but costs are above production targets. The cost of components is higher than expected, he said.

To help reduce costs, Cessna is negotiating with suppliers. Donnelly said their costs are out of line when compared with other programs.

Cessna remains in a transition stage of moving work to its Mexican facilities, Donnelly said. Some work has moved.

But "you're not seeing the full effect of trying to transfer some of that high labor content work down to Mexico," Donnelly said about future savings.

Its recent labor agreement with the Machinists union will help increase productivity and provide some relief in labor costs as well, he said.

Overall, Textron's financial results were mixed, Donnelly said.

Strong execution and cost performance at Bell, Textron Systems and in its industrial segments helped, he said.

Textron reported revenue of $2.5 billion, up 12 percent from a year ago.

Textron's net income for the quarter was $29 million, compared with an $8 million loss a year ago.

Reach Molly McMillin at 316-269-6708 or mmcmillin@wichitaeagle.com.

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