Cessna sees drop in revenue, profit

Cessna Aircraft Co.' s revenue fell 42 percent and profit declined 87 percent in the third quarter, its parent company reported Tuesday.

Textron said Cessna recorded profit of $32 million in the quarter, a drop from $238 million a year ago. It recorded $825 million in revenue, down from $1.4 billion.

Cessna is on track to meet or modestly beat its revised projection of 275 jet deliveries this year. At one time, Cessna had planned on delivering 535 jets this year.

Cessna delivered 68 Citation jets in the third quarter compared with 124 last year, Textron reported. Revenue also was affected by costs related to idle capacity and temporary plant shutdowns.

The planemaker's order backlog at the end of the quarter was $6.9 billion, a $1.3 billion decline from the second quarter. A year ago, its backlog was $15.6 billion.

Delivery of 275 business jets this year will leave the company with 30 "white tails," planes that are built but not sold, Textron president, chief operating officer and CEO-elect Scott Donnelly said in a conference call with analysts.

He said Cessna needs a couple more months to see where orders and deliveries are to get a more "credible view" before making predictions for deliveries in 2010, Donnelly said.

"The wild card here will be Cessna and where does the business jet market go," he said, referring to overall Textron revenue.

There are signs of market improvement and signals that the used aircraft market is getting better, Donnelly said.

Customers, primarily international ones, have started to order aircraft for 2009 and 2010 delivery.

Used aircraft pricing is stabilizing and starting to improve, Donnelly said.

That bodes well for new-jet customers who need to sell their used ones, he said.

Order cancellations continued to stack up in the quarter, however.

Cessna took cancellations for 119 planes, most scheduled for delivery in 2011 and beyond, Donnelly said.

The cancellations reflect customer uncertainty in the long term, he said. The short-term outlook was better.

Only two of the cancellations were for planes slated for 2009 delivery. None were for delivery in 2010.

Cessna took orders for 11 jets with 2009 delivery dates and orders for five jets for delivery in 2010.

The fundamentals are in place to prepare for a recovery, Donnelly said in response to a question about preparations for the market's return.

Cessna cut half of its work force in the past year to meet lower demand, but capital equipment — metal bonding, paint shops, assembly capacity — put in place to produce more than 500 jets is still there, Donnelly said.

And building back will require a lot of work with suppliers, he said.

Still, "we think we're a long way from our getting to a point where you're testing the capacity that's in place," he said.

In the meantime, Cessna continues to work on improving its costs but did not say what the cost-cutting might entail.

As it builds back up in the future, Cessna will be more efficient, said Textron chairman Lewis Campbell.

"When you're turning down, you find areas of waste that you just overlooked or didn't have time to get to," Campbell said. "So I expect us to come back a lot more lean and mean than when we went into the downturn."

Textron, which also makes Bell helicopters and EZ-Go golf carts, said its profit fell 98 percent to $4 million, or 1 cent a share, for the period ended Oct. 3. That's down sharply from $206 million, or 83 cents a share, a year ago.

Textron's third-quarter revenue was down 27 percent, dropping to $2.5 billion from $3.5 billion.

Textron shares closed higher Tuesday at $19.67, up $1.31, or 7 percent.