CEO: Cessna orders as expected

The phone at Cessna Aircraft is ringing more these days from prospective buyers of business jets.

But order cancellations, while they've slowed, continue, said Scott Donnelly, president and CEO of Textron, Cessna's parent company.

Order rates at Cessna in the first quarter were low but met company expectations, Donnelly said. Cancellations were slightly higher than planned.

Donnelly spoke to analysts about Textron's first-quarter financial results in a conference call.

At Cessna, revenue was $433 million, down 43 percent from the same time a year ago, primarily from a decline in aircraft deliveries. Cessna posted a loss of $24 million for the quarter, down from a $90 million profit a year ago.

"Clearly, the last 18 months have been difficult in the business jet market as it presents numerous challenges in our Cessna business," Donnelly said. "We believe that the cycle is going to follow the normal course. We see the right early indications, including most recently, corporate profits getting stronger."

The increase in sales activity in the last part of the quarter "bodes well as this industry starts to turn," he said.

Other indicators are also becoming more positive.

The number of used aircraft for sale continues to decline, daily use of Cessna aircraft remains stable and aftermarket revenue at Cessna is up.

Cessna continues to cut costs, including consolidating facilities and moving "certain activities" to lower-cost locations, Donnelly said.

Going forward, Donnelly expects orders to increase and cancellations to decline.

"We really do see a lot of small business and corporate activity coming back," Donnelly said.

Inquiries have been strongest for Citation Sovereign, XLS and CJ models, he said.

On the other hand, inquiries for its very light jet, the Citation Mustang, have been slower.

Cessna has not renewed plans to relaunch the Citation Columbus program, which it canceled last year, Donnelly said.

The company also isn't counting on making sales to the fractional ownership industry for the next couple of years.

"We have to recognize there's a lot of capacity out there," Donnelly said.

Cessna plans to deliver 225 business jets this year but must sell more planes to meet that goal. It is less than 70 percent sold out.

Donnelly said he didn't see a reason today, based on demand, to change production rates.

For Textron, revenue for the quarter was $2.2 billion, down 12.5 percent from $2.5 billion a year ago. The decline reflects lower aircraft deliveries at Cessna and downsizing of the company's non-captive finance business.

Textron posted a $8 million loss for the quarter, or a loss of 3 cents a share, compared with net income of $86 million, or 35 cents a share, a year ago.

Textron's performance caused the stock to rally Thursday. Stock closed at $24.23, up $2.63 a share, or 12 percent.