Used jet pricing, King Air slump hits Textron Aviation’s bottom line

Textron Aviation continues to face a tough pricing environment, strong dollar and lower demand for its King Air turboprops.

That’s according to leaders of its parent company, Textron Inc., which on Thursday reported its third quarter 2017 earnings.

For the quarter, Textron Aviation saw flat deliveries of 41 new Cessna Citation business jets, and five fewer deliveries of its Beechcraft King Airs from the same period last year.

Quarterly revenue for the Wichita-based planemaker was down $44 million to $1.15 billion compared with the third quarter of 2016.

Profit also was down, but only slightly, to $93 million compared with $100 million in last year’s third quarter.

Despite higher business aircraft utilization and thinning used business jet supply, the pricing of used jets has not improved and buyers are still wanting manufacturers like Textron Aviation to discount their new jets.

But Textron Inc. will sacrifice sales volume in order to keep new jet pricing firm, CEO Scott Donnelly said on a conference call with analysts Thursday.

“It’s a line that’s tough to hold in the market,” Donnelly said.

Donnelly also said a strong U.S. dollar and pockets of weak international economies are affecting sales and deliveries of its turboprops, including the Cessna Caravan but especially the King Air, where demand is highest overseas.

King Air deliveries improved from the second quarter of 2017 but, “all in all, it’s still a little light,” Donnelly said.

Despite flat to lower deliveries, revenue and profit, Textron Aviation managed to slightly improve its backlog in the third quarter of 2017, which rose by $142 million to $1.2 billion from the second quarter of 2017.

Donnelly also said on the call that Textron Aviation’s newest jet, the super-midsize Citation Longitude, probably won’t enter service until early 2018, instead of the end of 2017.

He told analysts one of the plane’s key suppliers “has an obsolescence issue” and company officials decided to upgrade the obsolete part or system – he didn’t specify what was obsolete nor did analysts press him on it – to “the latest and greatest,” before the Longitude began its Federal Aviation Administration certification testing.

”That’s taken us probably a couple months longer than we would have liked it to,” Donnelly said.

This story was originally published October 19, 2017 at 10:11 AM with the headline "Used jet pricing, King Air slump hits Textron Aviation’s bottom line."