NetJets on Monday entered an agreement with Textron Aviation to buy as many as 325 of the company’s biggest jets.
If fully exercised, the agreement would be valued at current list prices at nearly $10 billion.
The agreement for options on up to 175 Cessna Citation Longitude and 150 Hemisphere business jets was announced by the two companies Monday, on the eve of the 2018 National Business Aviation Association Convention in Orlando, Fla.
“The additions of the Citation Hemisphere and the Citation Longitude are a prefect addition to our fleet and we look forward to taking delivery of every single one of those commitments,” NetJets chairman and CEO Adam Johnson said at a joint news conference Monday morning.
Deliveries of the $26.9 million Longitude would occur between the second half of 2019 through 2033.
Monday’s announcement also establishes NetJets as the launch customer for the Hemisphere, a 19-passenger jet that would be Cessna’s largest and longest-range, at 4,500 nautical miles.
Earlier this year Textron CEO Scott Donnelly said the company was suspending development of the Hemisphere because of ongoing problems with its proposed engines, which are also under development. But last month, Brad Thress, Textron Aviation senior vice president for engineering, said in an interview that he “couldn’t be more confident” in French engine-maker Safran overcoming issues with the Silvercrest engine.
Now with the NetJets agreement, the Hemisphere program is apparently back on, though Donnelly didn’t provide a timeline for its first flight or entry into service. When Textron originally unveiled the Hemisphere at the 2015 NBAA Convention, the $35 million jet was expected to make its first flight in 2019.
“The beauty is that we have a partner who knows more about operating that class of aircraft than anyone in the world,” Donnelly said at Monday’s news conference. “We couldn’t have a better partner to work with us . . . to understand and make sure the Hemisphere hits the mark in the marketplace.”
There was some justifiable skepticism about the announcement, mainly because it came with no firm orders.
“The fact that these are options and not firm orders — and that they stretch out so far has raised some eyebrows” with rivals, wrote Corporate Jet Investor’s Alasdair Whyte.
However, Whyte acknowledged that “NetJets is a very credible buyer, so (it) gets an allowance.”
NetJets’ Johnson said his company has purchased 500 Cessna Citations since 1984. The most recent model that it’s acquired is the midsize Latitude; NetJets has taken delivery of 75 of them, and just placed its 100th Latitude order.
“We see the overall NetJets agreement being significant for (Textron),” Baird senior research analyst Peter Arment said in a note to investors on Monday.
“We assume some price discount was given, but we still expect the impact on Textron Aviation margins to be favorable as the program ramps exiting 2019,” Arment wrote.