A revitalized Cessna

The Cessna of today is a different company from the Cessna of about five years ago.

The economic downturn in 2008-09 rocked the jet maker’s business to the core, resulting in stalling sales, the layoff of thousands of employees and the cancellation of what would have been its biggest jet program, the Citation Columbus.

But beginning last year, a wounded Cessna began to show signs of the Cessna that decades before had grown to be one of the most dominant players in the industry.

The culmination of that may have come last week at the National Business Aviation Association Convention in Las Vegas.

It was there on Monday, in a standing-room-only news conference in the company’s chalet at Henderson Executive Airport, that Textron Aviation publicly unveiled Cessna’s super midsize Citation Longitude jet, announced plans for the Citation Hemisphere — which would be the company’s biggest and longest-range Citation jet — and reiterated plans for a third airplane, a single-engine turboprop with more than 1,500 nautical miles of range and a top speed of 280 knots, or 322 miles per hour.

NBAA “was really their show, with big announcements literally and figuratively,” aviation forecaster Rolland Vincent said. “I think they’ve got their mojo back.”

Textron Aviation – Cessna’s parent company – is going to need that mojo, Vincent and others said. In the next two years it will have to fend off the likes of Honda Aircraft Co. and Pilatus, which will bring competing small and midsize jets to market, while trying to regain some of the market share it ceded to Brazilian competitor Embraer during the recession.

That Textron Aviation succeeds is critical to Wichita. It is an important part of the area’s economy and one of its biggest private employers.

It employs 9,000 people in the state, most of whom work in Wichita. In the third quarter of 2015, the company recorded a $107 million profit on revenue of nearly $1.2 billion.

‘Leading edge’

In an interview with The Eagle at NBAA, Textron Aviation CEO Scott Ernest said the Latitude, Longitude, Hemisphere and single-engine turbo are not a response to Embraer, Pilatus or Honda.

“I don’t spend a whole lot of energy thinking about what Honda is doing,” Ernest said, noting that it has taken Honda more than a decade to develop its HondaJet, which fits into the small business jet category.

Instead, the seeming flurry of new planes are part of Textron Aviation’s “strategic product plans,” and its capability of bringing new airplanes from concept to reality in relatively short order.

“We’ve got a good process for designing and certifying products that customers are asking for,” Ernest said. “… There’s nobody in the industry that could say in the last three years they’ve certified eight products. That’s how you stay leading edge, in front of the market.

“I see them (competitors) as following us.”

The eight certifications to which Ernest referred include not only the Latitude, but upgrades to other jets in the Citation line such as the X Plus, Sovereign Plus, CJ3 Plus and M2.

The 3,400-nautical-mile Longitude and the 4,500-nautical-mile large-cabin Hemisphere are a continuation of that design and certification process.

The airplanes also fill holes in Cessna’s Citation line. They were holes being filled by competitors such as Bombardier, Embraer and Gulfstream.

“By not being in the large cabin space, or even super midsize, they’ve been essentially grooming customers for their competitors,” said Vincent, the aviation forecaster. “… Because they didn’t have an offering, people were moving up and beyond them.”

Wells Fargo Securities analyst Sam Pearlstein wrote in a note to investors last week that “the Latitude, Longitude and Hemisphere allow customers a path to larger jets while staying with Cessna.”

“With these planes, we believe Textron is targeting a market that has not seen significant investment in recent years,” Pearlstein wrote. “Those airplanes include the Bombardier Challenger 650, Dassault Falcon 2000LX, Embraer Legacy 650 and Gulfstream 280. With Bombardier focused on the CSeries and Global product line, we would not expect it to defend the Challenger line with new product.”

Vincent also said the demand for business jets continues to grow beyond North America, a market where demand for small and midsize jets — product categories that Cessna has traditionally dominated — has been the strongest. Vincent said 60 percent of the world’s business jets are based in North America.

But North America’s share of the business jet fleet will diminish over time to other regions of the world — regions that overwhelmingly prefer large business jets capable of flying longer distances, Vincent said.

“This market is globalizing,” he said.

Key competitors

There’s another reason why Cessna is moving into the bigger plane segment.

Teal Group analyst Richard Aboulafia said it’s a way for Cessna to offset the current and forthcoming competition from Embraer and Honda.

“Embraer’s gobbling up market share at the bottom end of the market, and then you’ve got HondaJet,” Aboulafia said. “It makes sense to move up.”

Honda said at NBAA last week that it was nearly finished with flight test of its HondaJet and expects FAA type certification “very soon,” allowing deliveries of its first business jet to begin immediately. Honda Aircraft CEO Michimasa Fujino has said the majority of its orders are from U.S. customers.

Greensboro, N.C.-based Honda Aircraft manufactures the HondaJet at its 260,000-square-foot factory at the Piedmont Triad International Airport.

Vincent described Honda Aircraft as “the most capable of new entrants” into the business jet market.

“They are the biggest threat facing Textron right now,” he said, adding that he expects the HondaJet to be the first of several business jet models to be manufactured by Honda. “The first aircraft is just the beginning of their investment.”

Embraer is a decade into expanding a business jet product line that includes the Phenom 100E and Phenom 300 small jets as well as the Legacy 450 and Legacy 500 midsize jets.

Embraer assembles and completes the Phenom 100 and 300 at facilities in Melbourne, Fla. Embraer also is expanding the Melbourne operations to include assembly of the Legacy 450 and 500, Embraer spokeswoman Alyssa Ten Eyck said.

The Brazilian planemaker expanded into Florida in 2005 because “our customer base is so heavily based in the U.S.,” Ten Eyck said. “We need to be closer to the customer.”

Even though Aboulafia thinks it’s a smart move by Cessna to expand into larger jets, that doesn’t mean it won’t face competition in the super midsize and large jet categories. It will be moving into a category of aircraft served by Bombardier, Embraer and Gulfstream.

“The three incumbents are not going to give up ground easily,” Aboulafia said.

But Wells Fargo’s Pearlstein wrote in his note to investors that Bombardier has other airplane development programs to focus on and likely would not react quickly — if at all — to Cessna’s new offerings.

“With Bombardier focused on the CSeries and Global product line, we would not expect it to defend the Challenger line with new product,” Pearlstein wrote.

And Aboulafia said he’s not convinced Cessna can timely execute on certifying the Longitude in 2017 and two years later make the Hemisphere’s first flight.

“It’s a tall order,” he said, adding that development of its biggest airplane ever — and a clean-sheet design, at that — is bound to see some obstacles during development.

Ernest said Textron Aviation’s aggressive product development efforts will continue.

He wouldn’t confirm whether that product development work would lead to additional new models, or upgrades to other existing Citation jets — even though the majority of them have received a major update in the past few years.

He equated Textron’s $200 million to $300 million annual product development work to a “team sport,” with 1,600 engineers focused on designing new products, improving on existing products and finding ways to better the company’s manufacturing processes.

“I want to keep the engineers busy,” Ernest said. “There’s a huge skill set (at Textron Aviation). We have to continue to … design new products with that talent base.

“My goal is to keep them busy from one program to the next.”

This story was originally published November 21, 2015 at 4:45 PM with the headline "A revitalized Cessna."